SC stays further transactions in United Spirits-Diageo deal
10 Feb 2014
The Supreme Court ordered a "status quo'' be maintained in the transactions related to the sale of United Spirits to British liquor group Diageo Plc till the court hears the matter next in April.
The order comes on a petition filed by Diageo in the apex court after the Karnataka High Court, in December 2013, ordered annulment of the sale in response to a petition by SBI and a batch of creditors to United Breweries Holdings (See: Karnataka HC annuls United Spirits' stake sale to Diageo).
Hearing arguments on behalf of Diageo and the SBI-led consortium of creditors to United Spirits, the SC bench consisting of Justice A K Patnaik and Justice Ibrahim Kalifulla observed that the issues raised by the parties regarding jurisdiction of the company's court and valuation of shares required a deeper examination.
Mukul Rohtagi, counsel for Diageo, argued that the valuation of shares at Rs1,440 was transparent and that it had received approvals from RBI, SEBI and the Competition Commission of India (Competition watchdog clears Diageo-USL deal; calls it boon to branded liquor market).
Rohtagi submitted that the consortium of banks was aware that the deal was completed in July.
However, the annulment of the transaction by the Karnataka High Court at the instance of the creditors who filed a winding up petition was on wrong legal presumptions, the argued.
Counsel for the SBI-led consortium of bankers argued that there was gross undervaluation of the shares.
Huge amounts had gone to foreign tax havens like British Virgin Islands, the Netherlands and South Africa. ''Now they want immunity for these transactions,'' he said.
On 20 December 2013, the Karnataka High Court had ruled null and void a deal in which UB Holdings sold 10 million shares in United Spirits ltd to Diageo in the first half of 2013 after seeking permission from the company court.
The court had also directed return of the shares that add up to 6.96-0per cent stake in United Spirits to UB Holdings by Diageo within two weeks from the order.
The apex court directed that no further transactions be carried out in the sale of stake in United Spirits Ltd to the British liquor major until the court hears the disputes in detail.
United Spirits sold its shares to Diageo through a complicated share transaction and the stake sale was completed in July 2013, almost eight months after the companies announced the deal, because of legal and regulatory hurdles.
The Supreme Court issued notice to both United Spirits and Diageo and said it would hold a detailed hearing in the matter in April.
