On Thursday, the Apex Court said it would examine whether assets of a company which have been attached by the authorities following legal proceedings can be considered for liquidation to settle financial liabilities.
A bench of Justice U U Lalit & Justice Vineet Saran was informed by Senior Lawyer C S Vaidyanathan, appearing for liquor baron Vijay Mallya's United Breweries (Holding) Ltd (UBHL), that company's assets in totality are far greater than its liabilities.
UBHL has challenged the March 6 order of the High Court of Karnataka upholding the decision of a single Judge to wind up the company.
Vaidyanathan told the bench that the Court shouldn't uphold winding up of the company as it has far more access assets than its liabilities.
He said the HC erred in not accepting its offer of settlement & gave its finding of upholding the decision to wind up the company.
The bench asked about the attachment of the company's properties by the Enforcement Directorate under the Prevention of Money Laundering Act (PMLA) proceedings against the fugitive businessman, who is in the United Kingdom.
The Bench said that tell us whether these properties which have been attached under the PMLA can be considered for liquidation instead of directing for winding up of the company.
The bench, which was initially inclined to issue notice on the appeal of United Breweries, was told by Solicitor General Tushar Mehta, appearing for a consortium of banks led by State Bank of India, the notice not be issued in the matter.
He said that proceedings before the courts in India are being misused by Mallya in extradition proceedings against him in the UK & he does not deserve any indulgence of the Court in the matter.
The bench reminded Mehta that he was appearing for the banks & not the Govt & said that this is not the PMLA proceedings.
Mehta replied that he was aware of the fact but his duty will not diminish in a matter of national interests only because he was appearing for the banks.
The bench then told Mehta, What is bothering us is that Mr Vaidyanathan is saying that some assets of the company are lying under attachment while proceedings have been initiated for winding up of the company."
Mehta said the proceedings under PMLA are completely different & that the assets attached under the provision would only be sold after the conviction of an accused.
He said the attached properties under PMLA cannot be considered for liquidation as in the event of attached properties being found to be proceeds of crime, they are liable to be confiscated & can't be used for settlement.
The bench said the assets are only attached & not confiscated since there is no conviction as on date.
So the question remains, why the assets attached cannot be considered for liquidation to pay the liabilities," it said, & asked whether the company should be wound up without the properties already under attachment being taken into consideration.
The bench said, "Once assets are attached, does that mean these assets cannot be considered to be part of proceedings when the company is considered for winding up?"
The bench observed that normally, winding up of a company is avoided as much as possible.
The solicitor general said the court has to keep in mind that it is dealing with a fugitive offender & not an innocent man.
The bench told Mehta, We are dealing with the company, not the man". It told Mehta that if he wanted to make these submissions then he has to wear two hats & observed, Only one hat will not do.
The bench posted the matter for further hearing on Sept 8 & told the parties that it needed an answer to the question whether the properties under attachment can be considered for liquidation to pay off the liabilities of the company.
On March 6, the high court had rejected the offer of Mallya for settlement of debts of now-defunct Kingfisher Airlines terming it as not bona fide & made in good faith & dismissed the appeal of UBHL against the order of winding up of the company.
UBHL had alleged that the market value of the company's assets is more than the debts.
The HC said that many of the assets proposed by the UBHL in the offer of settlement were attached either by the ED under PMLA or by the Debt Recovery Tribunal & it cannot prohibit the statutory authorities from discharging their functions & order sale of assets.
UBHL owes over Rs 6,000 crore & compound interest to SBI-led consortium of banks & the lenders have moved the courts & debt recovery tribunal with winding-up petitions to recover their dues.
The lenders to Kingfisher Airlines had filed the case against UBHL seeking dues from the now-defunct airline.
UBHL had given corporate guarantees for loans to run Kingfisher, which has virtually caused the collapse of Mallya's liquor empire. Mallya owns 52.34% in United Breweries Holdings Limited.
Earlier, the Debt Recovery Tribunal here had ordered the SBI-led consortium of banks to start the process of recovering over Rs 6,203 crore, at 11.5% annual interest rate, from the embattled tycoon & his companies in another Kingfisher Airlines case.
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