Mumbai: In a setback to liquor baron Vijay Mallya, the Bombay High Court today refused to restrain banks from selling shares of United Spirits pledged as security against loans to Kingfisher, apparently jeopardising his plans to complete stake sale to Diageo and to revive the grounded carrier.
"Ad-interim relief refused," said Justice S J Kathawala after hearing the banks and United Breweries Holdings, Kingfisher's parent company, which had filed the suit.
The court order would mean that the consortium of 17 banks would be free to sell shares of the subsidiary companies of the UB Group which had been pledged with the lenders under an agreement in 2010.
During the course of arguments, the banks informed the court that the process of sale of shares had already begun. Their counsels informed the court that after the borrower defaulted on repayment, it was decided to sell the pledged shares as per the agreement between the parties. Even those banks which are not part of the consortium have also started selling the shares, they said.
Birendra Saraf, Counsel for UB Group, told reporters that the banks had informed that one crore shares of Mangalore Chemicals and Fertilisers, a subsidiary of UB Holdings, pledged with the lenders, had already been sold. "The deal was materialised today," he said.
He had told the court earlier that 23 lakh shares of companies, including United Spirits Ltd and Kingfisher Airlines, were pledged in exchange for loans.
Mallya-owned UB Holdings pleaded in the suit that the banks be restrained from selling shares of United Spirits Ltd (USL) and other companies collectively worth Rs 100 crore. The petition sought a stay after State Bank of India sold a portion of USL shares recently, prompting the Mallaya-owned group to move the high court for relief.
The action by the banks, led by SBI which is the lead lender to the airline with over Rs 1800 crore dud exposure, is seen as a big jolt to Mallya's plans of reviving the airline as well as completing the stake sale in USL to Diageo, announced last November for over Rs 11,000 crore.
The banks decided to sell shares of USL after Kingfisher failed to repay their dues worth over Rs 7,500 crore since January 2012.
In February, the banks had decided to recall the loans to Kingfisher by selling a portion of the collaterals with them which included USL and Mangalore Fertilisers shares, Mallya's Goa villa and also the Kingfisher House in Mumbai apart from the brand kingfisher which was valued at over Rs 4,000 crore at the time it was pledged.
Finance Minister P Chidambaram appeared to support such a move when he last month asked state-run banks to take action against rich promoters of ailing companies.
"We cannot have an affluent promoter and a sick company. Promoters must bring in money... We wish banks take firm steps to recover non-performing assets," Chidambaram had said after a meeting with the bankers.