DRT allows bankers' plea on lifting of corporate veil, passes

In a setback to Vijay Mallya, the Debt Recovery Tribunal (DRT) today allowed consortium ofbankers' interlocutory application on lifting of corporateveil to pierce the protection against personal liabilityenjoyed by individuals controlling Kingfisher Finvest, aholding company of the beleaguered liquor baron.
It also directed spirit maker Diageo Plc to deposit with the tribunal the remaining USD 35 million of the USD 75-million 'sweetheart deal' with Mallya.
DRT also dismissed the interlocutory application (IA) filedby Dutch beer major Heineken, seeking impleadment in the Mallya case to enjoy Right of First Refusal (ROFR) over UBL shares.
Bankers had filed the IA seeking lifting of corporate veil to pierce the protection against personal liablity enjoyed by individuals controlling Kingfisher Finvest.

The doctrine of Lifting of Corporate Veil means disregarding the corporate personality and looking behind the persons controlling the company.
Heineken had filed an applicationseeking to be impleaded in the case to enjoy ROFR over UBL shares. Heineken has some presumptive rights on UBL sharesheld and owned by Mallya.

ROFR is a contractual term between shareholders,usually included in Articles of Association.
If a shareholderwishes to dispose shares that are subject to ROFR, it mustfirst be offered to those other shareholders who have its benefit.
Passing orders on yet another IA by Diageo Plc, DRT Presiding Officer C R Benakanahalli directed the companyto "attach" the remaining USD 35 million of the USD 75 million sweatheart deal amount with it, in case any transaction takes place as per the agreement between Mallya and Diageo Plc and its two other subsidiaries.

Diageo Plc had filed an Interlocutory Application seeking vacating of the DRT's March 7 order.
DRT had barred Mallya from withdrawing USD 75 million exit payment from Diageo till disposal of the case over the loan default by Kingfisher Airlines.
It had restrained Diageo and United Spirits Limited,owned by the UK-based firm, from temporarily disbursing theamount to Mallya, who worked out the deal under a severancepackage.
But USD 40 million of the USD 75 million package deal had already been disbursed, following which thebankers consortium had sought directions from DRT to attachthe amount before it.
On a DRT directive, Diageo Plc and its twosubsidiaries submitted details of the deal, in which bankers figured out that USD 40 million of the USD 75million was parked in an account by Mallya in New York-based JP Morgan Bank.

On May 17, DRT had directed the bank not to disburse to Mallya USD 40 million and asked it to "attach" (submit)before it, statements of accounts held by Mallya in the bank.
Diageo Holdings Netherlands had also filed an IA, seeking vacating of DRTs March7 order.