Karnataka HC declares UB Holdings' sale of USL shares to Diageo void

HS also ruled that Diageo will have to return shares purchased from UB Holdings as company embroiled in a clutch of winding-up petitions

A Division Bench of the Karnataka High Court has ruled Vijay Mallya-led UB Holdings Ltd’s sale of 11 million shares of United Spirits Ltd to Diageo Plc is void as the company court did not have the jurisdiction to authorise the share sale by the UB Group company.

A court order by Justice N Kumar and Justice Rathnakala said the deal was not “bona fide”, adding Diageo will have to return the shares purchased from UB Holdings as the company is embroiled in a clutch of winding-up petitions by creditors seeking unpaid dues of Rs 600 crore from the firm.

“We were not privy to the negotiations and that we should have been consulted at the time of the deal as a large sum of our funds is involved,” a lawyer representing one of the creditors to UB Holdings said.

Creditors to Kingfisher Airlines too were part of the appeal against the deal, as they are invoking UB Holdings’ corporate guarantees for loans of over Rs 6,000 crore to Mallya’s Kingfisher Airlines.

The Division Bench has ruled that the deal is void until a conclusion is reached on the winding up petitions against UB Holdings. Both Diageo and UB Holdings have not commented on the order. Counsel for UB Holdings, however, expressed an immediate plan to appeal to Supreme Court against the order.

Global spirits major Diageo currently holds a 25.02% stake in United Spirits Ltd.