Diageo Sues 'King of Good Times' for Breach of Contract
November 17 2017 - 12:33PM
Dow Jones News
By Saabira Chaudhuri
Diageo PLC is suing Vijay Mallya for breaching a deal he struck
last year to cut ties with its India unit in return for millions of
dollars, the latest twist in a yearslong saga between the Indian
billionaire and the world's largest liquor maker.
The drinks giant behind the Johnnie Walker, Smirnoff and
Guinness brands said it had filed legal proceedings in the U.K.
High Court to claw back $40 million it paid to Mr. Mallya under the
2016 deal. The suit also seeks compensation from Mr. Mallya for the
breaches and includes claims of about $141 million tied to a
company affiliated with him.
Mr. Mallya, one of India's best known businessmen often called
the "King of Good Times," said in a text message to The Wall Street
Journal that he would "file a robust defense."
Diageo had hoped the 2016 agreement would close the book on a
protracted and highly publicized conflict over alleged improper
payments United Spirits Ltd. -- the Indian liquor business Mr.
Mallya once chaired -- made to other businesses run by Mr. Mallya
before the drinks company acquired it.
Mr. Mallya has previously denies any wrongdoing and has
described these allegations as "full of half-truths and twisted
facts."
Under the 2016 deal Diageo paid Mr. Mallya $40 million up front
in exchange for his resignation from the board of United Spirits,
with the promise of another $35 million over a five-year period. It
also agreed to provide him with an honorary title and a noncompete
arrangement.
Diageo over 2013 and 2014 bought a 55% stake in United Spirits
for $3.2 billion, the largest food-and-beverage transaction in
Indian history. But the pricey deal has been checkered by legal
troubles, sparking criticism from investors who say it has become a
big distraction.
Diageo is in the crosshairs of Indian authorities and entangled
in multiple legal proceedings stemming from the acquisition. The
authorities are looking into whether Mr. Mallya used the deal to
launder money, and Mr. Mallya's creditors have sought the return of
shares purchased by Diageo.
The London-listed company said in its annual report earlier this
year that it didn't think it would be liable to pay Mr. Mallya the
remaining $35 million under the 2016 contract "owing to various
reasons," including breaches of the deal.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
November 17, 2017 12:18 ET (17:18 GMT)
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