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Diageo demands Mallya repay £28m payoff
Diageo is pressing VJ Mallya to repay the first £28m of a total £53m payoff agreed in February 2016 for him to sever all ties to United Spirits, and demanding compensation to recover losses from companies associated with Mallya.
In February 2016 Diageo agreed to pay Mallya US$75 (£58M) million in return for his stepping down as chairman of United Spirits Ltd, severing all connections with the company, and agreeing not compete with the world’s biggest spirits group for five years.
In its annual results statement Diageo says that it declined to make a second payment of £5m in February this year and that because of unspecified breaches of the agreement by Mallya, it would not be liable for further payments.
It is also demanding compensation from him and will seek to recover losses from companies associated with Mallya. It is possible that as a result of these actions Diageo could end up holding his stake in the Force India Formula 1 grand prix team.
The document says: “Owing to various reasons, including breaches of several provisions of the 25 February 2016 agreement by Dr Mallya, Diageo believes that it was not liable to pay the $7 million (£5m) instalment in February 2017 and considers it very unlikely that it will become liable to pay future instalments in subsequent years.”
Further, Diageo and other group companies have demanded from Dr Mallya the repayment of $40m (£28m), which was paid by Diageo on 25 February 2016, and also sought compensation from him for various losses incurred by relevant members of the Diageo group on account of the breaches committed by him.
Mallya has been convicted of contempt by India’s Supreme Court and of being a wilful defaulter over some £1bn in debts incurred by his failed Kingfisher airline. He is also accused of money laundering.
Mallya fled to the UK in March 2016. India has lodged two extradition warrants with the UK authorities for him to be returned to face justice. The first case will begin on December 4. Mallya denies all the charges.
Mallya timeline
- 2012 – Mallya’s Kingfisher airline (named after the Indian beer brand produced by United Breweries, now controlled by Heineken) collapses into administration
- Consortium of Indian banks seek repayment of some £1.1bn in loans and interest stemming from the failure of Kingfisher. They claim that Mallya misappropriated the funds, diverting some of the loans into buying properties abroad.
- July 2014 – Diageo takes control of USL
- September 2014 – Mallya declared a “willful defaulter” by an Indian court for failing to pay debts.
- February 2016 – Diageo strikes deal with Mallya to pay him $75m to step down as USL’s non-executive chairman.
- March 2016 – Mallya flees to the UK on the day court orders were issued to seize his diplomatic passport, a document held by all members of India’s Senate.
- Novermber 2016 – Indian court rules he dishonestly diverted the first $40m of his Diageo payout to family in America when it should have been declared as part of his assets being assessed for debt repayment.
- May 2017 – Mallya arrested in London to face an extradition warrant to India, after he is found guilty of contempt of court. He was released on bail on condition that he surrendered his remaining passport, continued to live at his $15m Hertfordshire mansion and kept his mobile phone on him and fully charged at all times.
- July 2017 – Indian court postpones sentencing of Mallya on contempt of court verdict until Mallya is brought before it in India.
- July 2017 – Diageo takes action to recover part of the £53m payout handed to Mallya to cut ties from United Spirits, and withhold further payments.