Probe Brings Warring Partners Closer

The Debt Recovery Tribunal’s (DRT) order to freeze the $75-million settlement deal between Vijay Mallya and Diageo, and Enforcement Directorate’s (ED) constant probing into the deal has brought warring partners — the beleaguered Indian billionaire and the liquor giant — on the same side.

In April, the DRT, while hearing a petition filed by a lenders’ consortium claiming its first right on the settlement amount, had asked the Diageo-owned United Spirits (USL) to furnish details of the severance package. It had also asked the company to deposit some $40 million with it barring Mallya from accessing the same.

But USL and its parent refused to furnish the details asked by the DRT saying that they have no legal obligation to do so and that the tribunal has no power to direct the company to deposit a part of the settlement amount with it.

The $75-million settlement from USL to former chairman Mallya for stepping down from the post was announced in February. The severance package was mainly on account of terminating a contractual obligation on the side of Diageo to continue with Mallya as USL’s board chairman and also to make Mallya sign a non-compete agreement. As per the deal, the payment was to be made in phases between 2016 and 2021.

Apparently, $40 million of the exit money has already been paid to Mallya, who fled to the UK in March as he faced legal proceedings for defaulting on debt amounting Rs 9,000 crore from various banks for his defunct Kingfisher Airlines.

Diageo contended before the tribunal that the amount was paid outside India.“The amount of $40 million, which is part of the $75 million payout package between Mallya and us, was paid outside India and hence the DRT does not have power to direct us to attach the money before the tribunal. Such a deal does not fall in the jurisdiction of DRT,” Diageo argued.

Since 2014, USL and Diageo had been fiercely fighting a serious boardroom battle with Mallya over fund misappropriation and related party transaction charges. Diageo, which bought Mallya-promoted USL (the world’s second largest alco-bev company) in 2012, even raised these charges against Mallya while he remained the chairman of the company. Following the findings on his wrongdoings, USL wanted to recover the financial losses and expel Mallya from its board. USL even complained against Mallya to the Registrar of Companies and the Securities and Exchange Board of India, besides taking the cases to courts.

But the dilly-dallying by the authorities then had left the warring partners to fight on the streets. The surprising haste shown by the authorities in the debt recovery action now has, however, made them friends.