Monday, July 31, 2017

Flying high on deceit

“The new loans did nothing to revive Kingfisher and the airline stopped flying in October 2012. In another month’s time, lenders like BNP Paribas of France filed a petition in the Karnataka High Court to wind up Kingfisher Airlines and UB (Holdings), the company through which Mallya controlled his other companies. BNP wanted the ₹146 crore that it was owed. The petition was accepted by the high court after a year, in November 2013, and is still Kingfisher Airlines 39 being heard.

Over the years, many other lenders have also become party to the winding-up petition. This includes SBI and aircraft lessors and engine makers such as Rolls-Royce and IAE.

As of March 2016, Kingfisher Airlines owed eighteen Indian and other banks ₹6,939 crore in principal and interest dues. Of this, ₹1,600 crore was owed to SBI and ₹800 crore each to IDBI Bank and Punjab National Bank.

A relook that mattered

In August 2013, perhaps realising that Vijay Mallya and Kingfisher had taken the bank for a ride in offering the brand as collateral, SBI and some other banks decided to take a relook at the brand value. The new valuation — by a new agency — came up with a figure of ₹200 crore (down from ₹4,100 crore in 2010, on the basis of which the banks had given further loans to the airline).

Two years later, in September 2015, the brand value of Kingfisher was down to ₹100 crore. In November 2015, after a Herculean effort that had to be cleared by the Bombay High Court and the Supreme Court, SBI was able to tag Vijay Mallya, Kingfisher Airlines and United Breweries Holdings as ‘wilful defaulters’.

Under RBI norms, a person or company is declared a wilful defaulter if he/it meets one of four conditions: his loans are not repaid when he has the capacity to do so; he has not used the loan for the purpose for which it was borrowed and diverts the money elsewhere; he siphons off the funds and money is not available with him in any asset form; and he sells off the assets given as security against loans without informing the lenders.

SBI had contended before the courts that funds were diverted from Kingfisher Airlines to various UB group companies and other firms. SBI made the claim after a forensic audit of Kingfisher Airlines. Mallya denied all allegations. SBI also said that UB (Holdings) had deliberately avoided paying its lenders.

Three months after the SBI action, Punjab National Bank on February 16, 2016 also declared Mallya, Kingfisher Airlines and UB (Holdings) wilful defaulters.
30/07/17 Business Line