This Just In: The King of Good Times Drowning under Spirits of Debt, may face asset freeze and arrest

Deepakar Livingston, Advocate, Bombay High Court
 and Ritvik M. Kukarni, IV BSL LLB, ILS Law College, Pune

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Bad times have ensued for Mr. Vijay Mallya, widely known as the king of good times. A huge consortium of 17 banks, led by State Bank of India (SBI), has moved the Debt recovery Tribunal at Bangalore seeking Vijay Mallya’s arrest. The Kingfisher owes to the SBI Consortium a whopping INR 7,800 crore in debt.  He was declared a ‘willful defaulter’ in law by SBI in November 2015. SBI has additionally sought for an order to obtain a full disclosure of Mallya’s assets and to further freeze all his assets.

Mallya seems to have triggered the wrath of the SBI Consortium when he stepped down as the Chairman of United Breweries Group (UB) in exchange for a severance package of USD 75 million (the Sweetheart Deal). This amount will be paid over a period of 5 years by Diageo PLC, which company now owns and controls United Spirits Ltd (USL). SBI has also sought from the Tribunal an order to freeze this 75 million USD severance package so that the same can be utilized to pay off the debts. On 4th March, DRT Judge Benakanahalli heard these applications on a priority basis and reserved the order for March 7 on SBI’s application for securing lender’s right.

Interestingly enough, Mallya’s counsel Uday Holla vociferously argued that his client is being “hounded” by banks even though he is a “small-time defaulter”. Apparently Mr. Holla intended to compare his client with the likes of Reliance India Limited, which allegedly faces a debt of INR 40,000 crore. Nevertheless, with all good intentions, Mr. Holla’s submission on his client’s miniscule financial nature promises to bring a smile to all our faces.

On the other hand, the banks argued that since Mallya has given personal guarantees for raising loans, he is personally liable to surrender all his assets for realization of the debts. To this, Mr. Holla argues that his client has secured the Sweetheart Deal as a result of a Non-compete agreement that Mr. Mallya will not enter the liquor business for next 5 years. This is a consideration for a completely new agreement and therefore, cannot be attached. The DRT postponed the hearing on deciding SBI’s application to impound Mallya’s passport; which is probably why SBI has moved the Karnataka High Court on this matter. What is unclear is why the DRT was reluctant to take up SBI’s application to get Mallya arrested.

Lastly, SBI has simultaneously initiated a full frontal attack in moving the Karnataka High Court to arrest Mallya and to impound his passport. Justice A. S. Bopanna, noted for his no-nonsense approach, has forthwith issued a notice to Mr. Mallya in regard of the same. On the application for arrest, Mr. Holla has argued that “Mr. Mallya is a respected member in Rajya Sabha; and arresting him would amount to demeaning the institution of the Upper House of the Parliament”.

Only time will tell if Mallya steers clear of his newfound woes; but what is sure is that not many will be banking upon him anymore.

 

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