Setback to Vijay Mallya: Karnataka HC declares as void UBHL's sale of shares to Diageo
Bangalore: In a setback to Vijay Mallya-led UB Holdings Limited, the Karnataka High Court on Friday held as 'null and void' UBHL's sale of shares of its United Spirits Limited to UK-based spirits giant Diageo.
A Division Bench comprising Justices N. Kumar and Rathnakala said the deal is void until a conclusion is reached on the winding up petitions against UB Holdings.
The court also asked Diageo to return the shares bought from UBHL as the company is mired in a whirlpool of winding-up petitions by creditors, who are seeking recovery of unpaid dues of close to Rs 600 crore from Mallya's firm.
Diageo had picked up more than 19 lakh shares of United Spirits for over Rs 472 crore in November this year.
UBHL said it would go through the judgement copy and decide on options to move the Supreme Court against the High Court order in January next.
Certain companies, including corporate banker BNP Paribas, which are creditors to UBHL, had filed petitions in the High Court seeking its winding up as the holding company was unable to pay its debts.
On December 16, the High Court had dismissed an appeal filed by UBHL against the winding up petition by BNP Paribas for 'lack of merits'.
UBHL had filed the appeal against last month's order of Justice Anand Byrareddy admitting BNP Paribas' winding up petition on defaults by now grounded Kingfisher Airlines, promoted by UBHL, over unpaid dues of over Rs 200 crore.
Next: Intend to challenge Karnataka HC order, say United Spirits Ltd, Diageo
Intend to challenge Karnataka HC order, say United Spirits Ltd, Diageo
Bangalore: United Spirits Ltd and Diageo on Friday said they would take steps to protect their interests after the Karnataka High Court declared as "null and void" the sale of shares of the Indian firm by its holding company to the UK-based giant.
"We will take all necessary steps to protect Diageo's interests as well as our own," UB Group Chairman Vijay Mallya said in a statement. Similarly, Diageo said it is awaiting receipt of the detailed written order of the division bench of the Court of Appeal in Karnataka.
"Once we receive the full written order of the Court of Appeal, we will review the detail of that order. We confirm that we intend to appeal the matter further," it added. In its statement, USL said the judgement "is in excess of 150 pages, which requires the company to first study it after a copy is made available and thereafter, consider the options".
"Till then we are unable to comment in any greater detail, except to say that one of the obvious options that we have is to prefer an appeal before the Supreme Court when it re-opens in January," it added.
Diageo on the other hand said: "We do not believe that there are any grounds for declaring the sale of the 10,141,437 shares in United Spirits Limited (USL) (6.9 per cent of USL) purchased by Diageo on 4 July 2013 from United Breweries (Holdings) Limited (UBHL) as void."
The company said it is "disappointed" to hear that the court has over-ruled the previous order of the High Court of Karnataka granting leave to UBHL under sections 536 and 537 of the Indian Companies Act in respect of the five winding up petitions then pending against UBHL to enable the sale of the USL shares by UBHL to take place.
"We are also disappointed, as a bona fide purchaser for value of the USL shares, that we have been brought into the private dispute between Kingfisher Airlines and its creditors," it said.
A Division Bench comprising Justices N. Kumar and Rathnakala of the Karnataka High Court today ruled the deal is void until a conclusion is reached on the winding up petitions against UB Holdings.
Last year, Diageo had announced that it would pick up 53.4 per cent stake in USL in a multi-structured deal for a total of Rs 11,166.5 crore. However, it could acquire only 25.02 per cent stake in USL for a total consideration of Rs 5,235.85 crore due to tepid response from shareholders in its open offer.
