Diageo to withhold US$35m Mallya payment

Diageo is to hold back the remaining US$35 million of a US$75m settlement it agreed to pay former United Spirits (USL) chairman and non-executive director Vijay Mallya, according to reports.

Diageo is to hold back the remaining US$35 million of a US$75m settlement it agreed to pay Vijay Mallya

Mallya resigned as chairman and non-executive director of Diageo-owned Indian drinks group United Spirits in February 2016, following a vote of no confidence from his own board.

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

He received US$40m initially, which he reportedly gifted to his children as a consortium of banks attempted to recover loans from him, and was to be paid the remaining sum in equal instalments over five years.

Now, according to Times of India, Diageo will hold back the remaining money, and will instead seek to recover dues from the tycoon.

The dues include US$135 million that Diageo had given to Standard Chartered Bank as a conditional guarantee for the liabilities of Watson Ltd, a company affiliated with Mallya, the report states. In addition, the company will claim Mallya’s stake in the Force India Formula One team pledged as security for Watson.

“They have decided not to pay the remaining US$35 million as there was violation of terms of agreement by the other side,” a source told Times of India on condition of anonymity. “The decision to not honour the deal signed with Mallya is also on account of charges of various financial misappropriations from USL and fund diversion by him.”

Diageo declined to comment.

In April Mallya was arrested and then bailed after appearing in a London court.