Diageo sues Vijay Mallya over $75m United Spirits agreement

Diageo has filed a lawsuit against Vijay Mallya in the UK over a $75 million agreement it struck with the tycoon for him to step down as chair of United Spirits in 2016.

Mallya resigned as chairman of United Spirits, which Diageo paid £1.8bn for a majority stake in, in February 2016, with the global spirits company agreeing a $75 million pay-off. Diageo paid $40m to Mallya upfront, with the remainder set to be handed out over a five year period.

However this week Diageo confirmed it had filed a lawsuit in the UK High Court against Mallya for payments of $181m, as reported by the Financial Times. 

“Diageo is pursuing substantial repayment and compensation from Dr Vijay Mallya and certain of his affiliate companies,” the company said in a statement. “The matters giving rise to these claims were clearly set out in our 2017 annual report as well as prior disclosures.”

Diageo alleges that Mr Mallya had breached the agreement, under which he would step down as chair of United Spirits in exchange for $75m. It wants its initial payment of $40m back, along with $141m of sums owed by a company affiliated to Mr Mallya.

The lawsuit comes as a consortium of 17 banks continues its efforts to recover more than a billion dollars of debt relating to Mallya’s now defunct Kingfisher Airlines. Mallya had been directed by the court in April to disclose all the assets held by him and his family, with a consortium of 17 banks led by the State Bank of India seeking recovery of over Rs 9,000 crore in debts accrued by the now-defunct Kingfisher Airlines.

The billionaire was declared a wilful defaulter by the United Bank of India and later by the State Bank of India, a label Mallya challenged.

The IDBI is one of 17 Indian banks seeking to recover more than US$1 billion from Mallya, which has already rejected his proposed scheme to repay $600 million.

Kingfisher Airlines, which was never profitable, collapsed into bankruptcy in 2012 with debts approaching £1bn.