Mumbai: In order to build additional legal pressure on Vijay Mallya for the recovery of loans, State Bank of India (SBI) is all set to initiate bankruptcy proceedings in the UK. According to sources aware about the plans, the proceedings against him can be started in the bankruptcy court in the UK under individual insolvency laws. Such a step is facilitated by a reciprocal arrangement that India has with Commonwealth nations, which recognizes and enforces foreign judgments in member-countries.
A person who knows about the plans said, “We will fight tooth and nail to recover the bank’s money. Soon, Mallya will be taken to the bankruptcy court in the UK.”
“Banks have managed to successfully get a freeze over his international assets. We hope to recover a substantial amount once we are done with all the legal action against Mallya,” this person added.
While Mallya’s assets have already been frozen, experts said SBI is seeking a “second layer of security” by taking the beleaguered liquor baron to bankruptcy court. Should Mallya be declared bankrupt, all of his assets will legally vest in the hands of the court-appointed receiver, who would then act in the best interests of the creditors. Any bankruptcy action against Mallya will also be a sentimental win for the banks, they said.
While no bankruptcy application has been filed yet, lawyers on both sides have been made aware that it could happen soon. “Bankruptcy action against Mallya is in the works and you will see the result very soon,” one person said.
“The lenders would have to first prove beyond doubt that Mallya owes them money, which is not less than 5,000 pounds (`448,000), for their claim to be admitted and that will not be a problem because the English courts have recognized the Indian debt recovery tribunal order against Mallya.” Mallya owes SBI over Rs 1,600 crore.
Victory for Banks as Mallya Loses Lawsuit
Mallya has already lost a lawsuit which was filed by 13 Indian banks in UK court two weeks ago. This can be seen as a moral victory of the banks as Judge Andrew Henshaw refused to overturn a worldwide order freezing Mallya’s assets and upheld and India court’s ruling that a consortium of 13 banks were entitled to recover funds amounting to almost $1.55 billion. This order will enable the banks to enforce the Indian judgment against Mallya’s assets in England and Wales.
The order prevents Mallya from removing any assets from England and Wales up to that value or to dispose of, deal with or diminish the value of his assets in or outside of this jurisdiction. However, some legal experts pointed out that a personal bankruptcy order will have no real effect on Mallya’s UK assets or bank accounts because they have already been frozen.
“Mallya’s assets have already been frozen by the English court in the civil proceedings and therefore a personal bankruptcy order will have no real effect on his UK assets and bank accounts, save that the receiver places himself into the shoes of Mallya to act for the benefit of the creditors,” said Sarosh Zaiwalla, a senior partner at Zaiwalla & Co., a London-based law firm.
A 17-member consortium led by SBI is battling to recover dues of over RS 9,000 crore from Mallya and his now-grounded Kingfisher Airlines. The banks have recovered Rs 350 crore from the sale of assets.