Vijay Mallya’s Worst Challenge Now May Be A Diageo Case In UK

The legal ground is strong for Diageo to initiate the case in the UK in the current situation. "It (Diageo) can argue that the ultimate harm of the fund diversion at the Indian subsidiary is to the parent, which is based in the UK, and the alleged offender Vijay Mallya too currently resides as well as owns several properties in the same country," said a Mumbai-based corporate lawyer.

Diageo’s case in UK, if initiated, could prove double whammy for Mallya. The British drinks major can either get the verdict there in the UK itself as the defendant is available there for trials or it can get the case transferred to India along with the defendant. In case, the fund diversion matter gets transferred back to India by the UK court, it could also strengthen the ground for invoking India-UK Mutual Legal Assistance Treaty (MLAT) by the UK legal system to extradite Mallya to India.

"The current owner of United Spirits has obvious reasons to get the case filed in the UK, although the original jurisdiction for the matter is India," said a company law expert, who doesn't want to be identified due to confidentiality reasons. While the first reason is certainly India’s helpless situation to get Vijay Mallya back into the country for trials, the second is the least progress that it witnessed in regulatory action on its complaints in India after the initial investigation, he added.

India’s Enforcement Directorate (ED) has already made its request for Vijay Mallya’s extradition from UK under MLAT in connection with its money-laundering probe against the liquor baron in connection with the bank loan defaults case. Mallya’s troubled airline’s unpaid loan liability with various Indian banks, including the state owned State Bank of India, currently amounts to a little over Rs 9,000 crore.

United Spirits has already stated to the media that it has escalated the matter to all the concerned regulators locally post the detailed investigation on the fund diversion charges. Following this, India's Securities Exchange Board of India (SEBI) has apparently initiated a probe on the deals between the United Spirits and UB group companies. Diageo could not be immediately contacted for its comments on whether it will use the UK route instantly.

Diageo-controlled United Spirits had in 2015 initiated an internal investigation looking into some doubtful transactions in the company for the period 2010-2014, when Vijay Mallya continued heading the Board. Although the primary findings in the USL investigation formally establishing the alleged doubtful transactions were out in 2015, the company had said that specific details of these transactions will be out only after the investigations involving independent agencies including forensic experts. Following the fund diversion allegations, the United Spirits’ board forced Mallya to step down as chairman with a $75 million settlement. While part of the settlement amount is already been given to Mallya, Diageo is likely to hold back the remaining amount on account of the newly proved fund diversion charges.

Although Vijay Mallya has denied any wrong doing and claimed that all the transactions that took place in United Spirits during his time were in order, Diageo’s likely move to drag the case to a UK court will be his worst challenge at this juncture.