Interim relief for Kingfisher in payment default case

The Delhi High Court on Thursday set aside a Punjab National Bank (PNB) notice that Kingfisher Airlines and its guarantors, United Breweries (UB) 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.

The bank had issued the notice alleging the carrier had wilfully defaulted payment of dues of more than Rs 770 crore. On Thursday, PNB told the court the dues to be recovered amounted to more than Rs 800 crore.

Judge Vibhu Bakhru said the operation of the notice would not come into effect as PNB will have to give the document, relied upon by it within a week from Thursday. The airline has been given two weeks thereafter to respond.

The court also held as "unacceptable" the bank's reasons for not allowing the airline 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 had relied upon or intends to rely upon in the matter, saying there was "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 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 airline is intending to delay the proceedings by wanting presence of its lawyers, saying Kingfisher will be accompanied by two advocates 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 it intended 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 "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.