UK court upholds plea of Indian banks to waive their security on Vijay Mallya’s assets

Chief Insolvencies and Companies Court in London upheld the application of a consortium of Indian banks, allowing them to waive their security over the assets of fugitive liquor baron Vijay Mallya, reported PTI.

The consortium of 13 banks led by the State Bank of India has argued in favour of their right to remove the security provided by them to Mallya’s assets. Financial debts are commonly in the form of securities or deposits.

The consortium has been pursuing the bankruptcy order in the United Kingdom to prove in the Insolvencies and Companies Court that the fugitive entrepreneur was bankrupt. This was the banks’ attempt to ensure that a bankruptcy trustee was appointed to investigate Mallya’s worldwide assets and recover the money he owed them.

The consortium of banks had in December 2018 initiated bankruptcy proceedings against Mallya, which owes the banks more than Rs 9,000 crore.

Mallya’s lawyers have argued that the funds in question involve public money held by the banks in India which prevents them from such a security waiver. In earlier hearings, the fugitive businessman’s barrister, Philip Marshall, had referenced witness statements of retired Indian judges to state that there is public interest under Indian law as the banks are state-owned.

In its ruling, Judge Michael Briggs noted: “I order that permission be given to amend the petition to read as follows: ‘The Petitioners [banks] having the right to enforce any security held are willing, in the event of a bankruptcy order being made, to give up any such security for the benefit of all the bankrupt’s creditors’”.

The order has brought the consortium a step closer to recovering the debts, according to PTI. The court has set July 26 for final arguments in favour of and against granting a bankruptcy order against Mallya. The date was finalised after the banks accused the 65-year-old businessman of trying to delay the matter and asked the bankruptcy plea to be brought to its end.

“Dr Mallya should have been extradited by now,” said barrister Marcia Shekerdemian, representing the banks, reported PTI. She also pointed out that the fugitive businessman was refused permission to go to the Supreme Court in May last year, arguing against Mallya’s defence that the cases against him are politically motivated.

Mallya is currently on bail in the United Kingdom while a confidential legal matter in the country is resolved. This is believed to be related to an asylum application.

Meanwhile, the consortium has been pursuing the bankruptcy order. Mallya’s legal team has contended that the debt remains disputed and that the ongoing proceedings in India on extradition prevent a bankruptcy order to be made in the UK.

In February 2017, India had submitted an extradition request to the United Kingdom after Mallya made it clear he would not return. In July 2019, the United Kingdom High Court allowed him to challenge his extradition order.

In January, New Delhi said the United Kingdom government had informed it that Mallya cannot be extradited until a “confidential legal issue” related to him is resolved. However, the UK government has refused to provide details of the proceedings or disclose how long it would take to resolve the matter.

The Indian government had informed the Supreme Court about the pending proceedings in the UK on two earlier occasions in October and November too.

Mallya has repeatedly denied the charges against him and offered to pay back 100% of the amount borrowed by Kingfisher Airlines, but neither the banks nor the Enforcement Directorate has been willing to accept the offer. He also claimed that the allegations against him were related to borrowing only Rs 900 crore.

The debt sought by the banks comprises principal and interest, in addition to compound interest at a rate of 11.5% cent per annum from 25 June 2013. Mallya has also made applications in India to contest the compound interest charge.