Mallya: Diageo challenge USL share sale
Diageo has challenged an order of India’s Prevention of Money Laundering Act court, which permitted the sale of assets seized from Vijay Mallya to repay a consortium of banks some of the £1.15 billion they claim he owes to them.
Last month the Indian courts allowed the sale of shares Mallya held in United Breweries and United Spirits worth more than £600m but Diageo, through its Dutch subsidiary, contends it has a prior claim to some £30m worth of the USL shares and has been given three weeks by the court to press its case.
Diageo has previously told its shareholders that it laid claim to the shares as part of a complicated loan to Watson Ltd, the company behind Mallya’s Formula 1 grand prix racing team, originally granted by Standard Chartered Bank and backed by the shares as collateral.
When Mallya defaulted, as part of the 2013 takeover of USL, Diageo’s Dutch subsidiary had to repay the debt of more than £100m. Ever since, it has been seeking through India’s courts to reclaim the shares pledged by Mallya to Standard Chartered to back that debt.
Meanwhile, in the London Courts Diageo is seeking a total of more than £250m from Mallya and his son Sidhartha for breach of contract and the failure to repay debts. They were ordered to pay by the end of November but failed to do so.
At the end of this month a judge will hear closing submissions on whether Mallya should be declared bankrupt.
He is due to be extradited to India to face charges of corruption and money laundering but despite running out of legal avenues in the UK courts, he remains on bail at his mansions in Hertfordshire and London.
The UK cannot execute the extradition warrant until a “confidential legal matter” is resolved. That is widely thought to be a plea by Mallya for political asylum.