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Business News/ Companies / Vijay Mallya seeks personal hearing before United Bank’s panel
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Vijay Mallya seeks personal hearing before United Bank’s panel

United Bank's executive director says Mallya has requested that he be allowed to present his case before the GRC to clarify his position

A file photo of UB Group chairman Vijay Mallya. Photo: MintPremium
A file photo of UB Group chairman Vijay Mallya. Photo: Mint

Mumbai: UB Group chairman Vijay Mallya has sought a personal hearing by the grievance redressal committee (GRC) of United Bank of India to argue against the bank’s decision to label United Breweries Holdings Ltd (UBHL) a wilful defaulter.

“He has replied to our wilful defaulter notice. He has raised some issues. We will examine those," said Deepak Narang, executive director at United Bank of India.

Narang said Mallya has requested that he be allowed to present his case before the GRC to clarify his position.

On 2 December, United Bank of India named UBHL, the holding company of UB Group, a wilful defaulter because it had acted as the guarantor for a loan taken by Kingfisher Airlines, which had been assigned the same tag earlier.

A default is considered to be wilful when a borrower has not repaid a loan when he can do so; when sanctioned funds have been used for other purposes; when the borrower has siphoned off funds; or when the borrower disposes of the assets pledged for availing the loan without the bank’s knowledge.

In a 9 September circular, the Reserve Bank of India (RBI) allowed banks to take action against loan guarantors even without exhausting all courses of action against the principal debtor, in case of a wilful default. If the principal debtor fails to make repayments, the banker will be able to proceed against the guarantor, RBI said in a notification.

“In case the said guarantor refuses to comply with the demand made by the creditor/banker, despite having sufficient means to make payment of the dues, such guarantor would also be treated as a wilful defaulter," the central bank notification said.

Once banks issue a wilful defaulter notice to a company, the company is given 60 days to respond, following which a final decision is taken. If declared a wilful defaulter, UBHL would lose access to any further bank funding, as per existing norms.

Kingfisher Airlines owes more than 7,500 crore to lenders led by State Bank of India (SBI). It has secured a stay from the Calcutta high court on the wilful defaulter declaration by United Bank of India.

The airline is also in a legal battle with the central government’s department of financial services and SBI for a notice served on it in August, alleging the airline had wilfully defaulted on paying dues to the bank. SBI, the leader of the consortium, has the maximum exposure to the company at 1,600 crore.

United Bank’s Narang said a case against UBHL was progressing in the Calcutta high court and the next hearing is on 9 December.

A UB Group spokesperson declined to comment.

On Monday, Mallya had resigned as director of another UB Group-promoted company, Mangalore Chemicals and Fertilizers Ltd (MCFL), without citing any reason.

Also on Monday, Kingfisher Airlines said in a filing to BSE that the ministry of corporate affairs had rejected an application for reappointing Mallya as its managing director.

The developments come on the heels of public shareholders of United Spirits Ltd voting against as many as nine related-party transactions between the company and entities controlled by the UB Group in an unexpected show of defiance against ties between the spirits maker and its Indian promoter. United Spirits is now controlled by Diageo Plc.

Kingfisher Airlines hasn’t flown since October 2012. The airline had accumulated losses of 16,023.46 crore as of 31 March 2013 and its net worth was a negative 12,919.82 crore. Kingfisher Airlines, launched in 2005, never made a profit.

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Published: 04 Dec 2014, 09:42 PM IST
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