Diageo pursues Vijay Mallya for US$182m

Diageo’s Indian drinks subsidiary United Spirits is seeking to recover US$182 million worth of “improper transactions” made at the company while Vijay Mallya was chairman.

Diageo is seeking to recover USL’s “diverted” transactions allegedly made under the leadership of Vijay Mallya

In a statement filed to the Bombay Stock Exchange this weekend, USL said an inquiry into the firm’s accounts between October 2010 to July 2014 discovered transactions amounting to 12bn rupees that were “diverted” from the business to “overseas and Indian entities that appear to be affiliated or associated with USL’s former non-executive chairman, Vijay Mallya”.

Mallya resigned as chairman and non-executive director or USL in February this year following allegations of financial impropriety. Diageo said the move ended the “uncertainty relating to the governance of USL” and agreed to pay the Indian tycoon US£75m in severance.

However, in March, Mallya was temporarily banned from accessing the funds as 17 banks attempted to recover substantial loans. Some of the lenders sought arrest warrants against the businessman, who is now based in the UK.

Diageo initially launched an investigation into USL’s books in September 2014, five months after acquiring a 55% controlling stake in the business for £1.13bn.

An “additional inquiry” involving “independent experts with specialised forensic skills” now estimates that US$182m had been diverted to businesses including Force India Formula One, Watson Ltd, Continental Administrative Services, Modall Securities Limited, Ultra Dynamix Limited and Lombard Wall Corporate Services while USL was under Mallya’s leadership.

USL claims that Mallya “appears to have a direct or indirect interest” in these companies.

Following the outcome of the inquiry, USL will “conduct a detailed review of each case of fund diversion to assess the company’s legal position and then take such action necessary to recover its finds from the relevant parties and individual, to the extent possible”.

USL added that its severance agreement with Mallya does not impact the outcome of the additional inquiry.

Earlier this year, the group said following Mallya’s departure, the tycoon would have “no personal liability” relating to findings of its first investigation.