United Spirits Limited (USL) argued before the Karnataka High Court that despite the fact that USL has repaid the entirety of its loan from IDBI, the bank is incorrectly refusing to release the securities. The bank is maintaining that it is holding the securities (in the form of shares) on the ground that loans taken by Kingfisher Airlines Limited remain unpaid. The court was hearing a petititon filed by USL against IDBI to release these securities.
Senior Advocate, P Chidamabaram, appearing on behalf of USL, stated that not only had USL paid the entirety of the 625 crore loan amount but also the incorrectly charged interest. This, he argued, discharged USL of its obligations towards IDBI over the loan and entitled it to receive its securities back from the bank. He argued that as USL cannot be held responsible for the liabilities of United Breweries Holding Limited (UBHL) as they are separate legal entities and Vijay Mallya only has a 1 percent stake in USL after the sale to Diageo. Mr. Chidambaram then cited multiple judgments to buttress his arguments.
The counsel for IDBI countered by stating that the judiciary must be cognisant of how modern corporate structures are designed to exploit legal loopholes to limit liability. He argued that one of the primary reasons for granting the loan to Kingfisher was because UBHL had given a corporate guarantee and that given that USL is a part of UBHL the two cannot be separated. He also pointed out that Vijay Mallya was the chairman and majority stakeholder of USL at the time the loan was granted and decried the practice of 'asset stripping' to dodge legal liabilities.
The judge responded by requesting the IDBI counsel to present the relevant case law that shows how USL and UBHL can be treated as the same entity in the next hearing, which it fixed for March 21st.