NEW DELHI: WANTED IN India for debt default and alleged financial irregularities as detailed in the recent Serious Frauds Office report, Vijay Mallya may have some more explaining to do. Paradise Papers investigated by The Indian Express show that after he sold his United Spirits Limited India (USL) to the Diageo group in 2013, Diageo approached a London-based law firm Linklaters LLP to undertake a massive restructuring exercise to simplify the complex group structure created by Mallya.
One reason for the complexity of the holding structure, records show, appears to have been aimed at a single objective — allegedly diverting funds through USL Holdings Ltd (BVI), an entity in a tax haven (British Virgin Islands); and three subsidiaries in the UK. These were USL Holdings (UK) Ltd; United Spirits (UK) Ltd and United Spirits (Great Britain) Limited (UK).
Documents from Appleby, which worked with Linklaters on the restructuring, show that funds amounting to over $1.5 billion were funnelled, as debt, into these four subsidiaries over a period of seven years till 2014.
Two years after they took control of United Spirits, Diageo undertook a restructuring process to get rid of these three intermediate subsidiaries and so, effectively, ended up waiving the $1.5-billion debt owed by these subsidiary companies.
That’s not all. As part of the restructuring, records show, Diageo also absolved Watson Limited, an entity owned by Mallya in his personal capacity, of its dues to a USL group company to the tune of 4.4 million pounds (around $5.8 million) through an exercise called novation — substituting one party in a contract with another, or replacing one debt or obligation with another. The $1.5-billion loan waiver and the novation seems to have resulted in Mallya taking away much more than the Rs 1,225 crore that Diageo reported to BSE – the amount actually works out to around Rs 10,000 crore going by Appleby documents.
While Diageo approached Linklaters LLP for the restructuring process, the law firm in turn approached Appleby and sought assistance in getting authorisations for the Mauritius-based Watson Ltd to complete the transaction.
