Financial Daily from THE HINDU group of publications
Thursday, Nov 28, 2002
Bangalore Court restrains UB from buying Mallya's US assets
BANGALORE, Nov 27
THE UB group's decision to buy its Chairman Mr Vijay Mallya's personal brewery assets in the US has received a jolt following a court intervention. A city court here has restrained Kingfisher Properties & Holdings Ltd (KPHL), a property and investment holding entity of the group, from purchasing shares of Mendocino Brewing Co, a Nasdaq listed company in which Mr Mallya holds stake in his personal capacity, for a consideration of $13 million.
The Bangalore City Civil Court on Tuesday passed an interim order on a suit filed by Mr Amarendra Kumar Dey, an aggrieved shareholder of Kingfisher Properties & Holdings Ltd (KPHIL), in which he has named the company, Mr Vijay Mallya and Golden Eagle Trust as defendants. The court, while restraining KPHL from effecting the transaction, has also served notices on the defendants. It has allowed the plaintiff to take suit summons in a leading financial daily under order 1 rule 8(2) C.P.C.
Reacting to the court order, a UB group spokesperson said: "We have received the court notice today afternoon and we are studying it. We learn that it was an ex-parte order."
The suit follows a decision by the board of directors of KPHL to utilise $13 million of the company funds to purchase up to 100 per cent shares of Mendocino Brewing Company. A resolution to this effect was passed by the shareholders at the AGM held on September 30 this year. It has alleged that this consent was obtained by "trick and subterfuge" as significant material information was not disclosed to the shareholders.
The plaintiff, a charted accountant reportedly holding 60 odd shares, has pointed out that "more than 80 per cent of the money remitted outside India by KPHL for purchase of Mendocino shares will go to Mr Mallya personally".
Claiming that Mendocino's current market value was only $3 million, the suit added that the company has suffered loss in the last two years and was carrying an accumulated loss of more than $6 million.
The suit has noted that United Breweries Ltd recently demerged into a beer company (United Breweries) and a property company (KPHL). The latter was formed with the intention of focussing on real estate development and should have no interest in running a brewing entity, added the suit. "Mendocino is in the business of beers and ales. Kingfisher, a brand owned by United Breweries, contributes roughly 70 per cent of the revenues of Mendocino. In such a case, there appears to be no business logic in KPHL purchasing shares in the American brewery," the litigant added.
The plaintiff has stated that Mr Mallya's holding in Mendocino is through a structure of offshore companies and trusts. As per the documents produced by him, the shareholding of Mr Mallya is held by two companies, Inversiones Mirabel SA and United Breweries of America, which in turn are held by a trust known as the Golden Eagle Trust.
The suit points out that beneficial interest declarations have been not given by the Golden Eagle Trust or by any other beneficiaries of the trust but by Mr Vijay Mallya.
"This indicates that the Golden Eagle Trust is not an independent entity but one controlled entirely by and used only for the benefit of Mr Mallya," the litigant said. It has further alleged that Mr Mallya has several financial liabilities and obligations overseas and this is a strategem adopted to use funds from property development to be siphoned out of India for the personal benefit of Mr Mallya.
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |
Copyright © 2002, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line