Annual Report 2012-2013 - UB Group

Notes to the Financial Statements (contd.)
i) 2,446,155 equity shares in United Spirits Limited
ii) 215,000 equity shares in McDowell Holdings Limited
iii) 10,000,000 equity shares in Mangalore Chemicals & Fertilizers Limited
iv) 21,870,156 equity shares in Kingfisher Airlines Limited
b) KFA lenders have invoked company’s Corporate Guarantee and demanded payment of dues, due from KFA
amounting to ` 64,932.900 million
c) the Company and others have filed a suit in Hon’ ble Bombay High Court against the Consortium of lenders
who have advanced loans to Kingfisher Airlines Ltd, inter alia seeking the following reliefs:
i) for a declaration that the corporate guarantee agreement and pledge agreement, both dated 21st December,
2010 and executed by the Company are void ab-initio and non-est;
ii) for a permanent order and injunction, restraining Consortium of Bankers, their servants, agents or assigns,
or any other person claiming by, through or under them or any of them, from acting upon, in furtherance
or in any manner giving effect to the impugned notices dated 16th March, 2013, or from taking any other
or further steps to act upon or in furtherance of the Pledge Agreement dated 21st December, 2010 save
and except in accordance with the procedure set out in clause 8.1 of the MDRA, including issuing a notice
thereunder.
iii) for a permanent order and injunction restraining Consortium of Bankers, their servants, agents or assigns,
or any other person claiming by or through or under or any of them, from acting upon or in furtherance of
the Corporate Guarantee dated 21st December, 2010 given by the company and Pledge Agreement dated
21st December, 2010.
iv) that an order and decree for damages of sum of ` 31,996.800 million as set out in the particulars of claim
be awarded to the plaintiffs.
v) that the maximum limit under the Companys’ Corporate Guarantees be ` 16,014.300 million for reasons set
outfiin the Suit. r
41. Cash flows
The mis-match between the inflows and outflows of cash has resulted in the company not being able to meet
certain interest and loan installments on due dates. Proceeds from the sale of certain shares to Diageo plc. pursuant
to an agreement dated 9th november 2012 is expected to address the mis-match.
42. Winding up Petitions
Certain Aircraft lessors of KFA have invoked the company’s Corporate Guarantees and have filed winding up
petitions against the company. These petitions are pending disposal before the Hon’ ble High Court of Karnataka.
The Company has filed a Suit for damages, claiming an amount of ` 13,193.000 million against some of the above
Petitioners in the City Civil Court, Bangalore.
43. The Company along with its subsidiaries has significant financial exposure on various counts to Kingfisher Airlines
Limited (KFA). Although KFA’s license has expired on December 31, 2012, under civil aviation regulations, KFA has
period of 24 months to reinstate the same. As at March 31, 2013, the financial exposure includes equity investment
of ` 20,953.043 million, loans and advances ` 23,592.484 million & other receivables ` 3,104.505 million & corporate
guarantees to banks/aircraft lessors, some of which have been invoked. Such invocations are being contested
in court. The Management is reasonably confident that none of the guarantees would eventually devolve upon
the Company. The ultimate diminution of investments and non-recovery of loans and advances are not presently
quantifiable and hence no provision has been considered in the accounts.
44. The Company has accrued interest of ` 83.756 million (Pr year ` 44.733 million) on loans to Kingfisher Airlines Limited
(KFA) as per loan agreement signed with them. Taking into account the financial position of KFA and pending its
recapitalisation, interest has not been accrued on the outstanding loans with effect from 1st October 2012.
45. In view of Kingfisher Airlines Limited (KFA) being precluded by its bankers from making payment of any guarantee
commission arising out of the corporate guarantee given and security commission arising out of security pledged
in favour of lenders of KFA and in view of the stand taken by the Company and other Plaintiffs in the Suit, before
the Hon’ ble Bombay High Court, guarantee commission arising out of the corporate guarantee given and security
commission arising out of security pledged in favour of lenders of KFA have not been accounted for, in the current
financial year.
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