With Kingfisher and its directors now being declared as wilful defaulters, the decision will have an impact on group companies. The big question is can banks now lend to Kingfisher's group companies which have any of these directors on their board?
They can't. In fact it is not just lend fresh even renewal of cash credit limits will not be entertained if any of the board members of any company are board members of a company that has been declared a wilful defaulter and in this case the specific directors have been named as wilful defaulters. So, companies which have these guys on their boards will not be able to get any access to bank funds, even renewal of cash credit limits.
Also Read: Kingfisher to challenge United Bank's decision
The companies impacted include Mangalore Chemicals where Vijay Malaya is chairman and Subhash Gupte is a director. United Spirits, Malaya is chairman, United Breweries, Malaya is chairman and Ravi Nedungadi is a director and United Breweries Holdings where Vijay Malaya is chairman.
These are only the high-profile companies. There are a whole host of group companies and they don’t have to be listed at all, a whole host of listed and unlisted companies where these four gentlemen could be directors which will find themselves locked out of bank funds. That said, I think the fact that Kingfisher Airlines and its directors have said that they will challenge the order itself on its merits is important. It is quite possible that they could get a stay on the wilful default status once they challenge the order itself on merit because banking circles are genuinely a little confused as to whether you can call KFA and the directors wilful defaulters.
They have run a bad company but wilful default would mean that you have taken away funds for KFA and diverted it to some other business which is not the case. KFA never made any money, so there was no question of diversion. If anything Vijay Malaya has pledged his shares in well run companies and lost all those shares. So, it could be possible that the court will grant a stay to the status of wilful default itself. So, not all hope is lost.
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