Excise policy case: Delhi HC orders Khao Gali Restaurants to pay over Rs 35 cr to Pernod Ricard India; both figure in ED’s excise case

Khao Gali Restaurants, however, defaulted on the repayment of the loan availed and the bank branch had then auto-debited the outstanding amount from Pernod Ricard India by invoking the corporate guarantee that the latter had issued. In January 2023, Pernod Ricard India demanded the amount from Khao Gali Restaurants Pvt Ltd, which the latter did not pay, leading to the recovery suit.

Notably, the Enforcement Directorate (ED), in its complaint pertaining to money laundering in the alleged scam, claimed that the loan amounts and the costs incurred by Pernod Ricard India in facilitating the issuance of the corporate guarantee are “proceeds of crime” under provisions of the Prevention of Money Laundering Act (PMLA).

Pernod Ricard India has made a claim of Rs 35,88,59,676 along with applicable interest, a cumulative sum of Rs 37,52,62,266 as of March 29, 2023.

The court of Justice Jasmeet Singh held that upon default by Khao Gali Restaurants, Pernod Ricard India, is “entitled to recover the debited amount” from Khao Gali Restaurants, and also recorded that Khao Gali Restaurants did not challenge or file a suit seeking a declaration of the corporate guarantee invoked by the bank for repayment of dues as void.

Reasoning on Khao Gali Restaurants’ argument before the Delhi High Court that criminal proceedings against both companies are pending before the special court and the corporate guarantee has been alleged to be ‘proceeds of crime’ by the ED, Justice Singh held, “Both the proceedings i.e. civil and criminal proceedings, are to be decided on the basis of evidence produced therein. In civil proceedings, the suits are decided on the basis of balance of convenience and in criminal proceedings, the burden of proof lies on the prosecution.”

“In the present case, I am of the view that there is only a prima facie initiation of a criminal prosecution by the prosecuting agencies. As of today, there is no finding of fact by a judicial authority regarding the fact that the sums involved in the present case are proceeds of crime. The mere fact that ECIR has been registered, a complaint has been filed, and cognisance has been taken does not make the transaction illegal and void. The criminal proceedings are of a much wider amplitude and concerns the violations of the New Delhi Excise Policy 2021-22,” Justice Singh said.

“The present suit for recovery before this court is only limited to contractual obligations between the parties herein regarding the invocation of corporate guarantee of the plaintiff (Pernod Ricard)…for defaults committed by defendant No. 1 (Khao Gali Restaurants Pvt Ltd,” Justice Singh added.

Sameer Mahendru, who runs M/s Indospirit Group and Khao Gali Restaurants, also an accused in the liquor excise policy case, has been called the ‘kingpin’. Mahendru had a 35% partnership stake in Indospirit LLP, which got a wholesale L1 licence and also obtained two retail zone licences under the name of Khao Gali restaurants which is under the name of his father-in-law “but (he) used to take all financial decisions in Khao Gali” and was the beneficial owner of the company, ED has alleged. The ED alleged the profit the company made between November 17, 2011, and August 31, 2022, of Rs 50 crore, is “nothing but undue benefit generated out of criminal activities”

The ED in its first chargesheet filed in the case of alleged money laundering in the now scrapped liquor policy had named Mahendru and three companies where he holds a stake, including Khao Gali Restaurants Pvt Ltd. The second chargesheet in the case had named 12 accused, including Pernod Ricard.