'Sweetheart deal' turns sour: DRT bars Vijay Mallya from withdrawing $75 mn Diageo money

Bengaluru: In a fresh blow to beleaguered Vijay Mallya, the Debt Recovery Tribunal Monday barred him from withdrawing USD 75 million exit payment from British liquor giant Diageo till the disposal of Kingfisher Airlines' loan default case filed by SBI.

Diageo and United Spirits Ltd, owned by the UK-based firm, have also been restrained by DRT Judge Benakanahalli from temporarily disbursing the amount to Mallya, who worked out the deal under a severance package.

The tribunal ordered that the amount be attached till the disposal of the original application filed by State Bank of India in 2013.

 

In his order on the plea by the SBI application seeking the lenders' first right on the USD 75-million sweetheart deal, the judge also directed disclosure of details of the agreement which they have arrived at.

Three other applications filed by SBI before the DRT will come up for hearing on March 28.

SBI, which leads the consortium of 17 banks that lent money to the grounded Kingfisher Airlines, had moved DRT here against the airline's chairman Mallya in its bid to recover over Rs 7,000 crore of dues from him.

 

The state-owned top lender had filed three other applications, including one seeking Mallya's arrest and impounding of his passport, which the judge had said on March 4 would be heard later.

Mallya had to quit recently as chairman of United Spirits - a company founded by his family in which he sold majority stake to Diageo.

Under the deal, that also ended a year-long boardroom battle at United Spirits, Diageo has agreed to pay Mallya USD 75 million (Rs 515 crore).

 

The settlement was sealed even as at least three banks including SBI declared the defunct Kingfisher Airlines, Mallya and his group holding firm UBHL (United Breweries Holding Ltd) as 'wilful defaulters' to recover unpaid loans. 

DRT had on March 4 reserved its orders on the application

by SBI seeking the lenders' first right after hearing arguments by both sides.

Delivering the order today, it said: "The defendant (Mallya) temporarily shall not draw the amount mentioned in the present application till disposal of original application as sought by the applicant banks."

 

It also added: "Diageo plc, Diageo Netherlands and USL shall not dispense the amount to Mallya or any of his agents, nominee or asignee till the disposal of the original application. Amount mentioned in IA is attached.

"The defendants, Diageo plc, Diageo Netherlands and USL are directed to furnish details of the termination agreement arrived between them."

Under fire, a defiant Mallya had yesterday rubbished the charge that he was an "absconder" and said he was making efforts to reach a 'one-time settlement' with banks through additional payments to the lenders.

Denying that "personally" being a "borrower or judgement defaulter", he had flayed the "disinformation campaign" to paint him a "poster boy" of all bad loans.

 

Questioning the "wilful defaulter" tag by some banks, he had also hit out at them, alleging that they didn't go after borrowers who "owe much more than the amount allegedly owed by Kingfisher Airlines".

Mallya and Kingfisher Airlines owed Rs 7,800 crore to the consortium led by SBI, which had an exposure of over Rs 1,600 crore to the airline.

Other lenders include Punjab National Bank, Bank of Baroda, Canara Bank, Bank of India, Central Bank of India, Federal Bank, Uco Bank and Dena Bank.

Last year, SBI declared Mallya as wilful defaulter while Punjab National Bank had also declared him, his group holding company United Breweries Holdings and Kingfisher Airlines as wilful defaulters last month.

As part of the deal, Diageo said it would pay USD 40 million immediately to Mallya with the balance being payable in equal installments over the next five years.

It will also absolve Mallya of all liabilities over alleged financial lapses at the company founded by his family.