BackKingfisher secures stay against United Bank’s wilful defaulter tag
Court asks bank to file its affidavit-in-opposition by 3 Nov and Kingfisher to file its reply one week thereafter
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Mumbai: Grounded airline Kingfisher Airlines Ltd on Saturday said that it has secured a stay from the Calcutta high court on the decision of the grievance redressal committee of the United Bank of India, which had earlier declared the airline and its directors (including erstwhile directors) as wilful defaulters.
“The bank has been directed to file its affidavit-in-opposition by 3 November 2014 and the petitioners have been directed to file their reply one week thereafter. The next date of hearing has been fixed for 10 November 2014," Prakash Mirpuri, vice president-corporate communications, Kingfisher Airlines Ltd, said in a statement.
“We had earlier stated that we would legally challenge the wrongful decision of United Bank of India and that we have great faith in the judiciary in our country. We will legally defend our position on all allegations going forward."
Kingfisher Airlines along with its directors and erstwhile directors had filed a writ petition in the Calcutta high court against the United Bank of India and others, challenging the constitutional validity of the RBI Master Circular on Wilful Defaulters and challenging the ex-parte decision of the grievance redressal committee constituted by United Bank of India declaring the petitioners wilful defaulters.
Mint could not immediately reach United Bank of India for a comment.
On 1 September, United Bank of India had termed Kingfisher Airlines, its chairman Vijay Mallya and three directors—A.K. Ganguly, Subhash Gupte and Ravi Nedungadi—as wilful defaulters.
On 2 September, the airline was denied relief by the Supreme Court. A bench comprising justices Anil R. Dave and U.U. Lalit had said a special leave petition filed by the airline seeking to block the decision by United Bank of India’s grievance redressal committee had become “infructuous", or ineffective in the eyes of the law.
“Your grievance has been that the grievance redressal committee should not decide the matter, but they have already decided it; therefore, your plea is infructuous," the bench had said.
The airline’s petition, a copy of which has been reviewed by Mint, specifically asked the court to restrain United Bank of India from proceeding against it as an interim relief. Kingfisher Airlines owes ₹ 7,500 crore to a consortium of banks led by State Bank of India. In February 2013, bankers publicly stated they had lost faith in the management’s ability to revive the company.
Kingfisher Airlines hasn’t flown since October 2012. The airline had accumulated losses of ₹ 16,023.46 crore as on 31 March 2013 and its net worth was a negative ₹ 12,919.82 crore. Kingfisher Airlines, launched in 2005, has never made a profit.
Mallya-promoted Kingfisher Airlines early this month had moved the Bombay high court against the central government’s department of financial services and SBI for a notice served on it last month alleging the airline had wilfully defaulted on payment of dues to the bank.
A default is considered to be wilful when a borrower has not repaid when he can do so; when sanctioned funds have been diverted for other purposes; when the borrower has siphoned off funds; or when the borrower disposes of the assets pledged for availing of the loan without the bank’s knowledge.
Kingfisher Airlines in its plea to the Bombay high court also asked for an urgent hearing of the case. A division bench of the high court comprising justices V.M. Kanade and P.D. Kode is yet to hear the case. Bachubhai Munim and Co., a Mumbai-based law firm is representing Kingfisher Airlines in the Bombay high court.
The matter with United Bank of India was listed for hearing on 26 September before justice Debangsu Basak.
“After hearing counsel for the petitioners and the bank, his lordship passed an order in which his lordship has held that, prima facie, the bank acted in breach of the principles of natural justice by not making over the documents referred to and relied upon by the bank to Kingfisher Airlines prior to the hearing, and thus, not enabling Kingfisher Airlines to make an effective representation against the charges/allegations made against them in relation to being declared wilful defaulters," Mirpuri said in a statement on Saturday.
Accordingly, the court granted a stay on the decision of the grievance redressal committee constituted by United Bank of India declaring the petitioners wilful defaulters till 24 November, Mirpuri added.
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