Lawyers representing United Breweries Group Chairman Vijay Mallya have made an offer that he will repay Rs 4,000 crore by September 2016 to a 17-member consortium of mostly public sector banks.
Mallya owes the banks a whopping Rs 9,091 crore.
Banks led by State Bank of India had approached the Debt Recovery Tribunal to declare Mallya a ‘wilful defaulter’ which in RBI’s definition indicates somebody who is capable but unwilling to pay.
Mallya’s lawyers were also quoted by Mint as offering “an additional Rs 2,000 crore if Mallya wins his lawsuit against GE Corp”. Although, it wasn’t clear which particular lawsuit was being referred to.
United Breweries Holdings (UBHL) has an ongoing lawsuit claiming damages of $234 million from Pratt & Whitney, which it accuses of supplying ‘defective engines’ to its A320 jetliners. Pratt & Whitney is a part of the conglomerated United Technologies.
When Business Today reached out to Mallya’s spokesperson Sumanto Battacharya, he said, “there is no further statement at this point of time”.
Mallya’s offer was informed to the Supreme Court by his counsel CS Vaidyanathan. The Rs 9,091 crore includes interest on the cumulative Rs 6,903 crore of principal amount that Kingfisher Airlines and its holding company UBHL. The company had borrowed from banks in an ultimately doomed effort to keep the airline afloat.
Mallya’s lawyers also affirmed that their client was not in the country but had held two rounds of negotiations on video with the consortium.
While his official spokesperson declined to comment, a confidant of Mallya, speaking to Business Today claimed that, VJM no coward and will not run away and that his gesture to repay Rs 4,000 crore is decent.
Shriram Subramaniam, who runs InGovern Research Services, a corporate governance and proxy advisory firm, said while it was true that there were other industrial houses which owed bigger sums of money, Mallya by offering to return Rs 4,000 crore was not doing anybody a favour.
“In fact, he had charged Kingfisher Airlines a commission for providing personal guarantees. One has to look at the details of Mallya’s offer which is not yet clear till now. Whether he is offering a one-time settlement or is this Rs 4,000 crore a first payment as his assets some say are more than the total liabilities owed. Since there is pressure on banks also to recover, they may arrive at a settlement to save face and claim that they have recovered majority of the funds owed. One has to await details of the settlement offer though.”
He also felt that the initial Rs 4,000-crore offer made was a trial balloon floated to see at what level banks may settle and is likely a bargaining ploy.
The VP (Legal, Finance and Corporate Affairs) of a competitor of UB, who did not want to be named, said: “Even if banks accept the offer, issues like money laundering, diversion of funds from one group company to another, investigations by the income tax department, presence of alleged offshore accounts, non-payment of TDS deducted from employees, etc, all will not go away pursued to send a strong message that the government is serious about cleaning up the system.”
He also felt that if the banks accept more than a 50 per cent haircut on loans lent to Mallya it would sent a bad precedent as the entire system is groaning with non-performing assets.
The anonymous source said: “Tomorrow another defaulter might legally use this as a precedent in case the consortium of banks accept the offer made by Mallya.”
State Bank of India and the other 16 banks in the consortium have asked for a week’s time to consider the offer.
Though the offer is being seen as a preliminary move with a final settlement being a long drawn process, it could be considered a victory.
Public hue and cry, as well as a concerted media effort to bring defaulters to book, seems to be paying off.
Mallya owes the banks a whopping Rs 9,091 crore.
Banks led by State Bank of India had approached the Debt Recovery Tribunal to declare Mallya a ‘wilful defaulter’ which in RBI’s definition indicates somebody who is capable but unwilling to pay.
Mallya’s lawyers were also quoted by Mint as offering “an additional Rs 2,000 crore if Mallya wins his lawsuit against GE Corp”. Although, it wasn’t clear which particular lawsuit was being referred to.
United Breweries Holdings (UBHL) has an ongoing lawsuit claiming damages of $234 million from Pratt & Whitney, which it accuses of supplying ‘defective engines’ to its A320 jetliners. Pratt & Whitney is a part of the conglomerated United Technologies.
When Business Today reached out to Mallya’s spokesperson Sumanto Battacharya, he said, “there is no further statement at this point of time”.
Mallya’s offer was informed to the Supreme Court by his counsel CS Vaidyanathan. The Rs 9,091 crore includes interest on the cumulative Rs 6,903 crore of principal amount that Kingfisher Airlines and its holding company UBHL. The company had borrowed from banks in an ultimately doomed effort to keep the airline afloat.
Mallya’s lawyers also affirmed that their client was not in the country but had held two rounds of negotiations on video with the consortium.
While his official spokesperson declined to comment, a confidant of Mallya, speaking to Business Today claimed that, VJM no coward and will not run away and that his gesture to repay Rs 4,000 crore is decent.
Shriram Subramaniam, who runs InGovern Research Services, a corporate governance and proxy advisory firm, said while it was true that there were other industrial houses which owed bigger sums of money, Mallya by offering to return Rs 4,000 crore was not doing anybody a favour.
“In fact, he had charged Kingfisher Airlines a commission for providing personal guarantees. One has to look at the details of Mallya’s offer which is not yet clear till now. Whether he is offering a one-time settlement or is this Rs 4,000 crore a first payment as his assets some say are more than the total liabilities owed. Since there is pressure on banks also to recover, they may arrive at a settlement to save face and claim that they have recovered majority of the funds owed. One has to await details of the settlement offer though.”
He also felt that the initial Rs 4,000-crore offer made was a trial balloon floated to see at what level banks may settle and is likely a bargaining ploy.
The VP (Legal, Finance and Corporate Affairs) of a competitor of UB, who did not want to be named, said: “Even if banks accept the offer, issues like money laundering, diversion of funds from one group company to another, investigations by the income tax department, presence of alleged offshore accounts, non-payment of TDS deducted from employees, etc, all will not go away pursued to send a strong message that the government is serious about cleaning up the system.”
He also felt that if the banks accept more than a 50 per cent haircut on loans lent to Mallya it would sent a bad precedent as the entire system is groaning with non-performing assets.
The anonymous source said: “Tomorrow another defaulter might legally use this as a precedent in case the consortium of banks accept the offer made by Mallya.”
State Bank of India and the other 16 banks in the consortium have asked for a week’s time to consider the offer.
Though the offer is being seen as a preliminary move with a final settlement being a long drawn process, it could be considered a victory.
Public hue and cry, as well as a concerted media effort to bring defaulters to book, seems to be paying off.
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