UB Group chief Vijay Mallya, who was named a wilful defaulter on Monday by United Bank of India due to Kingfisher Airlines' refusal to repay debt, faces the risk of being denied any future bank loans and directorship in any company.
United Bank is part of a consortium of 17 banks, headed by State Bank of India, which has given a loan of Rs6,500 crore to the now-grounded airline.
Other banks in the consortium of lenders needn't necessarily come out with the same declaration. But the damage now has been done and the law is now closing in on the once flamboyant tycoon who has little manoeuvring space apart from filing cases to delay the inevitable: facing criminal charges and losing whatever he now has.
What is the immediate impact ?
If the banking industry follows RBI's pronouncements on wilful defaulters, Mallya is likely to lose chairmanship of United Spirits, now owned by Diageo, and United Breweries, part owned by Heineken.While Mallya now holds just above 5% in United Spirits, the world's third largest liquor maker, he continues to be the chairman and is supposed to remain so under a pact with Diageo. He has also various other business interests including in sports.
Mallya might also lose the chance to retain control of Mangalore Chemicals and Fertilizers (MCF) through a combined effort along with Adventz group head Saroj Poddar to acquire a controlling stake for which a joint open offer for additional stake in the fertiliser company was approved by SEBI earlier.
Is anyone else affected ?
Apart from Kingfisher Airlines and Vijay Mallya, the United Bank named other directors like Subhas Gupte, Anil Kumar Ganguly, Ayani Kurassi and Ravindranath Nedungadi in its wilful defaulters' list triggering a process that might end up blacklisting Mallya or companies owned by its group from raising funds from banks, issue securities in the equity or market and most important, getting stripped of directorship from all companies including the defaulting one.
What are the options before Mallya?
Mallya can go to court against all such orders, get a stay and then delay execution of all such bank issues. "Matters will surely go legal," texted one of the directors to dna.
"Kingfisher Airlines intends to pursue all available legal remedies, including in the Special Leave Petition filed before the Supreme Court," said in a later evening statement.
KFA filed the Special Leave Petition on Friday against an order of Calcutta high court which dismissed its writ petition and an appeal against denial of the company's right to be represented by lawyers before the Grievance Redressal Committee of UBI.
What des the RBI circular say about wilful defaulter?
According to RBI's master circular on wilful defaulters, they should be debarred from any new funding from banks and financial Institutions for existing businesses and also for floating new ventures for a period of five years.The banks would ensure that the defaulting directors should also be removed from the board of the companies and that they are not inducted in the board of any company in future. According to the central bank, the defaulters would be prevented from accessing the capital market and a copy of the list of wilful defaulters (non-suit filed accounts) and list of wilful defaulters (suit filed accounts) should be forwarded to SEBI by RBI and Credit Information Bureau respectively.
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