The Supreme Court Judge recused himself from hearing the appeal filed by Vijay Mallya against the order passed by the Karnataka High Court that upheld the order of DRAT directing Mallya to deposit Rs. 3,101 Crore.
Brief Facts:
Kingfisher Air Lines was once, one among the biggest companies in India. Vijay Mallya, Chairman of United Breweries (holdings) Ltd, launched Kingfisher airlines in the year 2005. Kingfisher Airlines availed working Capital loans and Term loan from consortium of 17 banks led by State Bank of India in the year 2005. The company was grounded during the year 2012 due to heavy debts and non-payment to its creditors. Subsequently the said loans were restructured on 21st December, 2010 through a ‘Master Debt Recast Agreement’ and other supplementary agreements. However the company did not repay its loan despite recall notices issued to the company and was consequently declared as Non-Performing Asset.
Having United Breweries (holdings) Ltd. provided corporate guarantee and its chairman Vijay Mallya provided personal guarantee for the loans availed by Kingfisher Airlines, the state bank of India invoked guarantee to pay Rs. 6493.29 crores towards the availed loans. Whereas the Guarantors denied the liability stating the guarantee agreement was signed out of coercion and undue Influence.
The consortium banks apart from other recovery modes, also initiated proceedings before Debt Recovery Tribunal for recovery of Rs. 6203 crores along with interest at 15.20% p.a. After hearing both sides and perusing the records produced, DRT on 19/01/2017 held Vijay Mallya jointly and severally liable for the debts obtained by Kingfisher Air Lines and directed him to pay Rs. 6203 crores along with interest at 11.50% p.a.
Against the order passed by the DRT, Mallya preferred an appeal before the Debt Recovery Appellate Tribunal. However the registry after scrutiny has notified certain objections in the Memorandum of Appeal that are to be complied with. On 02/01/2018 DRAT dismissed the appeal for non-compliance of objections and for non-appearance. On 05/03/2018, he filed two applications praying, set aside of dismissal order and condonation of delay in filing set aside petition. On 28/03/2018 while dealing with these applications DRAT directed him to deposit Rs.3,101 crore on or before 25th April, 2018 as a precondition to hear the appeal failing which the appeal shall stand dismissed. Mallya failed to deposit the said money and consequently the appeal stood dismissed.
Following the dismissal order passed by the DRAT, Mallya filed a writ petition before the Karnataka High Court praying to quash the impugned order passed by the DRAT on 28/03/2018. He challenged the order of the high court stating that there is no justification to impose a precondition directing to deposit Rs.3,101 crore for hearing restoration and condonation of delay applications. He stated that DRAT should have considered his financial constraints as all of his assets were frozen by U.K. and Indian Courts. He further contended that huge amount of money is lying in the registry in pursuant to the deposit made as per the court orders in various litigations pertaining to the same loan transactions. However on 5/10/2018 the Karnataka High court dismissed the writ petition for devoid of merits and upheld the decision passed by the DRAT.
Following the dismissal of writ petitions, Vijay Mallya filed review petition before the Karnataka High court stating that the court had earlier overlooked the significant event that transpired between the date of reservation of judgment and the date of pronouncement of judgment that would have had an impact on the order passed in writ petition and hence it is an apparent error. The court while ruling that there were no significant events took place between the said dates and the above review petition is devoid of merits, dismissed the review petition on 13/09/2019.
Key Features:
1. The Karnataka High court while dismissing the writ petition observed that the conduct of the parties did not reflect the bonafide of proceedings and held that the precondition imposed by DRAT as valid and is in accordance with law.
2. The court rejected the contention of the petitioner that his properties were frozen by U.K. and Indian Courts and stated that the order of freezing of properties of Mallya passed by UK court for the first time in 10 months after the date of the order passed by DRT.
3. The court further observed the claim that huge amount of money is lying in the registry as deposit pertaining to the same transaction as vague due to want of necessary particulars and hence not acceptable.
4. The contention raised by the petitioner in review petition that the court overlooked the significant event of United Breweries (Holdings) Ltd. Offered Rs. 13,960.31 crores as final settlement was rejected stating that not even a penny was paid in pursuance to the offer and the same is devoid of merits.
On 20th January, 2020, the appeal filed against the two orders passed by the Karnataka High Court was listed before the Supreme Court bench comprising Justice R.F.Nariman and Justice Ravindra Bhat. Justice R.F.Nariman recused himself from hearing the appeal as his father F.Nariman was the counsel for defence and would lead to conflict of interest. Hence while observing that not even a penny was paid towards the repayment of loan even after a year of the order, he directed that the case is to be listed before another bench in which he is not a member.
Edited by J. Madonna Jephi
Approved & Published – Sakshi Raje
Reference:
1. Vijay Mallya vs. State Bank of India, Karnataka High Court, 5th October, 2018, https://indiankanoon.org/doc/114912732/ (last visited on 21st January, 2020).
2. Vijay Mallya vs. State Bank of India, Karnataka High Court, 13th September, 2019, https://indiankanoon.org/doc/182836245/ (last visited on 21st January, 2020).
3. Deccan Herald, SC judge recuses from hearing Mallya’s plea against K’taka HC order for payment of Rs.3,101 Cr, https://www.deccanherald.com/national/north-and-central/sc-judge-recuses-from-hearing-mallyas-plea-against-ktaka-hc-order-for-payment-of-rs-3101-cr-796515.html (last visited on 21st January, 2020).
