Diageo PLC, the world’s largest spirits maker, will hold back the remaining $35 million (approx. Rs 225 crore) of the $75 million (approx. Rs 482 crore) it had agreed to pay Vijay Mallya as part of a settlement, says an Economic Times report citing two people familiar with the development.
The report cited the two executives saying that the company will instead recover dues from Mallya, which include $135 million (approx. Rs 870 crore) that Diageo had given to Standard Chartered Bank as a conditional guarantee for the liabilities of Watson Ltd, a company affiliated with Mallya.
The British liquor company will also claim Mallya’s stake in the Force India Formula One team that had been pledged as security for Watson, the executives said.
Diageo paid $40 million (approx. Rs 257 crore) of the $75 million settlement reached last year after Mallya agreed to walk away from United Spirits (ULS). The rest of the money was to be paid in two equal instalments over the next few years.
“The remaining $35 million will not be paid now. The decision to not honour the deal signed with Mallya is also on account of charges of various financial misappropriations from USL and fund diversion by him,” the two executives were quoted as saying.
In 2012, Diageo, the maker of Johnnie Walker scotch and Smirnoff vodka, bought a 55 per cent stake in United Spirits for $3.2 billion, the largest food-and-beverage transaction in Indian history.
London-based Diageo cut ties with Mallya last year, and he left India amid criminal investigations of unpaid debts and possible money laundering and tax evasion. Diageo has the benefit of counter-indemnities from Watson and Mallya in respect of its liabilities under the guarantee.
The Indian unit of Diageo filed multiple complaints against Mallya after inquiries uncovered “improper transactions” worth Rs 1,225.30 crore. USL said Mallya had diverted the funds to nearly half-a-dozen companies in which he had a direct or indirect interest, mostly located in tax havens.
An Indian money-laundering investigation of Mallya, in cooperation with the U.K.’s Serious Fraud Office, is broadening to look at whether Diageo helped him shift assets offshore through side deals connected to the United Spirits takeover, according to an official at India’s Enforcement Directorate.