The Karnataka High Court has raised serious concerns regarding the recovery process initiated by a consortium of banks against fugitive businessman Vijay Mallya. In a recent order, a division bench comprising Justice D.K. Singh and Justice T.M. Nadaf questioned why the lenders continued to stake claims over shares belonging to Mallya and his son, Sidhartha Mallya, despite having already recovered assets worth Rs 14,131.6 crore. This total recovery stands at more than double the original Rs 6,203-crore loan extended to the now-defunct Kingfisher Airlines.
The court’s observation came as it allowed two petitions filed by Diageo Holdings Netherlands BV, which had been entangled in a dispute over shares pledged as security for a separate loan transaction. The disputed assets, including over 10 million shares held by Mallya and a similar volume held jointly with his son, had been attached by authorities as part of ongoing recovery proceedings. The bench noted that the banks’ claims had been effectively settled given the substantial recovery of assets already achieved.
During the proceedings, the consortium of banks had argued that the contested shares should be utilised to clear the remaining dues associated with the failed airline. However, the High Court rejected this position. The bench determined that the pledge created in favour of Standard Chartered Bank in July 2013, whose rights were subsequently acquired by Diageo, holds legal priority over claims rooted in Mallya’s personal guarantees or contractual restrictions. The court further dismissed the argument presented by the Debt Recovery Appellate Tribunal, which had previously suggested that Diageo was part of the Mallya group, labelling such a view as contradictory to the evidence on record.
Describing the transactions involving Diageo, Standard Chartered Bank, Watson Limited, and the Mallyas as bona fide commercial dealings, the High Court bench set aside the earlier orders issued by the Debt Recovery Tribunal and the Debt Recovery Appellate Tribunal. The ruling serves as a significant legal victory for Diageo Holdings, providing clarity on the ownership and status of the disputed United Breweries Limited shares.
In a pointed critique of the situation, the bench remarked that Mallya’s past behaviour, characterised by a flamboyant lifestyle and personal indulgence, appeared to have hindered the conclusion of these legal recovery efforts. The judges stated that it is now the responsibility of both the consortium of banks and the Government of India to bring these long-standing proceedings to an end, particularly since the recovered value has already exceeded the original loan amount by a significant margin.
Vijay Mallya, who departed India in 2016, was officially declared a “fugitive economic offender” in 2019. Following the High Court’s latest judgment, Mallya took to social media to question the continued branding of him as a thief or cheat, suggesting that his lifestyle had become the primary reason for his continued legal punishment. He expressed hope that the judicial process would eventually lead to a fair resolution.
As the legal fallout from the Kingfisher Airlines collapse continues, this decision marks a notable shift in how the courts are viewing the limits of lender recovery actions when substantial assets have already been sequestered. By prioritising existing commercial pledges over generic guarantees, the court has set a precedent that may influence how remaining claims are handled in the future.
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