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ED and banks to lock horns over assets pledged by Vijay Mallya

ED and banks to lock horns over assets pledged by Vijay Mallya
Banks and the Enforcement Directorate (ED) seem to be having a tiff over the right over the promoter shares of UB Group companies that Vijay Mallya had pledged with banks.

A few weeks back, ED officials had taken possession of the shares of some of these companies and other assets. They will soon move to get a confiscation order from the courts so that they can take over the shares.

However, as per banks, it’s not that simple.

"We hold the first right on pledged shares as a charge was created while disbursing loans to Mallya and his companies," said one banker requesting anonymity. "ED may dispose of other assets where there is no charge, but selling shares and assets pledged to us is not possible."

As per another banker, since banks hold prior right on all pledged assets, ED cannot confiscate such a property.

"Also, we are waiting for the extradition proceedings to get completed; recovery will speed up if Mallya is brought back."

The tiff might go for long and can also prove to be worrisome for Dutch brewer Heineken's plans to take majority ownership in United Breweries, of which has Mallya is a joint owner with a 30% stake. This stake is among the assets that ED possesses.

ED, however, has a possible upper hand in the form of an option. As per experts, if the agency proves to the court that money was laundered by Mallya and his companies and this laundered money was used to create these assets, then the ownership will have to be transferred to the government.

"If ED presses charge of money laundering and is able to prove that these shares/assets are from ill-gotten wealth, then these will go to the government and the charge by banks falls," Babu Sivaprakasam, partner at Economic Laws Practice, told ET.


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