Standard Chartered Bank alleges Vijay Mallya colluded with bankers

Bengaluru: Standard Chartered Bank (SCB) on Wednesday levelled allegations of collusion between liquor baron Vijay Mallya and consortium of banks led by SBI, during the hearing of its interlocutory application seeking vacation of the Debt Recovery Tribunal interim order, preventing it from transacting with British liquor giant Diageo Plc.

 Standard Chartered Bank alleges Vijay Mallya colluded with bankers

Vijay Mallya. AFP

Making submissions before DRT Presiding Officer C R Benakanahalli, SCB's counsel G Krishnamurthy argued that the fact that Mallya did not object to the interim order passed by DRT preventing SCB's transaction with Diageo Plc stands clear 'testimony' to collusion between the liquor baron and banks.

Elaborating, he said, "When DRT passed the interim order, preventing any transaction between Diageo Plc and SCB, Mallya did not object to it - This stands clear testimony to a collusion between Mallya and banks."

"Mallya could have objected to the interim order, but did not do it. Why he did not object? Because it served his purpose as the interim order prevented the sale and transfer of UBHL shares that were to be acquired by Diageo who had issued a guarantee to SCB for around Rs 877 crore loan to Watson, a holding company of Mallya," Krishnamurthy added.

Diageo, the world's largest spirits maker which acquired control of United Spirits (USL) in 2012, had issued a guarantee to SCB for a $135 million (around Rs 877 crore) loan to Watson to release certain United Breweries Holding Limited (UBHL) shares that were to be acquired as part of the deal.

The company, in their statement, had said that the risk had arisen due to default by Watson in May and DRT preventing sale or any other transfer of such UBHL shares in June as part of the enforcement process pending further orders following the petition by bankers.

Responding to SCB's allegations, the bankers' Counsel, in a counter argument, said, "If the bankers had colluded with Mallya, we would not have been waging a court battle against the high-profile defendent."

Making submissions before the tribunal, Krishnamurthy pleaded for vacating its interim order to allow transaction between Diageo Plc and SCB.

Submitting the grounds for vacating the interim order, Krishnamurthy argued that the DRT does not have the power to hear the case where the two entities were foreign entities and were not party at the time the transaction deal was struck.

Earlier, Diageo Holdings Netherlands counsel also pleaded before the tribunal for vacating the interim order, barring Mallya from withdrawing $75 million exit buyout by it under a deal, on the grounds that the bankers haven't made it a party either in their original application and interlocutory application.

Diageo Holdings Netherlands on 3 June had filed an interlocutory application seeking vacating of DRT's order barring liquor baron Vijay Mallya from withdrawing $75 million exit buyout by it under a deal till disposal of SBI's case against him over loan default.

"Since the bankers have not made us (Diageo Plc) a party, either in their Original Application or Interlocutory Applications, and hence we humbly plead before the Lordship to vacate the order, as we are no way connected with the case," Sondhi, Counsel for Diageo Netherlands, said.

DRT had barred Mallya from withdrawing $75 million exit payment from Diageo till the 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 the amount to Mallya who worked out the deal under a severance package.

However, $40 million of the $75 million severance package deal had already been disbursed, following which the bankers' consortium had sought directions from the Tribunal to
attach the amount before it.

Following a directive of the Tribunal, Diageo Plc and its two subsidiaries submitted the details of severance package deal, in which the bankers figured out that $40 million of the $75 million was parked in the account held by Mallya in New York-based J P Morgan Bank.

On 17 May, DRT directed J P Morgan Bank not to disburse to Mallya $40 million and asked it to "attach" (submit) before it statements of accounts held by Mallya in the bank.

Kingfisher had filed application for submitting objections to all the facts pertaining to the case.

Mallya, whose now-defunct group company Kingfisher Airlines owes over Rs 9,000 crore (Rs 90 billion) to 17 banks, had left the country on 2 March and is in the UK.

The beleaguered businessman has been declared a proclaimed offender by a special PMLA court in Mumbai on a plea by the Enforcement Directorate in connection with its money laundering probe against him in the alleged bank loan default case.

The next hearing was posted for 17 June.

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Updated Date: Jul 06, 2016 20:48:06 IST