A British court on Monday granted a bankruptcy order against Vijay Mallya, paving the way for a consortium of Indian banks led by the State Bank of India (SBI) to pursue a worldwide freezing order to seek repayment of debt owed by the now-defunct Kingfisher Airlines."As at 15.42 [UK time], I adjudicate Dr Mallya bankrupt," Chief Insolvencies and Companies Court (ICC) Judge Michael Briggs said in his ruling during a virtual hearing of the Chancery Division of the High Court here.
Allegations against Vijay Mallaya
The 65-year-old Mallya has been accused in a banks loan default case of around Rs 9,000 crore, which also includes interest on loans.The bankers have actually recovered much more than what they could have recovered in the insolvency and bankruptcy code (IBC).Mallya, however, has been disputing the interest portion, which has been added by the banks on a loan of Rs 6,000 crore. Mallya is already declared as a wilful defaulter by the lending banks. In fact, when the banks decided to move against Mallya in the DRT court way back in 2016, Mallya immediately fled the country. Two and a half years ago, Mallya was declared a fugitive economic offender under the Fugitive Economic Offenders Act, 2018.
Who are the petitioners?
The petitioners were made up of SBI-led consortium of 13 Indian banks, including Bank of Baroda, Corporation bank, Federal Bank Ltd, IDBI Bank, Indian Overseas Bank, Jammu & Kashmir Bank, Punjab & Sind Bank, Punjab National Bank, State Bank of Mysore, UCO Bank, United Bank of India and JM Financial Asset Reconstruction Co. Pvt Ltd as well as an additional creditor, had been pursuing a bankruptcy order in the UK in relation to a judgment debt which stands at over GBP 1 billion. Mallya's legal team contended that the debt remains disputed and that the ongoing proceedings in India inhibited a bankruptcy order being made in the UK.The debt in question comprises principal and interest, plus compound interest at a rate of 11.5 per cent per annum from 25 June 2013. Mallya has made applications in India to contest the compound interest charge.
Denial of appeal by the court
Vijay Mallaya's barrister ,Philip Marshall sought a stay as well as an adjournment of the order while legal challenges remain ongoing in the Indian courts. However, the requests were turned down by the judge who concluded that there was "insufficient evidence" that the debt will be paid back to the petitioners in full within a reasonable period of time. He also put forward an application seeking permission to appeal against the bankruptcy order, which Judge Briggs refused as there was no "real prospect of success" of an appeal.
Big challenge for bankers
The big challenge is to identify his properties outside the UK."The judgment paves the way for starting the process of attaching Mallya's properties all over the world," says one of the 11 consortium members. Mallya, who had sought asylum in the UK, has properties in different parts of the world."The first step would be to identify all his assets in the UK and other countries," says the official.The official also admits that it is going to be a long-drawn process as different jurisdictions have different requirements. "The first task is to identify the assets, which are in his name. We will have to approach the courts of other countries with favourable Indian as well as UK judgments," he adds.
Vijay Mallya's reaction
Mallya said the Enforcement Directorate is attaching his assets worth Rs 14,000 crores against debt of Rs 6,200 crores. He also levelled allegations that the banks are making him bankrupt since they have to return money to the ED. He wrote:"ED attach my assets worth 14K crores at behest of Govt Banks against debt of 6.2K crores.They restore assets to Banks who recover 9K crores in cash and retain security over 5K crores more. Banks ask Court to make me Bankrupt as they may have to return money to the ED".
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