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UB Group chairman Vijay Mallya has decided to turn the tables on lenders to Kingfisher Airlines (KFA) and aircraft lessors, from whom he has been facing intense pressure for some time. He has said he is moving court and seeking damages of close to Rs 4,500 crore (Rs 45 billion) from them.
KFA has in the past two years defaulted on repayment of loans of over Rs 7,000 crore (Rs 70 billion), for which Mallya and his publicly-held UB Holdings Ltd (UBHL) had stood guarantee.
According to legal experts, Mallya might be looking to work on the ‘lenders liability’, which broadly indicates that banks, while recovering outstanding loans, should do so with least prejudice. It is understood he is moving court indicating lenders had been rough with him and, hence, caused damage.
Sajan Poovayya, managing partner, Poovayya & Co, among the top lawyers in Bangalore, said there was not much precedence in the country where Indian courts had supported the borrowers on ‘lenders liability’. “It is a subjective issue and without proof of actual loss, I doubt if UB or Mallya can gain much out of this. This may be a strategy to push lenders to slow down their recovery process,” Poovayya felt.
According to a statement from UBHL, the lenders to Kingfisher had sold certain investments belonging to the company and it was moving the Bombay high court against the consortium of bankers seeking various reliefs, including declaring that the corporate guarantee and pledge agreement given by UBHL on December 21, 2010, were void.
The company is also seeking for a permanent order and injunction restraining the consortium of bankers and their associates from taking any other or further steps based on the pledge agreement and the corporate guarantees. In addition, UBHL has sought an order and decree of damages worth Rs 3,199.68 crore (Rs 32 billion).
While this suit is against the consortium of 17 public sector banks, UBHL has also filed another suit in the Bangalore High Court, seeking to restrain aircraft lessors and certain other creditors who have invoked corporate guarantees.
As part of this suit, the company has said, it is contesting admission of five petitions under Section 433/434 of the Companies Act by certain creditors of Kingfisher Airlines. UBHL has further said it has filed a suit for damages, claiming an amount of Rs 1,319.30 crore (Rs 13.19 billion) against some of the petitioners in the Bangalore city civil court.
