February 11, 2014 – India’s Supreme Court has delayed hearings until April on an appeal from Diageo and United Spirits of a Karnataka state court ruling reversing the sale of a tranche of USL shares to Diageo. According to Reuters and the Business Standard, the court ordered that the “status quo” be maintained until that hearing, meaning Diageo continues to own the approximately 7% of USL shares in question and continues to manage United Spirits.
The Karnataka court ruled in December that Vijay Mallya’s United Breweries Holdings improperly sold those shares to Diageo in a series of complex transactions. The holding company owes creditors millions of dollars in failed loans. A group of creditors led by the State Bank of India argued that the negotiated sale price was far lower than the shares would have brought on the open market, and was done without their consent, since the shares had been pledged as collateral for loans to UB Group and Mallya’s grounded Kingfisher Airlines. A lower court had approved the sale last year, allowing Diageo to take operational control of USL in July.
At the time, Diageo had only been able to acquire about 25% of USL’s outstanding shares, but agreements with UB Group and other shareholders to vote their proxies at Diageo’s direction gave the drinks giant management control over USL. Diageo has since acquired another 3% of USL’s shares this month, bringing its total stake in the company to around 28%.
No date for the hearing was announced.