The Supreme Court
on Monday directed no transaction regarding the sale of United Spirits shares to British liquor major Diageo be carried out till April, when the court would hear the issue in detail. The court allowed the winding-up proceedings against United Spirits to continue.
After hearing the British company and a State- Bank of India (SBI)-led consortium of creditors to United Spirits, a bench comprising judges A K Patnaik and Ibrahim Kalifulla said various issues required deeper examination.
Diageo counsel Mukul Rohtagi
said for the deal, the company had received approvals from the Reserve Bank of India, the Securities and Exchange Board of India and the Competition Commission of India. He added the bank consortium was aware of the deal completed in July and, at Rs 1,440, the valuation of the shares was transparent. The transaction had been annulled on wrong legal presumptions, the counsel said.
The consortium of lenders argued there was gross undervaluation of the shares. Huge amounts had gone to foreign tax havens. “Now, they want immunity for these transactions,” the counsel said.
On December 20, a high court had declared a deal in which UB Holdings had sold 10 million shares in United Spirits to Diageo as null and void. The shares, amounting to 6.96 per cent stake in United Spirits, were ordered to be returned to UB Holdings within two weeks. The transaction was part of a larger deal through which Diageo acquired 25.02 per cent stake in United Spirits from UB Group Chairman Vijay Mallya
and his various affiliate companies, at Rs 1,440 a share.
According to the creditors of UB holdings, the deal value had been not only agreed without their consent but also at a far lower price than what the shares would have commanded on the day of the permission of the Court when the shares had already crossed Rs 2,330 apiece. Furthermore, creditors also alleged that Diageo had only paid Rs 1440 for each share in United Spirits in public, whereas the company had exchanged more sums with Mallya outside the country for the same shares.
Diageo, which currently holds 28.78% (including the disputed amount) in United Spirits, had originally intended to pick up a majority in the Indian spirits firm but was unable to do so since most of Mallya's stake in the company was pledged with various lenders who did not release the shares.
Since then Diageo has made two open market purchases of additional United Spirits' shares at more than a 70% premium to the original deal value. In the two purchases, Diageo has paid Rs 1,338 crore for a total of 3.75% stake after spending Rs 5,200 crore for a 25.02% stake as part of the initial transaction.