Karnataka High Court rejects bank consortium's claim over UBL shares in Kingfisher case

The Karnataka High Court on 14 October 2026 allowed two writ petitions filed by Diageo Holdings Netherlands B.V. against State Bank of India and other lenders, and set aside the orders it had challenged. The court held there was no justification for a consortium of banks to claim UBL shares, noting that assets worth Rs 14,131.6 crore had already been restored to the banks against loans of Rs 6,203 crore given to the now-defunct Kingfisher Airlines Ltd.

What Happened

The petitions challenged an order of the Debts Recovery Appellate Tribunal (DRAT) at Chennai dated 9 October 2018, and an order of the Recovery Officer-I of the Debts Recovery Tribunal-2, Karnataka, dated 3 June 2017. Debts recovery tribunals decide bank recovery cases; the DRAT hears appeals from them.

A two-judge bench held that an oral undertaking would not override a Facility Agreement, a Share Pledge Agreement and a Backstop Guarantee Agreement, which were executed before the High Court's interim injunction of 3 September 2013 against Kingfisher Airlines, UBL and the promoter. It also held that the promoter's personal guarantee under his agreement with the lenders did not bind 1,04,64,288 UBL shares he held jointly with another person, who was not a party to that agreement and had given no guarantee. A co-owner cannot create security over jointly held assets without the other owner's express consent, the court said.

The court recorded that the banks never argued before the DRT that the petitioner was part of the promoter's group, and found the DRAT's observation on this contrary to the record. It held that the transactions involving Standard Chartered Bank and the petitioner were bona fide commercial transactions.

What It Means

The ruling restates principles from Supreme Court decisions the court relied on. A mere promise not to sell a property does not create a charge, or legal claim, over it unless the charge is created by deposit of title deeds or a registered document. A guarantee creates a personal obligation for the guarantor; the court said a guarantor's liability is co-extensive with the borrower's, so a lender can pursue either. But a guarantee does not, by itself, give the lender a security interest in assets the guarantor owns jointly with someone else.

The court also said it was for the bank consortium and the Government of India to bring the proceedings to a close, given the recoveries already made.

Source: High Court judgment