The UK High Court on Friday (24) heard arguments in a case brought by British beverages giant Diageo against Vijay Mallya to recover more than $175 million it claims is owed to them by the embattled liquor tycoon.
Justice Robin Knowles heard Diageo's claim that Mallya, his son Sidhartha and two companies associated with the family are liable for repayment of the funds dating back to the company's acquisition of a controlling stake in Mallya's United Spirits Limited (USL) around three years ago.
Of the total amount claimed by the London-headquartered drinks firm, $40 million is claimed directly from Mallya as the amount paid to him as part of a disengagement agreement and the remaining amount from Sidhartha Mallya and Watson Limited, a company held in a Mallya family trust called the Continental Administration Services Limited (CASL).
"We are suing Dr Mallya for repayment and damages amounting to approximately $175 million. This is money Dr Mallya and some of his affiliate companies owe Diageo and we have always been clear that we are entitled to exercise our right to recover the sum in full," said Dominic Redfearn, spokesperson for Diageo, one of the world's largest distillers behind brands like Johnnie Walker and Smirnoff.
The three claimants in the case, Diageo Plc, Diageo Holdings Netherlands BV (DHN) and Diageo Finance Plc, are pursuing 63-year-old Mallya over an agreement struck in February 2016, under which he would step down as chair of United Spirits in exchange for a financial agreement.
At the heart of the case lies an ICICI Bank loan owed by Mallya's Watson and CASL, for which Diageo stepped in as a backstop so that it could be refinanced by Standard Chartered Bank.
With some USL shares caught up in India's Debt Recovery Tribunal (DRT) action at the time, it was expected that the collateral associated with the loan could be pursued at a later stage.
"Watson and CASL's only defence is that, prior to entering into the Deed of Disengagement, DHN promised that it would not enforce its claims until certain orders granted in India are lifted. Watson and CASL relied on an oral promise," Daniel Toledano, the barrister for Diageo, told Judge Knowles.
"That defence is bound to fail. There are transcripts of the discussions at which the oral promise was alleged to have been made and it is clear from those transcripts that no such oral promise was made," he said.
Many of the transcripts were also read out in court, including one in which Mallya repeatedly urges Diageo to not "screw him" further down the line of their negotiations over the sale of the USL.
Diageo's counsel went on to argue the commercial rationale behind Mallya having entered into the agreement with the drinks major, because he "stood to gain a lot financially from the deal, which is why he entered into it".
He stressed that given the transcripts of a series of conversations presented before the court, there was no need for the case to go to a full trial and that a "summary judgment" by the judge would help save cost and delay.
Mallya's Barrister Daniel Margolin challenged Diageo's case by arguing that an oral promise had in fact been agreed between Mallya and Diageo CEO Ivan Menezes and other executives linked with the drinks major.
He claimed that at least two conversations that took place between Mallya and the Diageo chairman at the time and another one between Indian businessman Sunil Mittal and Menezes, for which no transcripts are available, are of high relevance to the case.
"It is not appropriate to simply dismiss those conversations," Margolin said, who also challenged Diageo's attempt at seeking a summary judgment from the High Court instead of presenting detailed evidence in a trial.
A verdict in the case is expected at the end of the day-long hearing.
Meanwhile Mallya, who was not present in court during Friday's proceedings and is separately wanted in India on charges of fraud and money laundering amounting to around Rs 9,000 crores (£1 billion), remains on bail.
He awaits his July 2 oral hearing before another UK High Court judge for his appeal against his extradition ordered by UK home secretary Sajid Javid in February.
