BENGALURU: The Karnataka High Court allowed writ petitions filed by Diageo Holdings Netherlands BV, challenging orders passed by the Debt Recovery Tribunal in 2017 and 2018 in favour of the Consortium of Banks over the pledge of United Breweries (Holdings) Ltd (UBL) shares by Vijay Mallya and his son, Sidhartha Mallya, to recover outstandings from the defunct Kingfisher Airlines.
Vijay Mallya owned 1,04,86,666 UBL shares and 1,04,64,288 UBL shares jointly with son Sidhartha.
“We hold that the Share Pledge Agreement dated July 29, 2013, executed by Vijay Mallya and Sidhartha Mallya over the UBL shares would have priority over the Consortium of Banks as they held only a personal guarantee and an unsecured negative covenant. The personal guarantee of Vijay Mallya under the Master Debt Recast Agreement (MDRA) would not bind in any manner the 1,04,64,288 UBL shares jointly held by Vijay Mallya and Sidhartha Mallya,” the court observed.
A division bench of DK Singh and Justice TM Nadaf passed the order while allowing petitions filed by Diageo Holdings Netherlands BV in 2017 and 2018, questioning the order dated October 9, 2018, passed by the Debt Recovery Appellate Tribunal, and the order dated June 3, 2017, passed by the Recovery Officer-I, Debt Recovery Tribunal-II, Bengaluru, passed in favour of the Consortium of Banks.
“As stated by the Finance Minister on the floor of the Lok Sabha on December 17, 2024, assets worth INR 14,131.6 crore, besides the UBL shares, have been restored from Vijay Mallya to the Consortium of Banks against their claim to an extent of INR 6,203 crore with interest.
We are, therefore, of the view that when the Consortium of Banks’ claim for their dues against the loan of INR 6,203 crore has got almost settled by making recovery of assets worth more than INR 14,131.6 crore, there would be no justification for their claim over the UBL shares,” the court said.
The court further stated that more than anything else, “we are also of the view that Vijay Mallya’s flamboyant lifestyle, excessive personal indulgence and his personal vanity are coming in the way of giving quietus to the claims of the Consortium of Banks against the loan of INR 6,203crore advanced to the defunct Kingfisher Airlines Ltd. It is for the Consortium of Banks and the Government of India to give quietus to the proceedings when INR 14,131.6crore worth of assets have been restored to the Consortium of Banks against their loan of INR 6,203 crore,” the court noted.
While setting aside the impugned judgments and orders, the court observed that the downfall of Vijay Mallya’s empire due to a flamboyant lifestyle and excessive personal indulgence is one of history’s most enduring corporate tales. Perhaps the ultimate modern embodiment of this phenomenon is Dr Vijay Mallya, who inherited and aggressively expanded a massive liquor empire built over decades. Dubbed the “King of Good Times”, his lifestyle became inseparable from his brand.
His debt-fuelled gamble on Kingfisher Airlines led to a spectacular collapse of more than a billion dollars in debt and his eventual status as a fugitive economic offender. Real-world examples like Vijay Mallya, who built “a self-made powerful empire only to lose it to reckless gambling and lavish spending” demonstrate that building an empire takes decades of relentless discipline, but destroying it requires only a few years of unbridled indulgence, the court said.