SBI declares Vijay Mallya a wilful defaulter

SBI declares Vijay Mallya a wilful defaulter

India’s largest lender State Bank of India (SBI) has declared Kingfisher Airlines, Vijay Mallya and United Breweries Holdings wilful defaulters, sources told FE, adding that a letter was sent to Mallya late last week.

“The names will be sent to RBI and credit information companies shortly and they will not be allowed to raise funds for five years,” a banker said.

According to people familiar with the letter, SBI has written that the bank’s grievance redressal committee has considered the legal representation of Mallya and has found it to be unsatisfactory.

“The bank has heard his advocates and has rejected their representation,” a source said.

In August last year, the bank had sent a notice to the airline and had given time to represent its case. However, while the Reserve Bank of India’s (RBI) wilful defaulter guidelines do not require a lawyer to be present at the grievance redressal committee meetings, Kingfisher Airlines had moved the Bombay High Court seeking intervention. It was finally resolved in September when the Supreme Court allowed Mallya’s lawyers to be present at the meetings.

SBI has also taken cue from an earlier instance when United Bank’s case of wilful defaulter against Kingfisher Airlines was shot down by the Calcutta High Court since its grievance redressal committee had four members instead of the mandated three.

“We have also taken care not to exceed the number of members in the committee in accordance with the United Bank case,” the source added.

Kingfisher Airlines, which has not flown since 2012, has dues of over Rs 7,000 crore to a consortium of 17 bankers who have been trying to recover their dues by selling securities pledged by the firm. These included real estate and shares in multiple group entities. SBI’s share is estimated to be the largest at around Rs 1,600 crore.

According to RBI guidelines, a borrower is termed a wilful defaulter if he has defaulted in meeting the repayment obligations to the lender even when it has the capacity to repay, or has not utilised the money from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes.

Paper trail:

Aug 2014: SBI sends wilful defaulter notice to KFA

Sep 2014: KFA seeks documents from SBI to substantiate the allegations in notice

Feb 2015: KFA moves Bombay HC to seek legal representation in wilful defaulter hearing

Jun 2015: SBI writes to Vijay Mallya to appear for a personal hearing

Sep 2015: SC allows Mallya’s lawyers to be present at wilful defaulter hearing

Nov 2015: SBI declares Mallya, UBHL and KFA wilful defaulters