India: Diageo seeks legal view on objections to using United Breweries shares

Diageo has sought legal recourse against the Enforcement Directorate objections on using United Breweries (UBL) shares, which the spirits major claims were provided as security for certain loan liabilities of Watson and are part of the security package to which Diageo Holdings Netherlands BV (DHN) is entitled, the Economic Times reported on February 11.

On the other hand, top officials at the federal probe agency said it does not recognise the claim since Diageo has created an artificial pledge to use the UB shares. ED officials said that when Diageo was aware that Mallya owed funds to the company, it should not have stood as a guarantor for his loans and paid them off.

“We believe it is an artificial pledge created by Diageo. Our priority is to ensure that dues owed are rightfully given to the government,” an ED official said. Diageo declined to comment.

Legal experts close to Diageo said that the PMLA/ FEOA case includes claims to UBL shares. “The special court order to the consortium of banks covers only movable assets of Vijay Mallya and does not cover the UBL shares. Diageo is impleading because of the risk of the PMLA/FEOA piece affecting its security. It is just that the recent order (Special court to bank consortium) in itself did not cover the shares within that security,” said an official close to the development.

DHN had issued a conditional backstop guarantee on August 2, 2013, to Standard Chartered Bank.

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