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Business News/ Companies / As noose tightens, Kingfisher Airlines knocks on high court doors
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As noose tightens, Kingfisher Airlines knocks on high court doors

The airline challenged a notice by PNB alleging that it had wilfully defaulted on `770 crore of loans and sought more time to comply with requirements

Kingfisher Airlines owes `7,500 crore to a consortium of banks led by State Bank of India. In February 2013, bankers publicly stated they had lost faith in the management’s ability to revive the company. Photo: HTPremium
Kingfisher Airlines owes `7,500 crore to a consortium of banks led by State Bank of India. In February 2013, bankers publicly stated they had lost faith in the management’s ability to revive the company. Photo: HT

New Delhi: Kingfisher Airlines Ltd, grounded in October 2012 under the weight of heavy debt and accumulated losses, on Tuesday approached the Delhi high court for relief in two separate cases.

The airline challenged a notice by Punjab and National Bank (PNB) alleging that it had wilfully defaulted on 770 crore of loans and sought more time to comply with requirements under its listing agreements with BSE Ltd and National Stock Exchange Ltd (NSE).

PNB had said in a 21 August notice that if no reply was received within seven days, the airline and its guarantors, United Breweries (Holdings) Ltd (UBHL) and promoter Vijay Mallya would be declared “wilful defaulters".

The matter was mentioned by the airline through senior advocate Rajiv Nayar before a bench comprising justices Badar Durrez Ahmed and Siddharth Mridul, which listed it for hearing on Wednesday.

Kingfisher has sought directions to the bank to rescind the notice and also restrain it from taking any action against the airline pursuant to the notice. It has contended that the bank’s action is “arbitrary, unreasonable, untenable and unlawful". The airline has contended that the 21 August notice “for the first time and as a complete afterthought has sought to rely on additional alleged facts in support of its decision to classify the petitioner, UBHL and Vijay Mallya as wilful defaulters".

The airline was issued the notices under the 1 July 2013 master circular from the Reserve Bank of India that pertains to steps to be taken by commercial banks with respect to non-performing assets. If Kingfisher Airlines gets characterized as a wilful defaulter, banks can take over the management of the company. In addition, bank funding to the entity will stop.

Kingfisher Airlines owes 7,500 crore to a consortium of banks led by State Bank of India. In February 2013, bankers publicly stated they had lost faith in the management’s ability to revive the company. Kolkata-based United Bank of India, which tried to tag promoter Vijay Mallya a “wilful defaulter", has been dragged to the Kolkata high court by Mallya.

In the second case, in a separate application filed by Kingfisher, justice Vibhu Bakhru of the Delhi high court granted it four weeks of extra time to comply with the requirements of the listing agreements it had entered with BSE and NSE.

In that case, Kingfisher had taken the BSE, the NSE, the Securities and Exchange Board of India (Sebi) and the ministry of civil aviation to court on 30 July. It claimed that due to the delay in granting security clearance to lawyer Lalit Bhasin for his appointment as a director of the ailing airline, it had failed to appoint a director and comply with its obligations under the listing agreement, for which it was being penalized.

Mint reported on 5 August that Kingfisher claimed that the BSE had fined the company 61,798 for failing to declare its financial results and 84,270 for non-compliance with listing conditions.

During the proceedings of that case, the ministry of civil aviation had granted Bhasin clearance and directed the NSE and the BSE to consider the matter afresh, subject to Kingfisher complying with the listing requirements and declaring its financial results within three weeks.

On Tuesday, Kingfisher told the high court that in addition to Bhasin, a third director was required by a public company to conduct a meeting of the board of directors and declare its financial results. It said that it had made a request for security clearance of a third director to the ministry of civil aviation on Monday. The government argued that the company should have raised this issue when the question of Bhasin’s clearance was brought to the court.

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Published: 26 Aug 2014, 11:58 PM IST
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