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Enforcement Directorate attachments under PMLA: Diageo moves court to get control of UB shares

Apart from Diageo, the official liquidator (OL) of the High Court of Karnataka and Ritu Mallya, the step-mother of Mallya too has separately intervened in the case.

Written by Khushboo Narayan , Sadaf Modak | Mumbai |
August 28, 2018 1:20:25 am
Money Laundering, PMLA, Vijay Mallya, Diageo Plc, United Breweries, Force India Formula One team, Enforcement Directorate, Prevention of Money Laundering Act, Indian express Ritu Mallya, the step mother of Mallya has in her petition opposed the confiscation of shares held by her in United Breweries.

Diageo Plc has moved court seeking to take control of shares of United Breweries (Holdings) Ltd and the entire stake of Watson Ltd in a joint venture that owns the Force India Formula One (F1) team, attached by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA) following a probe in the Rs 9000 crore bank loan default by Vijay Mallya-promoted Kingfisher Airlines Ltd.

The British liquor firm has filed an intervention petition in a special court in Mumbai on Monday, which is currently hearing the plea of ED that has sought immediate confiscation of the Rs 12500 crore assets of Mallya including the shares of United Breweries and Watson’s stake in Force India under the recently promulgated Fugitive Economic Offenders Ordinance (FEOO), 2018, which allows sale of assets even before the trial begins.

Apart from Diageo, the official liquidator (OL) of the High Court of Karnataka and Ritu Mallya, the step-mother of Mallya too has separately intervened in the case.

Diageo, sources said wants control of shares worth about $135 million (Rs 900 crore). This because Diageo Holdings Netherlands B.V had issued a guarantee to Standard Chartered Bank for a $135 million loan to Watson to release certain shares of United Spirits (USL) that were to be acquired as part of the acquisition deal of USL by Diageo in 2013. Watson defaulted on the repayment of the loan in May 2015.

Diageo and Standard Chartered agreed to extend the date for release of the guarantee amount to January 2016, to allow more time for repayment of the amount. Diageo also deposited $135 mn in an escrow account with Standard Chartered. As Watson could not repay the amount, $135 mn in the escrow account was transferred to Standard Chartered. Sources said the underlying security package for this loan included shares in UB and Watson’s interest in the joint venture that owns the Force India Formula One team.

The intervention petition filed by the official liquidator (OL) of the Karnataka High Court said it should be made party to the ED case as a ‘custodian of the interest of secured and unsecured creditors’. The OLs plea said the high court in its February 2017 order directed winding up of United Breweries and the OL had taken the ‘symbolic possession’ of the registered office of the company. The plea of the OL claimed that neither the statement of affairs nor any books of accounts were, however, submitted by the management of United Breweries as was required under the Companies Act, 1965. “If this application is not allowed, the official liquidator representing the company court and the interest of all the creditors would be put to great hardship and irreparable loss,” said the OL in its plea filed through counsel Lakshmi Iyengar.

Ritu Mallya, the step mother of Mallya has in her petition opposed the confiscation of shares held by her in United Breweries.

The court on Monday directed the ED to file its response on all these applications on whether the parties can be permitted to intervene in the ongoing hearing initiated under FEOO, 2018. The court has now directed that the documents be provided and slated the next hearing for September 3.

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