USL stake sale: Mallya, Diageo move SC against HC verdict

The matter will come up for an urgent hearing on Jan 15

Vijay Mallya’s UB Holdings Ltd (UBHL) and London-based Diageo have moved the Supreme Court against the order of the high court here which annulled the former’s 6.9 per cent stake sale in United Spirits Ltd (USL) to the latter, the world’s largest distiller. The matter will come up for an urgent hearing on Wednesday, according to the SC website.

The HC decision was last month. It declared as void the sale of 10 million shares in question. Diageo was rattled, as the Rs 1,460-crore purchase from UBHL was key to its strategy for penetrating the Indian market. “We are disappointed, as a bona fide purchaser for value of the United Spirits shares, that we have been brought into the private dispute between Kingfisher Airlines (a UBHL company) and its creditors,” Diageo had said at the time.

Creditors to Kingfisher Airlines and UBHL had appealed against the order from a lower court in March which had allowed the latter to part with 6.96 per cent of its 14.16 per cent stake in USL to Diageo.

This was despite five winding-up petitions against UBHL. On December 20, a larger bench of the HC overturned this order, saying the transaction was not “bona fide”.

“Diageo is of the view that the decision was wrong in law and based on erroneous facts,” the company said. Diageo had initially planned, in November 2012, to gain control over 53.4 per cent of USL to cement its position in India.

However, it ended with only a 25.02 per cent stake, in July 2013, primarily from UBHL, Kingfisher Finvest and a preferential allotment.

Lenders to Mallya possessing pledged shares of the company refused to part with these, citing non-payment of dues. An open offer in the market met a tepid response, as the share price of USL had already gone above the offer price of Rs 1,440 a share.

Legal thicket

As many as 44 petitions have been filed against the high court order to admit the winding-up petition of UB Holdings. A person familiar with the development said Prestige Group, a buildes’ firm with a joint venture in UB City and Kingfisher Towers in Bangalore, was one of the applicants. “Even the florists and the tours and travels operator of the company have opposed the winding-up,” the person said.  The next hearing in the petition is scheduled for Thursday.