rediff.com
News APP

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  gplay

Rediff.com  » Business » Vijay Mallya's maze gets trickier
This article was first published 10 years ago

Vijay Mallya's maze gets trickier

January 01, 2014 09:43 IST

Image: A file photo of UB group chairman Vijay Mallya during a news conference in Mumbai on June 14, 2005..
Photographs: Punit Paranjpe/Reuters Dev Chatterjee in Mumbai

Karnataka HC seeks probe into fund diversion by United Spirits

The problems of UB Group chairman Vijay Mallya seem to be growing still. The Karnataka high court has made scathing comments on his United Spirits' diversion of Rs 4,000 crore (Rs 40 billion) to the tax haven of the British Virgin islands before its sale to Diageo and said the diversion needs to be investigated.

While setting aside the sale of a seven per cent USL stake to Diageo by UB, the court order dated December 20 said without investigations of the serious allegations made by lenders on the transaction, the company judge had granted permission, which was not proper.

The latter was dealing with the public announcement of Diageo’s open offer for USL and permitted the sale of UB Holdings’ (UBHL’s) shares to Diageo.

Click on NEXT for more...

Vijay Mallya's maze gets trickier


Photographs: David Moir/Reuters

The lenders, led by BNP Paribas, said during the hearing that the diversion of funds by USL was not in the interest of the lenders and would impact UBHL. The latter and Mallya were both guarantors to Kingfisher Airlines’ loans.

After the now-grounded airline defaulted on payments, lenders and aircraft lessors sued UBHL and Kingfisher in the Karnataka HC, asking for their money back.

UB had told the company judge these funds were diverted for payment of the acquisition of Whyte & Mackay. The lenders said there were no supporting documents to show why such a valuation asset was parked in a tax haven. An email sent to the UB group on this issue did not elicit a response.

The HC said the company had not come to court with clean hands and the transaction in question is not bona fide. Hence, the diversion of funds needed to be investigated.

Click on NEXT for more...

 





Tags:

Vijay Mallya's maze gets trickier

Image: A child sleeps at a shop selling whisky in Hanoi.
Photographs: Kham/Reuters

On April 14, to get clearance of the sale to Diageo, the UB group gave an assurance to the bankers that it would make a significant payment to Kingfisher lenders out of the proceeds of the sale of USL shares to Diageo.

The UB group also requested the bankers not to take any action to sell USL shares in the market, which could derail the Diageo deal. But the group did not return any money to Indian banks and, instead, sued them in various courts.

The lenders also raised queries over Diageo’s $35-million investment in Mallya’s South African brewery and guarantee facilitation of $135 million by Diageo to the Force One racing team.  This, lenders allege, was part of the Diageo deal but the money was not brought to India.

Soon after the HC order, both Diageo and the UB group said they’d move the Supreme Court against it.

Click on NEXT for more...

Vijay Mallya's maze gets trickier


Photographs: Reuters

Pledge of shares under scanner

The lenders to grounded Kingfisher Airlines are miffed that the UB group created a pledge on United Spirits (USL)’s shares with brokerage and finance companies — including Srei, Motilal Oswal and LKP Finance — even after winding-up petitions were filed by them to recover their Rs 6,500 crore (Rs 65 billion) of loans to the airline.

The Karnataka HC order, which set aside these pledges, created late last year, will have a bearing on similar cases where pledged shares are involved.

The order says UB pledged shares of USL in favour of Narayan Sriram, ICICI Bank and Sicom to the extent of Rs 491 crore (Rs 4.91 billion), apart from Srei, Motilal and LKP. These shares were to be sold to Diageo, in line with an agreement among UB, Diageo and these brokers.

Click on NEXT for more...

Vijay Mallya's maze gets trickier


Photographs: Reuters

When asked, Vijay Mallya, chairman of UB group, said, “We will take all necessary steps to protect Diageo's interests, as well as our own. As the matter is sub judice, we cannot comment further.”

During the hearing, Indian public sector banks argued all the alleged pledges were created after filing of winding-up petitions, tantamount to dispossession of property.

Court documents show UB owed Rs 40 crore (Rs 400 million) to Motilal, Rs 71.5 crore (Rs 715 million) to LKP, Rs 35 crore (Rs 350 million) to Srei, Rs 145 crore (Rs 1.45 billion) to ICICI Bank, Rs 5 crore (Rs 50 million) to Narayan Sriram and Rs 193 crore (Rs 1.93 billion) to Sicom.

When asked, Srei Infrastructure’s vice-chairman Sunil Kanoria said: “Our shares have not been set aside. We are further getting this examined by our lawyers.”

Source: source