DRT blocks transfer of UB shares to Diageo

The Debts Recovery Tribunal at Bengaluru has issued an interim injunction order restraining Unit Trust of India Investment Advisory Services (UTI-IAS) and Standard Chartered Bank (StanChart) from handing over 1,04,86,666 shares of United Breweries held by Vijay Mallya, and 1,04,64,288 shares of the same company jointly held by Vijay Mallya and Siddhartha Mallya, to liquor major Diageo or any other person or entity except the 13 applicant banks, including State Bank of India and United Bank of India.

 StanChart and UTI-IAS have also been restrained from dealing with the shares in any manner until further orders of the Tribunal.

The order by the district and sessions judge on Wednesday came on an interlocutory application (IA) made by the banks expressing the fear that StanChart/UTI-IAS were in the process of transferring these shares to Diageo despite an interim order from the Tribunal on June 19.

The banks had moved the tribunal against the defendants for recovery of Rs 6,203.35 crore.

The banks contended that during the course of the proceedings, the defendants (Kingfisher Airlines, United Breweries, and Vijay Mallya) had given an undertaking that they would not transfer, alienate, or otherwise deal with their assets.

The applicant banks said the undertaking was continued on every hearing until a temporary injunction was granted by the High Court on September 3, 2013.

Subsequently, the banks said they came to know through filings before the stock exchanges on September 2, 2013, that pledges had been created on the two lots of shares on August 30, 2013.

They contended that it was done in violation of the undertaking and personal guarantees made by Vijay Mallya. They held that based on the market value of the shares, Rs 2,106.93 crore could be realised by them through the sale of these shares.

 According to the banks, Diageo had offered to repay the entire outstanding dues to StanChart subject to transfer of the shares to itself.

They found the whole transaction suspicious because only Rs 850.85 crore in dues was outstanding to StanChart.

Without expressing an opinion on the merits of the case, the tribunal found the case fit for issue of an interim injunction order.