[Vijay Mallya-UBHL] About Rs 3,600 Crore Recovered, Rs 11,000 Crore Still Due, SC Told; Dismisses UBHL's Appeal Against Winding Up

"We are here against the order of winding up of UBHL, which was a corporate guarantor of Kingfisher. Vijay Mallya was also a corporate guarantor and he has been proceeded against. It was alleged that we were unable to pay back the debt to the bank and a petition was filed (before the High Court), and both the Single and the Division benches said it may be wound up. But we have been able to demonstrate that as against the debt of Rs. 6303 crores, as adjudicated by the DRT with interest, assets of over Rs. 14,500 crores are available. There is more than ample for all creditors. This is not a case for winding up. It was the defence of even the banks that all these assets have been attached by the ED", began Senior Advocate C. S. Vaidyanathan for the UBHL.

"Winding up is the last resort. It should not be readily accepted that the company is to be wound up. That is why we are giving so much time to you", observed Justice U. U. Lalit.

"The fixed assets can be classified into 3 categories- UBHL, Vijay Mallya as the individual guarantor, and other entities who have all filed affidavits submitting their assets for disbursing the loans...these are mostly in the form of shares of United Breweries Ltd. (UBL)...these attachments are at the instance of the banks for the money they had loaned to the tune of Rs. 900 crores, which was wrongfully diverted...However, all these assets had been acquired before Kingfisher had even availed of the loan. The attachments orders are under appeal both by us and the banks, which are pending. Before the PMLA court, the ED had filed an application saying that per the PMLA Act, it is for the court to decide if the attachment should continue", he continued.

"The fixed assets are not even valued at current value...there is a record of the number of shares sold by them. The amounts are also available...The HC should have taken into consideration all these facts. Instead, it said that these are matters which cannot be gone into", argued Mr. Vaidyanathan.

"What is the valuation according to them of the ill-gotten wealth? Or the Proceeds of Crime, as they are called?", asked Justice U. U. Lalit.

"But some assets are from 1902! We are talking of loans of 2009!", contended Mr. Vaidyanathan.

Justice Lalit indicated to the attachment orders and the contents of the CBI FIR- "significant proportion of loan sanctioned by the IDBI was transferred to ICICI, Axis Bank and the Bank of Baroda and from there to other Kingfisher accounts, even outside the country. This was never used for the purpose it was sanctioned by IDBI Bank"

The judge also appreciated the prima facie material available against the petitioner, as elaborated in the attachment orders.

"The appeal against these orders is pending! The loan was of 900 crores. What they claimed had been diverted comes to about 200-300 crores. What is attached is more than 14,500 crores! Also, the assets which have been attached were acquired long before 2009!", pressed Mr. Vaidyanathan.

Justice Lalit expressed a desire to peruse the appeal memos of the banks to appreciate their submissions.

"They prayed for the release of the movable and immovable properties in favour of the banks. They submitted that the properties were already encumbered in their favour and that the attachment orders were passed without hearing the banks. They sought that the provisional attachment order be set aside", replied Mr. Vaidyanathan.

"What is the present status of the appeal?", asked Justice Lalit.

"They are pending...the crime alleged is diversion of loans. There is no other crime! Ultimately, that amount also has to go to the banks only! It is the banks which have to recover the money! Even the ED, in its counter-affidavit before the PMLA court, said that it leaves it to the best judgment of the court to grant the prayer to restore the properties to the banks!", advanced Mr. Vaidyanthan.

"What is the extent of the Proceeds of Crime?", questioned Justice Lalit.

"It is shown in the provisional attachment order itself! Out of the total amount sanctioned by the IDBI, the major amount was remitted outside of India. It was said to be employed towards payments of aircrafts, servicing, spare parts. There was huge variation in these payments, particularly leasing payments, in view of the type of aircraft etc...the PMLA investigation concluded that there is reason to believe that the loan sanctioned by the IDBI is not backed by marketable commodities. Accordingly, the order was passed for provisional attachment on grounds of involvement in money laundering", responded Mr. Vaidyanathan.

"What is the predicate of offences, schedule of offences against you?", asked Justice Lalit.

"Diversion of funds", replied the senior counsel.

"So some public servant has to be involved under the Prevention of Corruption Act? The Schedule to the PMLA Act mentions POCA as one of the offences. There is no specific allegation that effect?", asked Justice Lalit.

