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Payment default case: Interim relief for Kingfisher

New Delhi: The Delhi High Court today set aside a Punjab National Bank (PNB) notice to the extent that Kingfisher airlines and its guarantors, United Breweries (Holdings) Ltd (UBHL) and Vijay Mallya, will be deemed as wilful defaulters in the event of no reply to the bank's notice within seven days from August 21.


Vijay Mallya

The bank had issued the notice alleging the carrier has wilfully defaulted in payment of outstanding dues of more than Rs 770 crore. Today, PNB submitted before the court that currently dues to be recovered from the airlines are more than Rs 800 crore. Justice Vibhu Bakhru said that the operation of the default notice would not come in effect as PNB will have to give the documents, relied upon by it, within a week from today.

The airlines has been given two weeks time thereafter to respond. The court also held as "unacceptable" the bank's reasons for not allowing the airlines to be represented by lawyers in the proceedings initiated to decide whether the grounded carrier is a wilful defaulter for non-payment of dues and directed that two advocates be allowed to represent Kingfisher.

It asked the bank to supply within a week all the documents it has relied upon or intends to rely upon in the matter, saying there is "no justifiable reason" to depart from the practice in the present case. Kingfisher had moved the court seeking directions to the bank to rescind its August 21, 2014 notice and those issued earlier as well as to restrain it from taking any action against the airlines in pursuance of the same.

The court, while disposing of the airlines' plea, also addressed the bank's apprehension that the airlines is intending to delay the proceedings by wanting presence of its lawyers, saying Kingfisher will be accompanied by two advocates, one of whom may be a senior advocate, and they will be present before the committee on September 22 when the hearing will be concluded within six hours.

The bank submitted before the court that lawyers were not allowed as none of the members of the panel, which will conduct the proceedings, was a law graduate. It said that it intends to initiate such proceedings against 81 other borrowers also and allowing lawyers to represent the parties would impede the hearing in the matters. The court, however, was not impressed and said that "at the outset" the reasons cited by the bank "are not acceptable" as any adverse decision of the bank's committee would have significant implications upon the airlines.

The airlines, in its plea, had contended that the bank had denied legal representation to it in the hearings held pursuant to two notices issued last year and it apprehended that the same may happen in connection with the latest notice of August 21. It had contended that such an act of the bank was "arbitrary, unreasonable, untenable and unlawful". The bank had issued the notices under the July 1, 2013 master circular of Reserve Bank of India which pertains to steps to be taken by commercial banks with respect to non-performing assets.

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