Listen to this article
This is an experimental feature. Give us your feedback. Thank you for your feedback.
What do you think?
Creditors of Vijay Mallya’s now defunct airline have petitioned India’s Supreme Court to prevent the erstwhile liquor baron from travelling abroad as they battle to grab part of his $75m golden handshake from Diageo.
The State Bank of India led a consortium of at least a dozen lenders on Tuesday all claiming that they should have the “first right” to money Diageo paid Mr Mallya to resolve a bitter boardroom stand-off over his chairmanship of his former company, United Spirits.
The court will hear on Wednesday the banks’ request to stop Mr Mallya from travelling, but a spokesman for the tycoon declined to comment on his whereabouts.
Like many wealthy Indians, particularly business owners, Mr Mallya spends less than six months a year in India to ensure he is not liable for the country’s income taxes.
Diageo, which spent about £1.8bn to take a controlling stake in United Spirits in 2012 and 2013, agreed last month to pay Mr Mallya an additional $75m to ease him out from the chairmanship, a position he had retained even after the sale, as one of binding conditions for selling the company.
Mr Mallya’s relations with Diageo deteriorated in 2014, after auditors questioned alleged financial improprieties involving transactions to other parts of Mr Mallya’s business empire in years preceding the sale. But the businessman refused requests for his resignation, until the deal reached last month.
The surprise announcement of Diageo’s generous payout raised hopes among creditors of Kingfisher Airlines, which collapsed in 2012 under a debt pile of more than $2bn, that they could seize some of those funds against the carrier’s unpaid debts.
An Indian debt recovery tribunal fuelled hopes further on Monday after it ordered Diageo to stop making payments to Mr Mallya until he settles the disputes with his creditors.
But its unclear to what degree the tribunal’s order can be enforced. Diageo has already paid the first $40m tranche of the settlement. Citing confidentiality, it has declined to comment on whether funds were sent to Mr Mallya in India, or elsewhere.
The $35m balance is to be paid out in equal instalments over the next five years, contingent on Mr Mallya’s adherence to a “non-compete clause” and other conditions.
In a statement, Diageo said it was still waiting for a copy of the tribunal’s order to assess its full implications.
Known for maintaining his flamboyant, luxurious lifestyle even as staff at Kingfisher Airlines went unpaid for months, Mr Mallya is seen by many as the embodiment of India’s old-school business elites; owners who have lived high off the hog, even as their companies failed to repay huge debts to the country’s public sector banks.
This weekend, Mr Mallya lashed out at the relentless public scrutiny of his finances and lifestyle, while other tycoons responsible for banks’ estimated $117bn in bad debts have been ignored.
“I have been most pained at being painted as an absconder,” he said in a statement. “I have neither the intention nor the reason to abscond.”
Mr Mallya said his own business had invested about $600m in Kingfisher Airlines — money that will now never be recovered. He also said the creditors have received $182m from the sale of shares pledged as collateral on the airline’s debt, while a similar sum has been deposited with the Karnataka High Court for debt repayment.