Senior Advocate Amit Desai responded to this- "There is a charge under the POCA. Officials of IDBI have been named in the chargesheet. Section 13, POCA and sections 120B, 420 and 409 of the IPC have been applied"

"What is the status of the trial? The charges have been framed?", Justice Lalit wanted to know.

"No. It is pending. Because of Vijay Mallya's extradition...", replied Mr. Desai.

"Because of the extradition, everything has been put on the back-burner", observed Justice Lalit.

"They can go on. But everything has come to a stand-still because of this situation", responded Mr. Desai.

"Has the chargesheet been filed? What is the extent of the Proceeds of Crime?', asked Justice Lalit.

"900 crores, which is the amount of the loan disbursed by the IDBI", said Mr. Desai.

"So only IDBI officials have been named? No other officials?", questioned Justice Lalit.

"No. In the first FIR, only IDBI officials have been named. The second FIR pertains to the provisional order of attachment, but no chargesheet has been filed in that", said Mr. Desai.

When Justice Ravindra Bhat inquired about the amount in said order. Senior Advocate Mukul Rohatgi, appearing for SBI, said it was Rs. 4234 crores.

"What is the extent of the loans?", asked Justice Bhat.

"SBI has a decree worth 15000 crores", replied Mr. Rohatgi.

"15000 crores? Against UBHL? How do you compute this?", asked Justice Vineet Saran.

"Yes! 15000 crores due today! So it is a bogus argument that they have the money!", argued Mr. Rohatgi.

"Is the decree final?", asked Justice Lalit.

Yes. The DRT passed it in January, 2017", said Mr. Rohatgi.

"How will it be executed?", inquired Justice Lalit.

"We have been able to recover 3595 crores. 11000 crores are remaining", argued Mr. Rohatgi.

When Justice Lalit asked if this sum of Rs. 3595 crores was a part of the attachment order, he was told that it was beyond the attachment order. "Is this why the banks are saying the assets should be freed?", pressed the judge. "Yes! We have a prior charge. The ED has no stake. Even if it releases the assets, we will get only 4000 crores", contended Mr. Rohatgi.

"You are part of the creditors whose dues have been taken care of. You were noted when the final statement of liabilities was drawn up. Now the company is being wound up. So when you proceed against the assets, your dues will diminish", observed Justice Lalit.

"Yes, but only to the extent of 4000 crores! Other parties, other creditors are also waiting for the winding up! They are also due 200-300 crores! One associate company of UBHL is due some money. They went to the HC to say they support the winding up! This is the state of affairs! They don't want to sell their own assets for UBHL! They went to the ED to protest!", submitted Mr. Rohatgi.

"There is 1000s of crores worth of gap! No bonafide offer has been made in the past so many years", he urged.

"But there must be some material to say these are Proceeds of Crime? Someone has to point out which assets are free and the others which are not free?", noted Justice Lalit.

"But the winding up court also has to see whether there is any chance of payment, any desire for payment, and any funds for payment", said Mr. Rohatgi.

"Are these dues on record?", asked Justice Lalit.

"Yes. As of 2012 and 2013, the gross grant total, for the IDBI and 13 other banks along with other creditors, is 6958 crores. If you add the interest on this, it will be 12-14000 crores", said Mr. Rohatgi.

"But once you approach a tribunal or a court, you will not be governed by your contractual terms", noted Justice Lalit.

"These are not contractual terms. I have a decree for 11.5 % yearly interest", said Mr. Rohatgi.

"Their accumulated losses are more than 50% of the net worth. And this was in 2012, we are now in 2020. Their entire substratum is gone! All business concerns are closed! Everything has gone down the drain! Even if the assets are released in my favour, what will they fetch?", he argued.

"The appeal is totally devoid of merits. It is founded on the allegations of a 'X' director who is saying that so much is due. He has no idea. He is just making allegations as to facts and figures...Vijay Mallya is facing contempt before Your Lordships and is refusing to show up! There is a known connection between Manmohan Kapur (one of the directors of the Kingfisher board) and Vijay Mallya? Where has he got all these facts? These are being tweaked by that gentleman sitting abroad! Vijay Mallya has sold a major share to Diageo, which is a foreign spirits giant", he continued.

Finding no reason to interfere, the bench dismissed the petition.