Mallya can’t access Rs 515 crore received in Diageo settlement for now
A tribunal has temporarily halted a Rs 515 crorer settlement due to be paid by spirits giant Diageo Plc to liquor baron Vijay Mallya, after he resigned as chairman of Diageo unit United Spirits.business Updated: Mar 07, 2016 18:44 IST
In a major setback for liquor baron Vijay Mallya, the Debt Recovery Tribunal (DRT) on Monday barred him from accessing the $75 million (Rs 515 crore) exit payment from Diageo till the loan default case with State Bank of India is settled.
The DRT, allowing an SBI plea, restrained Diageo from disbursing the money for now and set March 28 as the next date of hearing.
The SBI had sought DRT’s intervention in seeking the lenders’ first right on the $75-million payout from Diageo to Mallya as part of deal last month.
Under the deal, Mallya was to step down as chairman of India’s top spirits company United Spirits Ltd in a settlement with its new owner, Britain’s Diageo. Mallya was to settle down in London after the deal.
The SBI had filed three other applications, including one seeking Mallya’s arrest and impounding of his passport, it approached DRT seeking action against him for defaulting on loans.
The DRT, in its order, restraining Diageo from disbursing $75 million, said the amount has been attached pending disposal of original application.
It directed Mallya and the companies concerned to disclose the details of the terminal agreement.
The order came hours after Mallya said he was in talks with banks for a one-time settlement of debt that his now-defunct Kingfisher Airlines owes.
In a statement late on Sunday, he had also stated that he had no plans to run away from his creditors.
SBI, which leads the consortium of 17 banks that lent money to the grounded Kingfisher Airlines, had moved DRT against the airline’s chairman Mallya in its bid to recover Rs 7,800 crore. SBI had an exposure of over Rs 1,600 crore to the now defunct airline. Since January 2012, the loan was not serviced.
Other lenders include Punjab National Bank, Bank of Baroda, Canara Bank, Bank of India, Central Bank of India, Federal Bank, Uco Bank and Dena Bank among others.
Last year, SBI declared Mallya as wilful defaulter while PNB had followed suit last month to declare him, his group holding company United Breweries Holdings and Kingfisher Airlines as wilful defaulters.
Diageo was to pay Mallya $40 million immediately and the balance in equal installments over the next five years.
The deal also absolved Mallya of all liabilities over alleged financial lapses at the company founded by his family.