Kingfisher Airlines set to be declared a wilful defaulter by its lenders

NEW DELHI: Kingfisher Airlines is set to be declared a wilful defaulter by its lenders, which could mean promoter Vijay Mallya facing criminal proceedings, being unable to set up any new ventures for five years and getting barred from raising money from financial institutions.
Kingfisher Airlines owes about Rs4,022 crore to a consortium of 17 lenders led by State Bank of India (SBI), which is close to declaring the company a wilful defaulter, said two bank officials aware of the development. The process involves uncovering diversion of funds by borrowers, something which was detected by Ernst & Young during its forensic audit of Kingfisher Airlines, the officials told ET. The airline hasn’t flown since October 2012, grounded by its inability to pay employees and subsequently losing its licence.

“It is a matter of time (declaring Kingfisher a wilful defaulter). They of course will have a legal recourse but that too will not take long,” said one of the officials.

Kingfisher Airlines, however, denied that there had been any diversion funds. “The allegation that there has been diversion of money in the loans given to Kingfisher Airlines is baseless and not supported by any facts,” said Prakash Mirpuri, vice president, corporate communications, at the UB Group. While Punjab National Bank has already given its consent for the airline being declared a wilful defaulter, SBI has also found fund diversion to have taken place, thus making for a watertight case. “Once declared as wilful defaulter, the holding company will also stand as defaulter, which will ensure that they do not have any access to finance,” said the second official. UB Holdings is the guarantor for Kingfisher Airlines.

The Securities and Exchange Board of India (Sebi) is also informed about wilful defaulters to prevent them accessing capital markets. The move could impact the UB Group plan to acquire additional stakes in its Mangalore Chemicals and Fertilisers Ltd (MCFL) unit. Earlier this year, UB Group joined hands with the Zuari group to ward off a hostile takeover bid by Deepak Fertilisers for MCFL and offered to buy additional shares in the firm at 9% more than their rival.

Kingfisher Airlines is already battling United Bank of India, another stateowned lender, in the Calcutta High Court to prevent being classified as a wilful defaulter. It has outstanding loans to United Bank worth Rs 300 crore. The bank has issued notices to both Kingfisher's management and Mallya.

“Neither Kingfisher Airlines nor any of its directors have been classified as wilful defaulters. As regards United Bank of India threatening to classify Kingfisher Airlines as a willful defaulter, the matter is sub judice," said Kingfisher's Mirpuri. As per Reserve Bank of India norms, banks will need to give Kingfisher Airlines 15 days to defend itself against such a decision. This will be handled by a grievance redressal committee headed by the chairman and managing director two other senior officials.