Karnataka HC Stays Mallya debt recovery for 3 months

The Karnataka High Court today stayed for three months the Debt Recovery Tribunal's (DRT) order issuing a demand notice to Vijay Mallya-owned United Breweries Holdings Limited (UBHL) and Kingfisher Airlines to pay Rs 192 crore on an application by three banks. 

The petitioner, UBHL, has challenged the DRT order which had allowed the application of the banks -- Oriental Bank of Commerce, United Bank of India and Corporation Bank – on March 28, and issued the demand notice on June 7 to pay Rs 192,51,08,484.67 within 15 days from the date of receipt.           

UBHL had argued that DRT had no jurisdiction to pass an order to issue a recovery certificate and demand notice to it and had also argued the Tribunal had misconstrued the law and arrived at an erroneous conclusion.          

Meanwhile, Dutch beer major Heineken filed an application before DRT seeking to be impleaded in the case.  

Making a submission in the DRT, Counsel for Heineken said the company seeks permission to implead itself in the case and enjoy the right of first refusal over UBL shares.    

Heineken has some presumptive rights on UBL shares held and owned by Mallya. "We are seeking permission to implead in the case to have the first right of refusal over UBL shares," he said.    

Right of first refusal is a contractual term between shareholders which are usually included in the Articles of Association.    

If one shareholder wishes to dispose of shares that are subject to a right of first refusal (ROFR), it must first offer them to those other shareholders who have the benefit of ROFR.