HC refuses relief to Mallya, banks free to sell pledged shares
Mumbai: In a setback to liquor baron Vijay Mallya, the Bombay High Court Tuesday refused to restrain banks from selling shares of United Spirits pledged as security against loans to Kingfisher, apparently jeopardising his plans to complete stake sale to Diageo and to revive the grounded carrier.
"Ad-interim relief refused," said Justice S J Kathawala after hearing the banks and United Breweries Holdings, Kingfisher's parent company, which had filed the suit.
The court order would mean that the consortium of 17 banks would be free to sell shares of the subsidiary companies of the UB Group which had been pledged with the lenders under an agreement in 2010.
During the course of arguments, the banks informed the court that the process of sale of shares had already begun. Their counsels informed the court that after the borrower defaulted on repayment, it was decided to sell the pledged shares as per the agreement between the parties. Even those banks which are not part of the consortium have also started selling the shares, they said.
Birendra Saraf, Counsel for UB Group, told reporters that the banks had informed that one crore shares of Mangalore Chemicals and Fertilisers, a subsidiary of UB Holdings, pledged with the lenders, had already been sold. "The deal was materialised today," he said.
He had told the court earlier that 23 lakh shares of companies, including United Spirits Ltd and Kingfisher Airlines, were pledged in exchange for loans.
Mallya-owned UB Holdings pleaded in the suit that the banks be restrained from selling shares of United Spirits Ltd (USL) and other companies collectively worth Rs 100 crore. The petition sought a stay after State Bank of India sold a portion of USL shares recently, prompting the Mallaya-owned group to move the high court for relief.
The action by the banks, led by SBI which is the lead lender to the airline with over Rs 1800 crore dud exposure, is seen as a big jolt to Mallya's plans of reviving the airline as well as completing the stake sale in USL to Diageo, announced last November for over Rs 11,000 crore.
The banks decided to sell shares of USL after Kingfisher failed to repay their dues worth over Rs 7,500 crore since January 2012.
In February, the banks had decided to recall the loans to Kingfisher by selling a portion of the collaterals with them which included USL and Mangalore Fertilisers shares, Mallya's Goa villa and also the Kingfisher House in Mumbai apart from the brand kingfisher which was valued at over Rs 4,000 crore at the time it was pledged.
Finance Minister P Chidambaram appeared to support such a move when he last month asked state-run banks to take action against rich promoters of ailing companies.
"We cannot have an affluent promoter and a sick company. Promoters must bring in money... We wish banks take firm steps to recover non-performing assets," Chidambaram had said after a meeting with the bankers.
While the consortium leader SBI has an exposure of Rs 1,800 crore to Kingfisher, Punjab National Bank has Rs 800 crore, IDBI Bank (Rs 800 crore), BoI (Rs 650 crore), Bank of Baroda (Rs 550 crore), United Bank of India (Rs 430 crore), Central Bank of India (Rs 410 crore), UCO Bank (Rs 320 crore), Corporation Bank (Rs 310 crore), State Bank of Mysore (Rs 150 crore), Indian Overseas Bank (Rs 140 crore), Federal Bank (Rs 90 crore), Punjab and Sind Bank (Rs 60 crore) and Axis Bank Ltd (Rs 50 crore).
The lenders hold 3.5 crore shares of USL as collateral which at Tuesday's closing price is worth over Rs 6,550 crore. More than 90 percent of promoters stake are pledged with various banks.
USL Tuesday closed at Rs 1859.80, down 1.5 percent on the BSE, while Mangalore Fertilisers closed at Rs 39.30, up 20 percent and Kingfisher closed Rs 8.71, up 4.06 percent on the BSE, whose Sensex rallied 176 points Tuesday.
More from India
More from World
More from Sports
More from Entertaiment
- Cortana for Android available for public beta in US
- Xiaomi Redmi 2 Vs Redmi 2 Prime: Specification comparisons
- Middle class woes to continue, wholesale onion price shoots up to Rs 57 per kg
- Alleged land encroachment in Greater Noida: HC asks DM to decide representation in 3 months
- Watch: Review of Mahindra TUV300