Kingfisher House battle: SBI asks Arun Jaitley to step in

When a consortium of lenders to Kingfisher Airlines led by State Bank of India took possession of the Rs 100-crore Kingfisher House in Mumbai’s Vile Parle, it thought at least a part of its dues could be recovered. Until the income-tax (I-T) department issued a notice forbidding the auctioning of the building, claiming first lien. SBI has now written to the finance ministry seeking its intervention, sources aware of the development told FE.

“The bank has written to the ministry suggesting that it be allowed to auction the property and then share the proceeds with the I-T department,” a source said, adding that the ministry has not yet called for a meeting to sort it out. The bank has also asked how it should proceed in future recoveries as the I-T department always says it has the first claim.

“On one hand, the ministry has been stressing on recoveries and on the other a government department is stalling the process,” a source said. In Q3 FY15, SBI’s recoveries and upgrades fell 75% to R667 crore.

Earlier last month, in a letter addressed to SBI, SBICAP Trustee, IDBI Bank and Punjab National Bank, the I-T department said its dues amount to R442 crore (from R350 crore earlier) in the form of tax deducted at source (TDS) by Kingfisher Airlines but not paid to the government.

It added that if the lenders sell the property, they will be liable to pay R442 crore to the department before they can recover their loans.

The intimation came barely a week after SBI took possession of Kingfisher House following a judgment from the chief metropolitan magistrate, Mumbai, under the Sarfaesi Act filed by SBICAP Trustee Company.

Sources said that the I-T department has also put up a notice at Kingfisher House saying that anyone who purchases the house must pay the dues as the property was attached under the I-T Act.

Kingfisher House is among the assets pledged by the company to a consortium of 17 banks. In 2013, the I-T department had moved a Bengaluru court asking lenders to first settle the dues of the department amounting to R350 crore as the property was attached under the I-T Act.

Kingfisher Airlines, which has not flown since October 2012, owes over Rs 7,000 crore to bankers who have been trying to recover their money by selling securities pledged by the firm. These include real estate and shares in multiple group entities. Banks had also sold around 4 lakh shares of United Spirits pledged with them for Rs 104 crore last year.