Mumbai, Nov 22, 2015, (PTI): After a protracted legal battle, State Bank of India (SBI) has declared industrialist Vijay Mallya a 'wilful defaulter' for defaults on nearly Rs 7,000 crore loans to the long-grounded Kingfisher Airlines.

"SBI has declared Mallya, Kingfisher Airlines and its holding company United Breweries Holdings as wilful defaulters," sources told PTI.

The sources said after the Bombay High Court in August this year allowed Mallya to be represented by his legal counsels, SBI moved the Supreme Court challenging the HC order, saying that HC order violated the RBI rules on grievance redressal committee that allow only the borrower to be present his case in person.

However, the Supreme Court upheld the High Court verdict and asked SBI to consider this only as "a one-off instance" and allow Mallya's lawyers to represent him at the grievance reddressal committee meeting which was held recently.

However, the lawyers could not satisfactorily present a case of genuine distress of Mallya and his companies in not paying the money they owe to the bankers.

Following this, SBI declared them as wilful defaulters, the source added.

However, Mallya can still challenge the label in the apex court through review petitions, according to banking experts.

Meanwhile, following the development, the 17 lenders to the airline has said they will e-auction the assets of the grounded airline, in their latest bid to part recover their dues of around Rs 7,000 crore and accrued interest on the principal, that not been serviced since January 2013.

The airline, owned by flamboyant liquor baron Mallya, had taken Rs 6,900 crore from a consortium of 17-lenders led by State Bank of India in early 2010 after a second debt restructuring for the airline.

SBI has an exposure of Rs 1,600 crore to the airline.

Out of this, the bankers, which recalled the loan in February 2013, could recover only around Rs 1,100 crore after selling pledged shares of UB Group companies.

Other banks that have exposure to the airline include Punjab National Bank and IDBI Bank (Rs 800 crore each), Bank of India (Rs 650 crore), Bank of Baroda (Rs 550 crore), Central Bank of India (Rs 410 crore).

UCO Bank has to recover Rs 320 crore, Corporation Bank (Rs 310 crore), State Bank of Mysore, (Rs 150 crore), Indian Overseas Bank (Rs 140 crore), Federal Bank (Rs 90 crore), Punjab & Sind Bank (Rs 60 crore) and Axis Bank (Rs 50 crore).

This February, SBI had taken over the possession of the airline's prime property Kingfisher House, near the city airport, after a protracted court battle.

The 17,000 sqft-property at Vile Parle near the domestic terminal is valued at around Rs 100 crore.

It could be noted that last September, United Bank had become the first lender to declare Kingfisher Airlines, Mallya and three other directors as wilful defaulters.

However, later in December a three-judge bench of the Calcutta High Court set aside the single-bench decision that allowed United Bank to tag them as wilful defaulters, on technical grounds.

Lenders have also decided to auction the assets of the grounded airline in a bid to part recover their dues which have not been serviced since January 2013.

The assets to be e-auctioned on December 7 include the equipment and movable assets of the airline and not the bigger properties like the Kingfisher House here and the Kingfisher Villa in Goa worth around Rs 90 crore, and both have been taken over the lenders in recent past.

In a notice issued here today SBICap Trustee, which is a security trustee for the lenders consortium to the airlines, said it would e-auction the cars, towing machines, forklifts, tractors, fire extinguishers, and iron ladders among others of the airline under their possession.

SBICap Trustee, which is an arm of SBI, has set a reserve price of Rs 65 lakh, and said the auction will be conducted on December 7.

Kingfisher, started by Mallya in May 2005 with much fanfare, went on to become the second largest in its heydays even though it never made a single penny in profit.

As cashflow issues mounted on the airline, it was grounded since October 2012, and the airline lost its flying licence two months later.

Banks are now charging 15.5 per cent compounded interest on this principal amount, which have not been serviced since January 2013 which would take is overall dues to over Rs 8,000 crore.