Vijay Mallya’s United Spirits seat under threatBy Amy Hopkins
Vijay Mallya, billionaire chairman of United Spirits, has been declared a “willful defaulter” by the United Bank of India, casting further uncertainty over his future at the company.
The bank claimed that Mallya has purposefully not paid an emergency overdraft lent to him to support his grounded Kingfisher Airlines despite having the means to.
Overall, Mallya owed UBI a total of US$66 million due to loans incurred for his cash-strapped airline, whose three other directors have also been declared “willful defaulters”.
A wilful defaulter tag prohibits an individual or company from accessing banks and capital markets for funding needs, and could potentially lead to investigations and legal proceedings.
Mallya had unsuccessfully challenged UBI’s plans in a Calcutta court and failed to turn up to a grievance hearing before declaring a “willful default”, the Financial Times reports.
His position as chairman of both United Spirits – which recently acquired by Diageo in a £1.1 billion deal – and United Breweries are therefore both at risk as his “willful defaulter” tag could prevent the companies from accessing bank funds.
According to the Reserve Bank of India’s (RBI) guidelines, companies which are seeking to borrow money from banks should “expeditious and effective steps” to oust directors who are willful defaulters from their boards.
Other banks seeking to declare Mallya a willful defaulter include the Punjab National Bank, IDBI bank, and the State Bank of India, which, according to FT, is leading a consortium owed more than £1bn from Kingfisher and has commissioned a forensic audit of the company’s books.
However, representatives for Kingfisher Airlines has described a Calcutta court’s decision not to let it be represented by an external lawyer of its choice at the missed grievance hearing as a “miscarriage of justice” and said that it would seek “all available legal remedies”.
Diageo now owns 55% of shares in United Spirits – the world’s biggest drinks producer by volume – after finalising its embattled deal in July this year, keeping Mallya as chairman of its board.
The UK drinks group has not yet responded to The Spirits Business’s request for comment.
Mallya has irked state officials and the Indian public by continuing to lead a supposedly extravagant lifestyle, despite not paying his loans and leaving Kingfisher Airlines workers without a salary for seven months, eventually causing the airline to be grounded.
As it stands, USL is yet to publish its full-year sales results for 2013/2014, thought to be due to the company’s inability to explain loans of approximately 1,400 crore (around £140m) to parent company United Breweries Holdings, during which time billionaire Mallya was leading the group.