With the grounded Kingfisher Airlines under increasing pressure from its lenders, its promoter and chairman of the UB Group Vijay Mallya has decided to go to the courts seeking damages of close to Rs4,500 crore from them on the ground that they have sold pledged assets, which they have no right to sell.
Kingfisher is in default of repayment of loans of over Rs7,000 crore, for which Mallya and his publicly-held UB Holdings Ltd (UBHL) had stood guarantee.
The airline also said while announcing its fourth-quarter results in Bangalore on Friday that it has filed a case in the Bombay High Court against its lenders for planning to invoke various guarantees given by UB Holdings and Mallya.
It added that the financial statements have been prepared on the basis that it is a going concern.
According to a statement from UBHL, the lenders to Kingfisher had sold certain investments belonging to the company and it was moving the Bombay High Court against the consortium of lending bankers seeking various reliefs, including declaring that the corporate guarantee and pledge agreement given by UBHL on 21 December 2010, which was void.
The company is also seeking a permanent order and injunction restraining the consortium of bankers and their associates from taking any further steps based on the pledge agreement and the corporate guarantees. In addition, UBHL has sought an order and decree on damages worth Rs3,199.68 crore.
While this suit is against the consortium of 17 public sector banks, UBHL has also filed another suit in the Bangalore High Court, seeking to restrain aircraft lessors and certain other creditors who have invoked corporate guarantees.
As part of this suit, the company has said, it is contesting admission of five petitions under Section 433/434 of the Companies Act by certain creditors of Kingfisher Airlines. UBHL has further said it has filed a suit for damages, claiming an amount of Rs1,319.30 crore against some of the petitioners in the Bangalore city civil court.
Most lawyers seem to believe that Mallya does not have much of a case, particularly as there is no precedent in India of courts granting relief to debtors on such bases. He may merely be trying to buy time, they feel.