State Bank of India & Ors v Mallya [2020] EWHC 1981 (Ch) (22 July 2020)

State Bank of India & Ors v Mallya [2020] EWHC 1981 (Ch) (22 July 2020)

It is impermissible as a matter of law to take account of security over third-party assets when deciding whether to dismiss a bankruptcy petition under section 266(3) of the Insolvency Act 1986. Security must be over the property of the debtor. The failure to disclose security over the debtor's assets is a breach, but does not mandate dismissal; the court must exercise discretion considering the breach, conduct, and circumstances. The petitioners' failure to disclose security over Dr Mallya's assets can be addressed by amendment, and security over associated companies' assets is irrelevant for this purpose.

Citation
[2020] EWHC 1981 (Ch)
Parties
Petitioner: State Bank of India; Petitioner: Bank of Baroda; Petitioner: Corporation Bank; Petitioner: The Federal Bank Limited; Petitioner: IDBI Bank Limited; Petitioner: Indian Overseas Bank; Petitioner: Jammu & Kashmir Bank Limited; Petitioner: Punjab & Sind Bank; Petitioner: Punjab National Bank; Petitioner: State Bank of Mysore; Petitioner: UCO Bank; Petitioner: United Bank of India; Petitioner: JM Financial Asset Reconstruction Co. Pvt. Ltd; Respondent: Dr Vijay Mallya
Jurisdiction
England and Wales
Judgment Date
22 July 2020
Procedural Posture
Bankruptcy Petition / Post Judgment, Application to Dismiss or Amend Petition Due to Alleged Security
Outcome
Petition not dismissed; issue of security over associated companies' assets not determined at this stage; petitioners may amend petition to address disclosure breach.
Legal Topics
Secured Vs Unsecured Creditor Status, Disclosure Requirements in Bankruptcy Petitions, Effect of Security Over Third Party Assets, Jurisdiction Under Insolvency Act 1986, Foreign Judgment Enforcement
Insolvency Bankruptcy Cross Border Enforcement Secured Vs Unsecured Creditor Status Disclosure Requirements in Bankruptcy Petitions Effect of Security Over Third Party Assets Jurisdiction Under Insolvency Act 1986 Foreign Judgment Enforcement

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Parties

State Bank of India

Petitioner

Bank of Baroda

Petitioner

Corporation Bank

Petitioner

The Federal Bank Limited

Petitioner

IDBI Bank Limited

Petitioner

Indian Overseas Bank

Petitioner

Jammu & Kashmir Bank Limited

Petitioner

Punjab & Sind Bank

Petitioner

Punjab National Bank

Petitioner

State Bank of Mysore

Petitioner

UCO Bank

Petitioner

United Bank of India

Petitioner

JM Financial Asset Reconstruction Co. Pvt. Ltd

Petitioner

Dr Vijay Mallya

Respondent

Procedural Posture

Bankruptcy Petition / Post Judgment, Application to Dismiss or Amend Petition Due to Alleged Security

Legal Issues

  1. 1 Whether the petitioners are secured creditors for the purposes of the Insolvency Act 1986
  2. 2 Whether security over third-party assets (not the debtor's) is relevant to the petition
  3. 3 Consequences of failing to disclose security in the bankruptcy petition

Ratio Decidendi

It is impermissible as a matter of law to take account of security over third-party assets when deciding whether to dismiss a bankruptcy petition under section 266(3) of the Insolvency Act 1986. Security must be over the property of the debtor. The failure to disclose security over the debtor's assets is a breach, but does not mandate dismissal; the court must exercise discretion considering the breach, conduct, and circumstances. The petitioners' failure to disclose security over Dr Mallya's assets can be addressed by amendment, and security over associated companies' assets is irrelevant for this purpose.

Court Disposition

Petition not dismissed; issue of security over associated companies' assets not determined at this stage; petitioners may amend petition to address disclosure breach.

Orders

  • Petition not dismissed on grounds of security over third-party assets.
  • Petitioners permitted to amend petition to disclose security over Dr Mallya's assets if necessary.