HC admits banks' plea for winding up Kingfisher Airlines

The Karnataka High Court on Friday admitted a petition filed by a consortium of 14 creditor banks, led by State Bank of India (SBI), seeking the winding up of Vijay Mallya's grounded Kingfisher Airlines Ltd.

This comes less than three weeks after the court admitted a petition to wind up Mallya's UB Holdings Ltd.

The court, however, postponed the process of issuance of public notice about winding up process while adjourning further hearing to the second week of January 2014.

Justice Anand Byrareddy passed the order after KAL was unable to demonstrate any concrete progress in its attempt to revive the company by holding talks with prospective investors. KAL in September had indicated to the court that it was working out a scheme for revival.

During the hearing on Friday, KAL's counsel K G Raghavan submitted a copy of an e-mail sent to SBI, intimating the steps taken to revive the company and informing that certain foreign firms are engaged in due diligence of the records of KAL.

He also submitted that the company had now directly engaged the largest creditors, the banks, in its revival process.

However, the banks' counsel S S Naganand said that no details of the revival process had been mentioned in the communication, and that the company could have engaged the banks in the revival process about a month earlier.

Meanwhile, the court further extended its 18 November interim order restraining SBICAP Trustee Company Ltd from taking possession of 'Kingfisher House', a prime property housing the airline's prominent offices in Mumbai.

If Kingfisher fails to secure a stay against Friday's order, an advertisement announcing the winding-up decision will be published in newspapers, notifying all creditors to stake their claim. Employees of Kingfisher Airlines, impleading in the case along with the company and opposing the winding-up petitions of creditors to avoid job losses, also have four weeks to file an objection.

They had invoked preferential payment under a section that granted workmen's dues priority in case of the winding-up of a company, other provisions of the Act notwithstanding. Employees of the trouble-torn airline have not been paid for 15 months.

Creditors have already started monetising the personal and corporate guarantees pledged by Mallya, selling pledged shares of United Spirits Ltd, UB Group's biggest company by revenue, and seizing properties given as collateral.

The Kingfisher Villa in Goa has already been seized by State bank of India, though the bank cannot carry out any activity or alter any arrangement on the premises owing to an order secured by Mallya's legal team.

State Bank of India has the largest exposure to the crisis-hit carrier, at about Rs1,600 crore, followed by Punjab National Bank and IDBI Bank (Rs800 crore each).