DRT tells Diageo to deposit amount payable to Vijay Mallya with tribunal
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Bengaluru: In another setback to Vijay Mallya, the Debt Recovery Tribunal (DRT) in Bengaluru has directed spirit maker Diageo Plc to deposit the remaining amount of the $75 million ‘sweetheart deal’ payable to beleaguered businessman with the tribunal.
On Saturday, the DRT passed three orders on so-called Interlocutory Applications which include lifting of the corporate veil of Kingfisher Finvest Pvt Ltd—a wholly owned company under Mallya’s United Breweries Holdings Ltd (UBHL)—and the dismissing of beer maker Heineken NV’s application seeking ‘first right’ at buying United Breweries Ltd shares if and when it comes up for sale.
The tribunal is hearing the Rs.9,000 debt recovery case against Mallya’s failed carrier, Kingfisher Airlines Ltd (KFA).
In its order on Saturday, the tribunal said that if Diageo is liable to pay any amount as per its agreement dated 25 February with Mallya, the same should be deposited with the DRT.
Diageo had decided to pay Mallya $75 million to get the latter to step down from his post as chairman of United Spirits Ltd (USL)—the flagship company of Mallya’s UB Group after allegations of fund diversions surfaced last year.
Public sector lender State Bank of India (SBI)-led secured creditors consortium had moved DRT on 2 March to stop this payout along with other applications seeking his arrest, impounding of passport and disclosure of assets and liabilities.
Mallya left the country for Britain on the same day where he continues to reside.
On 7 March, DRT blocked Mallya from getting his hands on the $75 million payout.
Diageo has already paid $40 million on 25 February and the remaining $35 million was to be paid over the course of five years depending on adherence to conditions such as a global non-compete clause among others.
On 17 May, upon disclosure of the agreement between Diageo and Mallya, the DRT passed another order directing JP MorganChase (New York-North America) not to disburse the $40 million which was already paid out Mallya.
The legal counsels for Diageo had said that any money that was payable to Mallya was already paid and there is ‘no outstanding amount payable as on date’.
The DRT has also passed orders for lifting of corporate veil of Kingfisher Finvest. The company’s counsels had argued that Kingfisher Finvest—though 100% owned by UBHL—was an independent entity and not a front for its holding company or KFA.
SBI had argued that UBHL had given over Rs.857 crore loans to Kingisher Finvest, which has not been paid back and hence was claiming this by attaching its shares. SBI counsels had said that the money given to Finvest was invested in group companies like USL and McDowells Holdings Ltd.
“Money from USL share sale has been realised but not returned to UBHL—which in turn owes the banks,” S.S. Naganand, senior counsel appearing for the banks had argued on 14 June. He went on to say that Kingfisher Finvest has committed fraud or intention to fraud with money taken from UBHL.