Diageo Sues 'King of Good Times' for Breach of Contract

By Saabira Chaudhuri Features Dow Jones Newswires

Diageo PLC is suing Vijay Mallya for breaching a deal he struck last year to cut ties with its India unit in return for millions of dollars, the latest twist in a yearslong saga between the Indian billionaire and the world's largest liquor maker.

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The drinks giant behind the Johnnie Walker, Smirnoff and Guinness brands said it had filed legal proceedings in the U.K. High Court to claw back $40 million it paid to Mr. Mallya under the 2016 deal. The suit also seeks compensation from Mr. Mallya for the breaches and includes claims of about $141 million tied to a company affiliated with him.

Mr. Mallya, one of India's best known businessmen often called the "King of Good Times," said in a text message to The Wall Street Journal that he would "file a robust defense."

Diageo had hoped the 2016 agreement would close the book on a protracted and highly publicized conflict over alleged improper payments United Spirits Ltd. -- the Indian liquor business Mr. Mallya once chaired -- made to other businesses run by Mr. Mallya before the drinks company acquired it.

Mr. Mallya has previously denies any wrongdoing and has described these allegations as "full of half-truths and twisted facts."

Under the 2016 deal Diageo paid Mr. Mallya $40 million up front in exchange for his resignation from the board of United Spirits, with the promise of another $35 million over a five-year period. It also agreed to provide him with an honorary title and a noncompete arrangement.

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Diageo over 2013 and 2014 bought a 55% stake in United Spirits for $3.2 billion, the largest food-and-beverage transaction in Indian history. But the pricey deal has been checkered by legal troubles, sparking criticism from investors who say it has become a big distraction.

Diageo is in the crosshairs of Indian authorities and entangled in multiple legal proceedings stemming from the acquisition. The authorities are looking into whether Mr. Mallya used the deal to launder money, and Mr. Mallya's creditors have sought the return of shares purchased by Diageo.

The London-listed company said in its annual report earlier this year that it didn't think it would be liable to pay Mr. Mallya the remaining $35 million under the 2016 contract "owing to various reasons," including breaches of the deal.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

November 17, 2017 12:18 ET (17:18 GMT)