UK/India: Diageo unchained, Vijay Mallya sued over $40 million payment

Diageo, the global premium spirits maker, has filed on Tuesday in London a suit against Vijay Mallya to recover a $40 million payment made when the Indian billionaire was ousted from Indian whiskey producer United Spirits (USL) last year. The liquor maker claims Mr Mallya breached a $75 million agreement, of which it had already paid out $40 million. The payment compensated Mallya for stepping down as chairman of USL in February 2016. The deal asked Mallya to leave the company and not compete or interfere with it for five years.

Already one year earlier in April 2015 USL informed shareholders that the board had lost confidence in Mallya’s continuation as chairman after an internal inquiry confirmed funds diversion from USL to United Breweries group companies, which were also part of Mallya’s business network.

"Diageo is pursuing substantial repayment and compensation from Dr. Vijay Mallya and certain of his affiliate companies," a spokeswoman for Diageo said in a statement. "They include seeking compensation from Dr. Mallya for breaches of the agreements announced in February 2016 that ended his association with United Spirits."

Soon after receiving the payment Mallya fled to England to escape creditors and Indian tax authorities, following the collapse of his Kingfisher Airlines in 2013. He is said to owe Indian state-owned banks $1.3bn.

Mallya admitted in an affidavit in November 2016 that he had transferred the $40 million to his three children through gift settlements within two days of receiving it. He told the court that Siddharth, Leena and Tanya Mallya were US citizens and that he had no control over their assets. (, 12.1.2017)

In April this year Mallya was arrested in London on behalf of the Indian authorities but was released on a £650,000 ($833,000) bail. Since then he lives in his £11.5m ($14.75m) Hertfordshire mansion. (, 19.4.2017)

He could so far prevent an extradition on the grounds that he will not be safe in Indian jail if sent back to India to face trial. With a detailed assessment of security cover given to prisoners in Mumbai's Arthur Road jail and Delhi's Tihar jail, the Indian government will convince the Westminster Magistrates' Court, when hearing of the extradition proceedings start on December 4.

Viajya Mallya became chairman of UB Group in 1983 at the age of 28, following his father's death. He had since then grown the company into a multi-national conglomerate of over 60 companies.

In 2012 Diageo bought in a $2.1 billion deal 53.4% of USL, the largest Indian spirits company. Since then Diageo amassed a 55 percent stake. At the time of the sale Mallya, who controlled USL played down any link between the USL sale and problems at his Kingfisher airline.

Dutch brewer Heineken acquired a 37.5% stake in United Breweries in 2008 through its takeover of Scottish & Newcastle and managed to increase its holding since then to 43%. Still, Mallya holds 32.45% in United Breweries, nearly half of which is pledged with banks as his personal surety for loans taken to run the defunct Kingfisher Airlines.

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