London court defers Indian banks' bankruptcy plea; allows Vijay Mallya six months to pay up
BusinessToday.In April 10, 2020
A London court adjourned the bankruptcy petition against Vijay Mallya filed against him by State Bank of India-led consortium of banks. Judge Briggs adjourned the petition and said that Mallya must be given "at least six months" time to repay the banks. Declaring him bankrupt would have enabled the banks to recover a loan of over Rs 9,000 crore.
While pronouncing the judgment, Briggs said that the petition was in breach of the Insolvency Act and Insolvency Rules. He added that the banks failed to disclose their security over Mallya's assets. The banks were secured creditors in part, he said.
The London court adjourned the petition and allowed sufficient time for Mallya's petitions in the Supreme Court as well as his settlement proposal before the Karnataka High Court to be determined. This would allow Mallya time to repay the debts he owes in full. Briggs added that Mallya's petitions "stand a reasonable prospect of success".
"If the proposal before the Karnataka HC is sanctioned, then the United Breweries (Holdings) Ltd (UBHL) debt will be paid in full and there will be no liability under the personal guarantee. It is difficult to see what reasonable basis the banks may have for rejecting the offers," said Briggs.
The London court called the banks' bankruptcy petition "by any measure extraordinary". "The banks are pressing for a bankruptcy order at a time when there is extant proceedings in India such as a challenge to the personal guarantee, a challenge to the high rate of interest accruing on the debts and the Karnataka HC is seized of compromise proposals presented by UBHL. In addition a petition has now been presented to the Supreme Court to sanction a binding compromise," stated the court.
Mallya has filed a petition in Supreme Court asking for a court-sanctioned settlement with UBHL creditors. He had also offered to sell the UBHL assets and other companies controlled by him as well as his family members and deposit them with the Karnataka HC.
Briggs added that the banks should have known that they are secured creditors due to their participation in the Indian proceedings.
The bankruptcy petition is based on the judgment loan by the Debt Recovery Tribunal in Karnataka against unpaid loans that were extended to his airline, Kingfisher Airlines.