The Karnataka High Court has held that the share sale of United Spirits Ltd (USL) to Diageo by United Breweries Holdings Ltd (UBHL) is null and void.
The court passed the ruling while admitting an appeal against the USL-Diageo deal by the creditors of UBHL.
After Kingfisher Airlines defaulted on its loans, several creditors such as BNP Paribas had dragged UB Holdings, the corporate guarantor for the liabilities, to court and had filed a winding-up petition.
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While the ruling does not appear to be challenging the legality of the USL-Diageo deal per se, the high court, by terming the share sale as void, has likely spelt fresh trouble for the Vijay Mallya-led UB Group.
Diageo had picked up a 53.4 percent stake in USL for about Rs 11,150 crore last year.
The court also said that the application under Section 536 and 537 to protect the deal that could have otherwise have been filed would not be permitted now since the winding up process is on.
The ball now lies with the company court as to how this would materialize going forward. UBHL lawyers have clearly stated that they will approach the Supreme Court against this order, reports Vineetha Athrey of CNBC-TV18.
“One should not take this matter very lightly for the simple reason that this does send a signal to corporate India at large that you cannot ignore the unsecured creditors or for that matter secure creditors,” said Aseem Chawla, founder & partner, MPC Legal.
“The Companies Act does have a preferential payment priority envisaged in the scheme but having said that I thought generally the creditors consent is secured before such corporate restructuring transactions do take place. In this particular situation, however, the creditors are big names and have taken a very stern stance to it. So, this is up for long haul till such time there is an amicable resolution either between the creditors and the company or for that matter a legal remedy which suggests the fact that creditors do not have a locus standi, it is hard to believe in such simplistic manner,” he said.
“This news has come as a surprise. I think the company would again go and file an appeal. Right now I can say only this much about this development,” said V Srinivasan of Angel Broking.
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