Tag: sbi

The IBC was notified in 2016 after Vijay Mallya’s defaults. A special court in Mumbai dealing with cases under the Prevention of Money Laundering Act (PMLA) has asked lifted the claim of the Enforcement Directorate on the Mallya’s assets it had seized, paving the way for banks to sell them to recover their dues.

The assets including several floors of the UB City commercial tower in Bengaluru’s central business district and shares in United Breweries and United Spirits that Mallya had controlled are estimated to be valued at Rs 5,646.54 crore. The banks reportedly have outstanding dues of Rs 11,000 crore. (Including the penalty and interest charges as the total amount due was Rs. 9000 crore in 2016)

“Lenders have security. Irrespective of what Vijay Mallya does, bankers have the security to recover their dues from his assets. And that security is very good and valuable. Recently, the PMLA court has approved the sale of his assets. In Mallya’s case, whatever is the narrative, whatever be his mistakes. I am sure the lender will recover better than many other stressed assets,” former SBI chairman Rajnsh Kumar told ETBFSI recently.

Mallya’s dues

The principal amount that Kingfisher had borrowed from the banks is Rs 5,400 crore. The largest lenders to the airline are State Bank of India with an exposure of Rs 1,400 crore, Punjab National Bank with Rs 7,00 crore and Bank of Baroda with Rs 500 crore. The loans are the principal amounts that banks lent to the airline without calculating the interest on it.

The court order

The PMLA court had noted that the assets it restored to banks were insufficient to fully recover their loss, which was estimated at Rs 6,203 crore.

Concluding that the restoration of properties to the banks was done in “good faith”, the court said: “…claimants are public sector banks and these banks are dealing with the public money. There cannot be any personal or private interest of said claimants to pursue such a claim against the present respondents and accused.”

The court noted that even Mallya himself had placed a proposal for repayment of the due amount. Had there really been no loss to the applicant banks, then, why was Mallya ready to repay the loss, it asked.

The court held that prima facie there was falsification of accounts of Kingfisher, which it said Mallya had full control of.

The airline did not have offshore operations, but its accounts allegedly indicate expenditure for fuel abroad, the court said. Also, despite it being virtually in default, the airline company during 2009-2011 transferred part of the loan amount to Force India Formula 1 racing team that Mallya had controlled, it said.

Comparison with other IBC cases

This week the NCLT passed an order giving Videocon Industries to Twin Star of Vedanta group. The resolution yielded less than 10% for lenders.

Bankers have lost over Rs 40,000 crore in the Videocon account, as Anil Agarwal’s Twin Star snapped the company for less than Rs 3,000 crore. This has been the story for most cases under IBC where barring the top nine accounts the average recoveries have been just 24%.