Mallya gifts US$40m severance to his children

Vijay Mallya has reportedly gifted US$40 million received in a severance deal from Diageo to his children, as a consortium of banks attempts to recover substantial loans from the tycoon.

Vijay Mallya’s children are now in possession of US$40m paid to the beleaguered businessman by Diageo

Mallya resigned as chairman and non-executive director of Diageo-owned Indian drinks group United Spirits in February this year, following a vote of no confidence from his own board.

Diageo agreed to pay Mallya a US$75 million severance package in order to “bring to an end the uncertainty relating to the governance of USL”.

Mallya received US$40m immediately, while the agreement states that he will be paid the remaining sum in equal instalments over five years.

Now, The Financial Express reports that documents filed to India’s Supreme Court show that Mallya transferred the US$40m to his children through gift settlements two days after it was received.

Mallya’s three children are US citizens and sole beneficiaries of three trusts into which the funds were transferred, the publication states.

Upon his departure, Diageo agreed that Mallya would not have any “personal liability” relating to an investigation that found a number of transactions at USL were “diverted” to subsidiaries of former parent company United Breweries, including Mallya’s grounded Kingfisher Airlines.

However, a number of banks are seeking to recover loans unpaid to the businessman, primarily for Kingfisher. Mallya and the airline allegedly owe a consortium of 17 lenders, including the State Bank of India, about US$1.2bn.

The State Bank of India initially sort an arrest warrant against Mallya and also tried to ban the tycoon from receiving the Diageo payment.