Karnataka HC Refuses To Quash Condition Imposed By IDBI Bank For Release Of Pledged Equity Shares Of United Spirits Ltd[Read Order]

The Karnataka High Court has refused to grant relief to United Spirits Limited and USL Benefit Trust, which sought to quash a condition imposed by IDBI Bank Limited for release of its pledged equity shares given in lieu of a loan of Rs 625,45,056 crores sanctioned and disbursed to Kingfisher Airlines, in 2010. Justice Alok Aradhe while dismissing the writ petition filed by USL and USL Benefit Spirit said "The right of the parties are founded in contract and writ of mandamus in the fact situation of the case is not available to the petitioners as the duty of the respondents to close an account and to issue a no due certificate and to release the pledges security under the agreement dated 17.06.2010 has no public law element. The writ of certiorari is in the nature of court's discretion and the petitioner who is guilty of committing breach of the contract is not entitled to the discretionary relief of writ of certiorari." The bank imposed the condition, after promoters of United Spirits Limited - United Breweries (Holdings) Ltd, Kingfisher Finvest India Ltd along with SWEW Benefit company and USL Benefit Trust etc. - entered into an agreement with DIAGIO Pls and Relay B V, for sale of 252, 26, 839 equity shares in 2012. The company sought permission for the transaction but bank refused the same. United Spirits Limited then transferred a sum of Rs 628 crore to the cash credit account of the bank, as prepayment of the entire loan availed. It sought the pledged shares back. The bank wrote back to the company saying it would agree to the proposal subject to "Dr Vijay Mallya and United Breweries (Holdings) Limited (UBHL), depositing the sale proceeds in respect of the share holding of Dr Vijay Mallya and family stake UBHL's stake sale in United Spirits Limited to Diageo Plc, in an Escrow/TRA account, as may be decided by IDBI Bank". Senior Counsel, P Chidambaram appearing for the petitioners had argued that condition imposed was arbitrary. Petitioners have no control or influence whatsoever over the affairs of any of its shareholders, such as Dr Vijay Mallya and UBHL or its subsidiaries and therefore is not in a position to ensure compliance with the condition, argued Chidambaram. The bank argued that writ is not maintainable as the dispute between the parties is purely contractual. The company is guilty of committing breach of corporate guarantee furnished by it. Assets of the company have been stripped without the permission of the bank. The court after analysing the facts said "It appears that an attempt was made to claim back the security under the guise of making prepayment and to allow a third party as acquirer of the shares to enter the management of the company. The rights of the parties and question of breach of terms and conditions of contract require determination in a civil suit, as the same requires recording of evidence for adjudication of the factual dispute."Click here to download the Order

Karnataka HC Refuses To Quash Condition Imposed By IDBI Bank For Release Of Pledged Equity Shares Of United Spirits Ltd[Read Order]

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