Sept. 18--BANGALORE/MUMBAI -- The Karnataka high court on Tuesday gave Vijay Mallya's UB Group one week to submit an audited report on United Breweries Holdings Ltd's (UBHL's) stake sale in United Spirits Ltd (USL) to Diageo Plc.
Five groups of creditors to Kingfisher Airlines Ltd, the UB Group's grounded airline, have filed winding-up petitions in the Karnataka high court against United Breweries, which has given corporate guarantees worth nearly Rs.9,000 crore for the airline's debt.
To raise funds, Mallya, through United Breweries and other group companies, agreed in November to sell stake in United Spirits, India's largest distiller, to Diageo.
Kingfisher's creditors tried to stop the stake sale, but the high court had allowed United Breweries in May to sell over 13.5 million United Spirits shares to the UK distiller. It had also asked the company to deposit Rs.250 crore in the court related to the winding-up petitions and to submit a detailed report on the sale.
While United Breweries deposited Rs.250 crore with the court it hasn't yet submitted the complete report. United Breweries also couldn't sell the entire amount of 13.5 million shares as some UB Group lenders refused to release nearly 3.5 million United Spirits shares that they held as pledge against money lent to one of the group's companies.
A UB Group executive, on condition of anonymity, confirmed the company is yet to give the details of the Diageo deal to the court. "The Diageo deal has three-way fund transfers. Diageo-UBHL, Diageo-USL and Diageo and Vijay Mallya. The court has asked the audited details of Diageo-UBHL," he said.
He added that the court may take a call to divert the Diageo funds to clear the salaries of Kingfisher Airlines' employees after getting the details.
The court had on Monday asked Mallya to appear before it the following day regarding the winding-up petitions filed against UBHL. Mallya did not appear before the court on Tuesday and judge Ram Mohan Reddy said he would keep his order in abeyance till he receives the report on the stake sale.
The high court also asked UBHL to file a status report on the proposed revival plan for Kingfisher in four weeks, according to a lawyer representing one of the creditors who has filed a winding-up petition.
Last week, Mallya said the UB Group was in discussions for an out-of-court settlement with two of Kingfisher's creditors that have filed winding-up petitions against UBHL. UBHL in its annual report released earlier this month also said that it planned to keep funding Kingfisher for now.
The airline's operating licence was suspended in October by the Directorate General of Civil Aviation (DGCA) following a strike by its employees. The permit expired on 31 December, but it can be renewed within two years.
Kingfisher said in its latest annual report that it has submitted a revival plan to the DGCA. It also said that it was in discussions with investors for restarting the airline.
Analysts and experts have expressed doubt about Kingfisher's ability to restart operations and find an investor, as the airline has never made a profit since its inception in 2005 and because it doesn't look like it can turn in one any time soon.
Mallya is due to be present in Bangalore for the annual general meetings of shareholders of UB Group companies on 24 September.
UBHL shares fell 5.09% to Rs.25.15 each on BSE on Tuesday, while the Sensex rose 0.31% to 19,804.03 points.