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DRT directs Diageo not to disburse $ 40 million to Mallya

In another blow to beleaguered businessman Vijay Mallya, the Debt Recovery Tribunal(DRT) today directed Diageo Plc not to disburse USD 40 million of the USD 75 million sweetheart deal to him.

During the proceedings, the DRT here also took the bankers to task for not exercising due deligence and take appropriate action to prevent Mallya from receiving USD 40 million.

In tandem, the Tribunal also directed New York-based JP Morgan Bank to “attach” (submit) before it the statements of accounts held by Mallya in the bank there.

DRT Presiding Officer Benakanahalli also directed companies including Watson Limited, a Mallya-affiliated firm, to attach shares before the Tribunal.

The directions until further orders came during the hearing on two applications filed by the consortium of banks led by SBI.

The consortium had prayed for directions from the Tribunal not to disburse USD 40 million of the USD 75 million severance package deal arrived at between Diageo and Mallya and to ask JP Morgan Bank to attach before DRT statements of the account held by Mallya in their bank.

The banks also sought attachment of shares of companies including Watson Limited, a Mallya-affiliated firm, before the Tribunal.

Diageo, the world’s largest spirits maker, which acquired control of United Spirits (USL) in 2012, had issued a guarantee to Standard Chartered Bank for a USD 135 million (around Rs 900 crore) loan to Watson to release certain UBL shares that were to be acquired as part of the deal.

The company, in their statement, had said that the risk had arisen due to default by Watson in May and DRT preventing sale or any other transfer of such UBL shares in June as part of the enforcement process pending further orders following the petition by bankers.

Pulling up the banks, Benakanahalli said, “My question is I will do it, but what were the banks doing to take due deligence of taking appropriate action to know the details of transaction being done between the two parties, which everybody knew, even prior to arriving at sweetheart deal.

“What were the banks doing? Are you not supposed to pester him (Mallya) and find out where he has deposited the money; where it was received – things like that,” he said.