SBI seeks Vijay Mallya's arrest, seizure of passport

Mumbai/Bengaluru: State Bank of India (SBI) has moved the Bangalore debt recovery tribunal (DRT), seeking an arrest warrant against Vijay Mallya, a week after United Spirits Ltd (USL) said he had resigned as its chairman in return for a $75 million payout.

The nation’s largest lender is also demanding that Mallya’s passport be impounded, said two people with direct knowledge of the development on condition of anonymity. In addition, SBI is seeking a full disclosure of Mallya’s assets.

SBI chairman Arundhati Bhattacharya declined to comment on the case.

UB Group’s official spokesperson declined to comment immediately.

SBI, which has declared Mallya a wilful defaulter for non-payment of dues owed by his defunct Kingfisher Airlines, moved the tribunal in the wake of the 26 February announcement that the UB Group chairman had stepped down as chairman of USL, now controlled by Diageo Plc.

Diageo agreed to drop all charges of irregularities at USL under his watch, and pay him $75 million over five years in return for getting him to go.

Diageo and Mallya, who said he wanted to live close to his children in England, had been sparring for some time over his exit. Diageo completed the purchase of a majority stake (54.7%) in USL in July 2014 and had been pushing for Mallya’s removal from chairmanship since then. Mallya refused to step down.

One of the applications filed by SBI also requires that the $75 million severance package which Mallya is to receive from Diageo be stopped so that lenders can claim that amount, said one of the two people cited in the first instance.

On Monday, Press Trust of India reported that lenders to the beleaguered Kingfisher Airlines had approached the DRT to stake their claim to the severance package.

“Since Mallya had given personal guarantees for the loans given to Kingfisher, this money (which he will receive from Diageo) belongs to us. We have decided to move DRT to claim that money,” a senior official from a public sector bank was quoted as saying in the PTI report.

Mallya and Kingfisher Airlines owed ₹ 7,800 crore to a consortium of 17 lenders led by SBI, which had exposure of over ₹ 1,600 crore to the airline. Other lenders include Punjab National Bank, Bank of Baroda, Canara Bank, Bank of India, Central Bank of India, Federal Bank Ltd, Uco Bank and Dena Bank.

Banks, riddled with bad loans, have been striving to clean up their books through asset sales and recoveries. Reserve Bank of India governor Raghuram Rajan, too, has been pushing banks to get tough on defaulters, particularly on those who have wilfully defaulted on their loan obligations.

In a 22 January interview on NDTV, Rajan had taken a dig at those who owe banks money, but continue to lead lavish lifestyles.

“If you flaunt your yacht, massive birthday bashes, etc, even while owing the system a lot of money... it seems to suggest that you don’t care. I think that is the wrong message to send out. If you are in trouble, you should show that you care by cutting down your expenses,” Rajan told journalist Shekhar Gupta on NDTV’s Walk The Talk show.

Banks are owed a significant amount by wilful defaulters, a term used for borrowers who don’t repay loans although they can afford to do so.

According to a 24 February PTI report, loans worth ₹ 11,700 crore given by SBI have been locked up as non-performing assets because 1,160 defaulters had wilfully decided not to repay.

“When an individual has provided a personal guarantee in favour of a bank, banks proceed to enforce such guarantees by seeking a disclosure of all assets of the guarantor,” said Deep Roy, associate partner at Economic Laws Practice.

“They have a subsequent right to attach relevant assets of a guarantor till the time the dues are adequately paid,” he said.

He declined to comment on whether banks can seek the issue of an arrest warrant as he is not familiar with the facts of the case.

“Under Section 10 (3) (e) of the Passport Act 1967, the passport authority may impound or revoke the passport if proceedings in respect of an offence alleged to have been committed by the holder of the passport or the travel document are pending before a criminal court in India,” Roy added.