Wilful defaulter: Is this end of the road for Vijay Mallya?

Moneycontrol BureauIn what would have come as an outright jolt to beleaguered tycoon Vijay Mallya, the United Bank of India (UBI) yesterday declared him, three associates from his UB group, along with the group's grounded Kingfisher Airlines, as “wilful defaulters”.The move came after Mallya and his associates failed to turn up for a meeting at the grievance redressal cell of the bank, to which Kingfisher owes about Rs 350 crore.

Mallya and associates had insisted on being accompanied by a lawyer, a request that was denied recently by the Calcutta High Court, which they petitioned soon after they were served a showcause notice asking why they should not be labeled as wilful defaulters.Under law, willful defaulters cannot have access to any further bank funding and neither can companies where they serve as directors.The latest development could serve as the final nail in the coffin of the UB empire that Mallya once ruled over, and which now threatens to unravel after Kingfisher Airlines went into a tailspin under a Rs 7,000-crore debt burden.Since the Kingfisher crisis, Mallya and his UB group, who had personally guaranteed most of the carrier’s debt, have been forced to sell shares in other cash-rich alcohol companies such as United Breweries (to Heineken) and United Spirits (to Diageo).Even as Mallya is no longer the largest shareholder in these firms, he continues to remain chairman and that post could now be under threat following the latest missive by United Bank of India, as these firms could face a funding squeeze if he continues to operate on their boards.Mallya’s relationship with Diageo is already reportedly stressed and the latter has delayed declaring United Spirits results for two quarters now as the new board is reportedly looking closely into several financial transactions carried out under the previous board.The move could also claim another UB company, Mangalore Chemical & Fertilizers, in which Mallya and his friend Suraj Poddar’s Zuari are busy jointly defending against a hostile takeover bid by Pune’s Deepak Fertilizer.Reports suggest Deepak may now impress upon markets regulator Sebi to disallow Mallya-Zuari’s joint open offer to raise their stakes in MCF, in light of the latest development, and allow its own.In fact, two annual general meetings, for United Breweries and MCF, are coming up on Thursday.It remains to be seen how long Mallya’s partners such as Heineken, Diageo or Zuari agree to slug it out with him even as the latest development could potentially directly impact UB businesses in which they have a keen stake.Today, the Supreme Court rejected Kingfisher’s petition challenging the Calcutta High Court’s move denying legal representation before the UBI cell -- on grounds that it had become infructuous (or invalid) as the bank had already labeled Mallya and associates as wilful defaulters.The apex court did, however, say that Kingfisher could choose to contest the ‘wilful default’ tag.It must be noted that the Delhi HC had recently allowed legal representation for the carrier after the Punjab National Bank had issued a showcause notice to the company asking why it should not be declared as a willful defaulter.