India: Diageo seeks $135 mln worth of United Breweries shares seized from Vijay Mallya

Diageo is seeking to assert its “legal and substantial” rights to $135 mln worth of shares in India’s United Breweries Holdings pledged to it by Vijay Mallya and his son Siddhareth, The Drinks Business said quoting reports in India.

The shares, which have been seized by the Indian authorities, were used by Mallya as collateral for a loan guaranteed by Diageo’s Dutch subsidiary. Mallya defaulted on the loan and Diageo’s guarantee was called in.

India’s Enforcement Directorate has taken control of all Mallya’s assets in the country under its Prevention of Money Laundering legislation and a consortium of state-run Indian banks wants them liquidated to recoup the £1.15 billion they claim Mallya owes them as a result of the collapse of his Kingfisher Airlines in 2012.

The Economic Times reports that Diageo has opposed that application and has asked the court to be allowed to present its case over first rights ownership of the shares before they are sold.

Indian sources suggest this application will be opposed by the Economic Directorate but that Diageo might seek redress from Mallya under its Fugitive Economic Offender legislation.

Mallya fled to Britain in March 2016 and has appealed against a court ruling that he should be extradited to India. He has consistently denied wrongdoing.

Observers suggest that Indian banks’ demand that his assets be liquidated rapidly and Mallya’s appeal against extradition reflect the forthcoming Indian general elections which are due this spring.

Mallya has always alleged that the charges against him were politically motivated and that he has more than sufficient assets to repay his creditors. A change of government might have far-reaching implications.

In London, Diageo referred The Drinks Business to the legal disclosures appended to its latest interim results published in January and declined to comment further. Those disclosures confirm Diageo’s claim to the United Breweries shares pledged by the Mallyas.

14 March, 2019