The Karnataka High Court order on Tuesday directing the winding up of the holding company of Vijay Mallya, United Breweries Holdings (UBHL), to recover dues payable by Kingfisher Airlines surely comes as a blow to the beleaguered businessman, but it falls woefully short of the dues of around R9,000 crore owed by the defunct airline to a consortium of banks.
The total value of all investments held by UBHL as on date according to Capitaline is R3,365.9 crore. The major investments of UBHL are in United Breweries where it holds a 11.46% stake worth R2,316 crore as on date and United Spirits where it holds 2.9% worth R939 crore.
Since UBHL’s own debt is of around R2,162 crore, if that is removed from the total value of R3,365.9 crore, the value falls to R1,200 crore. Since Mallya holds 52.34% in UBHL, the final value of his holding will be only about R600 crore.
In ordering its winding up, the court took the view that since UBHL was the guarantor for Kingfisher Airlines, if the UB Group is not in a a position to repay the dues owed to a consortium banks, the assets of UBHL can be sold for recovery of dues.
As a result, UBHL will now lose control over all its movable and immovable properties, including shares in group companies, which will be liquidated and paid towards the dues of creditors. Justice Vineet Kothari pronounced the 248-page order while allowing all 11 petitions against UBHL. He also rejected an appeal for staying the order.
“This court has come to a conclusion that the respondent company UBHL deserves to be wound up for failure to discharge their duties to pay up their creditors,” Kothari said in his order, allowing petitions by banks and aircraft lessors.
The development comes after a CBI court last month issued a non-bailable warrant against Mallya in the R720-crore IDBI Bank loan default case as the agency sought his extradition from the UK.
Earlier, the debt recovery tribunal had ordered the State Bank of India-led consortium of banks to start the process of recovering over R6,203 crore, at 11.5% annual interest rate, from Mallya and his companies in another Kingfisher Airlines case.
In January 2015, the high court had admitted a bunch of winding-up petitions against UBHL filed by various lenders and creditors. French bank BNP Paribas, the lead petitioner in the case, and other creditors including SBI, aircraft lessors, aircraft engine makers such as Rolls Royce and International Aero Engines (IAE) and Hindustan Petroleum Corporation (HPCL) had filed petitions. Other companies such as Prestige Estates, HDFC Bank and Lakshmi Vilas Bank, among others, too had filed petition against the winding-up of the company.
“Justice Kothari delivered the verdict while allowing all petitions filed in 2012. The court has pronounced one combined order by allowing all petitions. They did not stay the order. We will now file an original side appeal (first appeal) against the winding up of the company before the divisional bench of the high court,” Praveen
Kumar Hiremath, counsel for Prestige Estates, told FE.
All the objectors in the original petition will be party to the appeal against the winding-up order, he said.
He said UBHL is a going concern and making profits, albeit less. There are 100 direct and over 1,000 indirect employees working in the company and their livelihood will be affected if the company is wound up. The winding-up of UBHL will also harm the interests of its employees and other creditors like Prestige Estates, which has dues from UBHL to the tune of Rs 150 crore. In case the company is wound up, Prestige Estates may also lose its dues from the company. In case of liquidation, they will be the last beneficiary, he said.
The high court has also ordered the official liquidator to take possession of all assets of UBHL — both movable and immovable including shares held in group companies — immediately and recover the dues of creditors. The official liquidator will take charge of all assets and prepare a list of all kinds of assets held by UBHL in India and overseas and evaluate them. The liquidator will submit a report to the court and proceed with the liquidation. However, the entire process will take some time as it involves a lengthy process, the counsel said.
The assets of UBHL also includes shares held by the company in group companies such as United Spirits, United Breweries, UB Engineering, UB Global and Kingfisher Airlines. The airline company suspended its operations in October 2012.
“The assets, whatever are left now, cannot be left under the control, possession and management of the respondent company, and if necessary could be handed over to official liquidator to proceed further until winding up of the respondent company is achieved in accordance with the law,” the judge said said