Home / Companies / News /  Karnataka HC issues winding up order against Vijay Mallya’s UB Holdings

Bengaluru: In another blow to Vijay Mallya, the Karnataka high court on Tuesday issued a so-called winding-up order on United Breweries Holdings Ltd (UBHL), the holding company through which he controlled his once sprawling business empire.

The court directed that all assets of the company be taken over by the official liquidator and a status report be filed within four weeks.

The order, issued in a case which includes multiple parties including a consortium of secured lenders, service providers, lessors of aircraft and suppliers of aero engines, comes days after a Central Bureau of Investigation court issued an arrest warrant against the millionaire who flew to the UK in March 2016 as creditors of his grounded Kingfisher Airlines (KFA) closed in on him.

That followed an investigation by the federal investigative agency into alleged collusion between executives at KFA and IDBI Bank Ltd over the issue of a loan by the lender that eventually became a bad loan.

In January, the debt recovery tribunal in Bengaluru ruled in favour of creditors seeking to recover more than Rs9,000 crore in unpaid loans they extended to Kingfisher Airlines.

On Tuesday, a UBHL spokesperson did not immediately respond to an email seeking comment.

In court, UBHL argued that the company had deposited Rs1,250 crore with the Karnataka high court. It also claimed that banks rejected two offers from it—on 29 March 2016 and 6 April 2016—for a settlement.

Justice Vineet Kothari pronounced the verdict via video conferencing from Dharwad, Karnataka. There are 10 petitioners who have claimed varied amounts for services rendered to Kingfisher Airlines, amounting to over Rs6,958.60 crore. They invoked corporate guarantees furnished by UBHL.

In his order, the judge said UBHL “cannot wiggle out of its guarantee obligations". He added that its “net worth is negative" and that it is “commercially insolvent" with there being no “hope" of it being revived “to meet the financial obligations".

UBHL is 52.34% owned by promoters: Indian promoters hold 26.93% and foreign promoters hold 25.41%. Mallya holds 7.91% of UBHL in his personal capacity.

UBHL holds 10.72% of United Breweries and has a 2.84% stake in United Spirits Ltd. At the end of March 2016, UBHL had a balance sheet size of ,824 crore and net worth of 553.6 crore.

That number, though, is misleading.

UBHL’s auditors have qualified its earnings reports for March and September 2016 by saying that the company has not provided for losses arising out of its financial exposure to Kingfisher Airlines in the form of corporate guarantees of Rs8,158.89 crore. The company shows this as a contingent liability, said the auditor’s report to its September quarter earnings.

In October 2012, Indian aviation regulator Directorate General of Civil Aviation suspended the operating permit of KFA. The licence has since expired but lenders, vendors, tax authorities and ever unpaid former employees of the company took the legal route to recover dues owed to them.

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