United Bank of India will consult legal experts on declaring United Breweries Holdings (UBHL) a wilful defaulter, as it was a corporate guarantor for loans extended to the now grounded Kingfisher Airlines.
This comes after the lender issued a notice to UBHL and received a reply from it raising some legal issues, said United Bank executive director Deepak Narang.
The bank had issued a notice to UBHL as to why it should also not be declared a wilful defaulter as it was a corporate guarantor to KFA and, under RBI guidelines, group companies of defaulting units can also be classified as wilful defaulters. United Bank had declared Kingfisher Airlines chairman Vijay Mallya and its three directors wilful defaulters on September 1.
?UBHL has raised some legal issues in its response. We will examine those issues and consult law experts in our bank. The bank?s general manager (law) is looking into it,? Narang said.
?After examining legal aspects, we will give a reply to UBHL and, if they want, we will call them for a hearing,? he added. ?If a borrower is declared wilful defaulter, its guarantor is also a wilful defaulter if the firm belongs to the same group and does not pay up,? he said.
A borrower is classified as a wilful defaulter when it does not repay despite having the capacity to do so, or has siphoned off funds or diverted them for some purpose other than for which the loan was granted. Once an entity or an individual is declared a wilful defaulter, it is barred from availing finance from banks and financial institutions.
Kingfisher Airlines borrowed around R350 crore from United Bank and has close to R6,500-crore in outstanding to a consortium of 17 banks.
Mallya, who was declared a wilful defaulter by United Bank, has maintained he was not given a hearing on the matter.
If United Bank finally decides to declare UBHL a wilful defaulter, it would come as a major blow to Mallya as SBI too has sent a notice to him.
?We have already sent out a notice and there is a mandatory time that is required to be given to them to respond, so that time is currently going on,? said SBI chairman Arundhati Bhattacharya on Tuesday.
