State Bank of India & Ors v Mallya

State Bank of India & Ors v Mallya

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 for failure to disclose security. Security must be over the debtor's property. The breach in failing to disclose security over Dr Mallya's assets does not require dismissal; the petition may be amended. The court's discretion must be exercised only with reference to relevant circumstances, not including third party security.

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 Hearing Judgment on Exercise of Discretion Following Procedural Breach
Outcome
Petition not dismissed; discretion exercised to allow amendment, not dismissal.
Legal Topics
Secured Creditors, Bankruptcy Petitions, Disclosure of Security, Third Party Security, Exercise of Judicial Discretion
Insolvency Bankruptcy Secured Creditors Bankruptcy Petitions Disclosure of Security Third Party Security Exercise of Judicial Discretion

Case Brief

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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 Hearing Judgment on Exercise of Discretion Following Procedural Breach

Legal Issues

  1. 1 Whether the bankruptcy petition should be dismissed or amended due to failure to disclose security over debtor's assets as required by Insolvency Act 1986 and Rules
  2. 2 Whether security over third party assets can be considered in exercising discretion to dismiss or amend the 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 for failure to disclose security. Security must be over the debtor's property. The breach in failing to disclose security over Dr Mallya's assets does not require dismissal; the petition may be amended. The court's discretion must be exercised only with reference to relevant circumstances, not including third party security.

Court Disposition

Petition not dismissed; discretion exercised to allow amendment, not dismissal.

Orders

  • Petitioners permitted to amend the petition to disclose security over Dr Mallya's assets.
  • No determination at this stage on whether petitioners hold security over assets of UBHL or associated companies; issue reserved for further evidence if relevant.