Once a company is declared wilful defaulter, criminal proceedings can be initiated against promoters and directors of the company. Besides, it would not be allowed to raise fresh funds from banks and set up new ventures for five years.
In what could prove as a final nail in the Vijay Mallya-led Kingfisher Airlines bad loan coffin saga, the carrier is likely to be tagged as a "willful defaulter" by its lenders. The Department of Financial Services, after reviewing top 50 Non Performing Accounts (NPAs) of public sector banks, has asked the state-owned banks to initiate action against defaulters.
Kingfisher Airlines has an outstanding debt of about Rs 4,022 crore to a consortium of banks, led by SBI . United Bank of India , part of the consortium, has already initiated the process to declare the company a wilful defaulter.
According to a Business Standard report, quoting finance ministry data, Kingfisher is at the number one spot on defaulters. The list also has Winsome Diamond (Rs 3,243 crore), Electrotherm India (Rs 2,653 crore), Corporate Power (Rs 2,487 crore) and Sterling Biotech (Rs 2,031 crore).
Once a company is declared wilful defaulter, criminal proceedings can be initiated against promoters and directors of the company. Besides, it would not be allowed to raise fresh funds from banks and set up new ventures for five years.
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As per RBI guidelines, it would have to be proven that the borrower had diverted funds which he took from the bank and was not paying up despite having the ability to pay. According to reports, the consortium has appointed consulting firm E&Y for a forensic audit on Kingfisher.
As part of the recovery process, banks in February last year decided to sell a portion of the collateral with them, including shares of group companies United Spirits and Mangalore Chemicals & Fertilizers Ltd, Mallya's Goa villa, Kingfisher House in Mumbai and the Kingfisher brand, which was valued at over Rs 4,000 crore at the time it was pledged.
Meanwhile, IDBI Bank clarified on Tuesday that it is not being probed by the CBI over the Rs 950-crore loan extended to KFA but investigation was being carried out against the borrower. "The preliminary enquiry initiated by the CBI a few months ago is against the borrower, Kingfisher Airlines Ltd and not against IDBI Bank," IDBI Bank said in a statement.
With inputs from PTI
Kingfisher Air stock price
On August 13, 2014, at 13:59 hrs Kingfisher Airlines was quoting at Rs 2.52, down Rs 0.19, or 7.01 percent. The 52-week high of the share was Rs 6.84 and the 52-week low was Rs 2.06.
The latest book value of the company is Rs -166.59 per share. At current value, the price-to-book value of the company was -0.02.
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