By Menaka Doshi, CNBC-TV18

The deal between Heineken and Scottish & Newcastle has left a bitter taste in Vijay Mallya's mouth. Mallya fears S&N’s stake in United Breweries will transfer to Heineken with all it's special rights. Heineken already has an India business. This war has been brewing for months and many words were exchanged between the two before matters went to Court.

It started in January 2008 when Vijay Mallya met with Heineken Chairman Jean Francois Van Boxmeer. Post it's acquisition of British brewer Scottish & Newcastle, Heineken wanted complete ownership and control of S&N's 37.49% stake in United Breweries, as also the rights and privileges attached to those UB shares. Mallya refused but offered to negotiate a new agreement with Heineken.

On February 20, days before the Heineken, Carlsberg, S&N deal was finalised, UB CFO Ravi Nedungadi wrote a strongly worded email to Kalyan Ganguly and Lesley Jackson. Ganguly is the CEO of UB and Jackson is the S&N nominated Finance Director on UB's board. The letter focussed on Heineken's takeover of S&N and the subsequent conflict of interest.

It says, “As you are aware, an Heineken associate namely Asia Pacific Breweries is already operating in India and is in a competitive position vis-a-vis United Breweries Limited. I would suggest that you forthwith stop providing any information other than those published and available to minority shareholders to anybody, including the current S&N nominees on the board of UBL. Please desist from participating in any press events, investor meets including one-on-one investor calls for the time being. Anybody seeking clarification or information about the likely outcome of the change of control of S&N should be referred to either Dr Mallya or myself. I trust you will appreciate the need to exercise extreme caution at this stage of the game.”

Word of this must have got to S&N because six days later, John Nicholson, S&N's Director on UB's board wrote to Vijay Mallya himself. Nicholson made it clear in the letter that even after Heineken's takeover S&N will remain in existence, that S&N's rights in UB will remain unchanged and that there was no need to announce an open offer. Nicolson also suggests that Heineken be given the copies of 3 crucial UB agreements namely the Kingfisher Trademark Assignment, the brand protocol agreement and the logo copyright license.

And he makes it amply clear that despite the takeover S&N rights in UB should stay as it is. "The change in control will not affect our rights, for example the rights to appoint representatives to the board of UB, our veto rights in the areas of budget, financial controls and material contracts and our rights to financial information. In particular, Lesley Jackson's position as Finance Director should remain unaffected. I know that you will have some reservations relating to Heineken's investment in APB and these will need to be considered in light of the non-compete provisions in the Shareholder's Agreement."

Non-compete is at the core of this case. UB's arguement is that the shareholder agreement signed with S&N is no longer valid as S&N itself is a changed entity due to Heineken's takeover. And that the agreement's non-compete clause has been violated as Heineken has an existing India business. This battle is long brewn one.