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Justice Michael Briggs of the insolvency division of the High Court granted relief to Mallya, ruling that he should be given time till his petitions to the Supreme Court of India and his settlement proposal before the Karnataka High Court be determined, allowing him time to repay his debts to the banks in full.
Chief Insolvency and Company Court judge Briggs, in his verdict delivered Thursday, said there is no obvious advantage to the banks to pursue this class action at this point in time.
This bankruptcy petition is by any measure extraordinary. The banks are pressing for a bankruptcy order at a time when there are extant proceedings in India, read the judgment.
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A consortium of Indian public sector banks led by the State Bank of India had sought a bankruptcy order against Mallya as part of efforts to recoup around GBP 1.145 billion of unpaid loans from Mallya.
Judge Briggs had reserved his judgment after hearing arguments from both sides in December last year over the loans to Mallya’s now-defunct Kingfisher Airlines.
In his judgment, the judge concluded that the legal cases being pursued by Mallya in India stood a reasonable prospect of success.
Although the petition to the Supreme Court and proposal before the Karnataka High Court are not guaranteed to succeed, they are genuine. The evidence supports the view that the petitions stand a reasonable prospect of success, he said.
According to the court document, the judgment on the bankruptcy petition was produced in December last year and circulated in January this year but its handing-down was adjourned for further argument at the request of the parties.
The parties agreed to a hearing after 1 June 2020. The outbreak of Covid-19 has made fixing a date uncertain. In my judgment it is in the interests of the administration of justice and in the public interest that this judgment be handed down now, the ruling noted.
While the banks had argued for a bankruptcy order to ensure they receive what is owed to them amid a multiplicity of creditors, Mallya’s lawyers stressed that the Indian banks were identified as secured creditors by Indian courts, which makes the bankruptcy petition in the UK court unfair.
Why should we take less than everything we are owed, said Marcia Shekerdemian, the barrister for the Indian banks, referring Mallya’s settlement offers.
During the hearing last year, the court had also heard that the banks do not accept the former Kingfisher Airlines boss’ assertion that most of his assets are in India and to a lesser extent worldwide.
A villa in France and assets spread across the British Virgin Islands, a trust registered in the Caribbean nation of St Kitts & Nevis and the Indian Empress superyacht in Malta were some of Mallya’s worldwide assets referred to during the course of the hearing.
Mallya’s legal team, led by barrister Philip Marshall, sought dismissal of the bankruptcy petition, arguing that their client was being unfairly pursued by the banks in India and the UK on opposite grounds.
Payment has been inhibited by virtue of the intervention by the Enforcement Directorate of India the banks are seeking a bankruptcy order against Dr Mallya for non-payment but have created a situation where he can’t make a payment, Marshall told the court.
A previous UK High Court ruling had refused to overturn a worldwide order freezing Mallya’s assets and upheld an Indian court’s ruling that the consortium of 13 Indian banks were entitled to recover funds amounting to nearly GBP 1.145 billion.
The banks then launched efforts to recover dues as part of the freezing order, with the bankruptcy petition aimed at seizing UK-based Mallya’s assets to recover the dues.
Meanwhile, Mallya remains on bail pending a UK High Court ruling in the extradition proceedings brought by India in relation to charges of fraud and money laundering amounting to an alleged Rs 9,000 crores.