DRT verdict on Diageo money to Vijay Mallya today

The Debt Recovery Tribunal (DRT) will deliver verdict later today on a plea by the State Bank of India to direct Vijay Mallya and Diageo Plc to deposit the $ 75 million (around Rs 500 crore) committed by the British liquor firm for a non-compete deal signed with the Indian liquor baron to exit the spirits business.

Mallya, who owes over Rs 7,200 crore to a consortium of banks led by State Bank of India, has objected to the plea by India's largest public sector bank seeking the money saying that the payments are being made to him as a person not to compete with Diageo in the liquor business.

 

"The payments from Diageo Plc to myself are towards my personal non compete obligations globally except in the UK. In effect, I have given up my interests in the spirits business globally at considerable cost," Mallya said in a statement on Sunday evening.

The banks also have filed petitions in the DRT as well as the Karnataka High Court to arrest Mallya, impound his passport as well as seek disclosure of all his assets.

Mallya had taken the loans to run the defunct Kingfisher Airlines that led to him losing control over his liquor empire to global players - Diageo in spirits and Heineken in beverages. He claimed that his UB group has pumped over Rs 4,000 crores in Kingfisher Airlines.

"My Group directly invested over Rs 4000 crores into Kingfisher Airlines itself which investment stands fully impaired - it is not as though it is only the bank debt that has suffered. The banks will recover a substantial part of their debt - my groups loss is permanent. Absent any fraud, the concept of corporate limited liability cannot be ignored," Mallya said in the note. ?

Mallya claimed that since April 2013, banks have recovered Rs 1,244 crores in pledged shares and Rs 1250 crore has been deposited in Karnataka high court belonging to United Breweries (Holdings) Ltd.

The plea by the banks in the DRT maintains that SBI should have the first right of the funds from United Spirits as Mallya had stepped down from the company's board. The banks want  Diageo to deposit the funds in the tribunal.

SBI, which leads a consortium of banks that lent Mallya, declared him as a wilful defaulter in October 2015. Besides SBI, United Bank of India, which he has got a stay from the Calcutta High Court, and Punjab National Bank has also declared him wilful defaulter.

Mallya and Kingfisher, now defunct since it suspended operations in October 2012, owes SBI and the consortium of 17 banks over Rs 7,200 crores of loans raised to run the airline. Kingfisher Airlines was started as a trophy airline by Mallya for his son's 18th birthday. The airline redefined luxury air travel in India but soon crash landed due to high cost structures, increased competition and mismanagement.