Politics

Vijay Mallya Offers to Pay Rs.4,000 Crores to Settle Dues

Vijay Mallya has broken his silence. Credit: PTI

Vijay Mallya has offered to pay a partial amount of what he owes to a consortium of banks. Credit: PTI

New Delhi: Industrialist Vijay Mallya on Wednesday submitted a proposal in the Supreme Court to pay 4000 crore rupees as partial settlement of the dues he owes to a consortium of banks led by State Bank of India.

Senior counsel C.S. Vaidyanathan, appearing for Mallya and his company Kingfisher, made this proposal before a bench of Justices Kurian Joseph and Rohinton Nariman. When the court asked where Mallya is, Vaidyanatha confirmed he is out of the country and that he does not want to return due to the “surcharged atmosphere” against him.

Vaidyanathan said the proposal was a result of negotiations with Mallya, held through video conference for two days, and that Mallya’s presence may not be required as these days everything can be done through video conferencing. Requesting that the proposal to be kept in a sealed cover, he said “media hype against him (Mallya) vitiates public interest. The atmosphere becomes surcharged in the media if the proposal comes out.”

To this Justice Kurian countered, “No. Media has not vitiated the atmosphere. They want the money taken from the banks be recovered. They don’t have any other interest.” Replying on behalf of Mallya, Vaidyanathan said, “The atmosphere is so surcharged against me (Mallya). There are cases in which (the) media created such a surcharged atmosphere that even beatings have taken place… the less said the better.

Senior counsel S.S. Naganand, appearing for the consortium of banks, informed the court that the proposal was to pay by September 4,000 crore rupees of the over 9,000 crore rupees owed.  Naganand said the proposal also mentions a payment of over 2000 crore rupees on the basis of a pending suit filed by Mallya’s businesses. When he expressed some reservations to accepting the proposal, the bench asked the banks to respond within a week. The bench took the proposal on record and told Naganand, “It is for you to tell us whether you reject this or not.”

The consortium of banks had initially approached the Debt Recovery Tribunal (DRT) to arrest Mallaya. But the DRT only issued a garnishee order preventing London-based Diageo Plc from transferring any money to Mallya for the moment. Mallya had received a $75 million payout for selling United Spirits to Diageo. The Karnataka high court had also declined to issue an arrest warrant against him.

In their appeal, the banks said Mallya had publicly declared his intention to stay in London and that if allowed to leave the country he was unlikely to come back. The banks also sought an order to impound his passport, which would curtail his movements in and out of the country without court permission.

The banks said that the DRT and the Karnataka high court were wrong in refusing to pass interim orders against Mallya. The high court had completely failed to protect the interest of the petitioner banks, which had to recover an amount in the excess of 9000 crore rupees from the four respondents  – Kingfisher Airlines, United Breweries (UB), Mallya and Kingfisher Finvest (India) Ltd.

The banks claimed that they had individually advanced loans worth crores to Kingfisher and this had been restructured into a one-by-another agreement on December 21, 2010. UB and Mallya had executed corporate and personal guarantees to repay this amount due by that agreement. This loan had since been declared to be a non-performing asset and recovery proceedings were pending.

The banks said that grave miscarriage of justice would be caused if the proceedings were to be delayed any further or if Mallya succeeds in settling in London.

The bench posted the matter for further hearing on April 7.

  • ashok759

    The unpaid dues of KFA employees add a note of pathos and VM’s colourful lifestyle tends to become a distraction, but this is essentially a commercial transaction gone sour. VM made a poor business decision in starting and running an airline but the lending banks too have been imprudent. 4,000 crores is a worthwhile start, if 2,000 crores from GE materialises, that would be a good resolution to a problem where there are no winners. The man has effectively lost his liquor empire, a crown jewel Diageo and Heineken have been thrilled to acquire. There will be many, many such proposals on the table, as overleveraged groups begin to place assets on the block, Jaypee’s cement division, GVK’s stake in Bangalore airport. The government should turn up the heat, the banks must make fair, reasonable compromises. Think of this as the unwinding of the speculative excesses leading up to 2008.