Financial Daily from THE HINDU group of publications
Saturday, Nov 02, 2002
Corporate - Corporate Disputes
Chhabria estate must answer case: Mallya
BANGALORE, Nov. 1
THE UB group Chairman, Mr Vijay Mallya, has said that the legal proceedings against the late Manu Chhabria in a Hong Kong Court would be taken to the logical conclusion. A favourable verdict in the case, which is slated to come up for hearing soon, may help Mr Mallya break into his biggest spirit and beer competitor, Shaw Wallace & Co Ltd, which was acquired by Mr Chhabria in 1986.
Speaking to Business Line, Mr Mallya said, the demise of Chhabria had not weakened his position in the case, which was being fought apparently for control over SWC. "If he is not there, his estate has to answer the case," he said. Replying to a specific query whether he was hoping for control of SWC, he added: "Let me see what the court says."
However, he vowed to go the full hog in the case stating that "17 years of my efforts cannot go waste".
It must be mentioned that the case is reportedly based on the premise that Mr Mallya through a Hong Kong firm helped the Chhabrais in acquiring SWC after being promised equity stake in the company. In fact, Mr Mallya has been quoted earlier on the "unfulfilled obligations" of Chhabria in the wake of SWC acquisition.
But over the years, SWC has denied these allegations and said Mr Mallya has had no role in enabling the Chhabrias to acquire the company.
Mr Mallya said UB group's recent move to file class action suit in the Mumbai High Court against SWC's restructuring exercise had no connection with the Hong Kong happenings.
This came on the back of the industry speculation that the corporate restructuring at SWC would render Mr Mallya's Hong Kong case weak and his latest legal salvo was aimed at keeping the overseas dispute simmering.
"McDowell & Co, a UB group company, is an aggrieved shareholder and it has nothing to do with our role as a rival or a competitor," he said. In 1999, McDowell acquired about 10,000 SWC shares from the open market. SWC, which initially refused to register this share purchase, later undertook the registration following a court intervention.
Mr Mallya alleged that there was lack of transparency in SWC's restructuring exercise in which most assets, except brands, were transferred into marketing and manufacturing subsidiaries under the management control of the Jumbo Group, a Dubai-based business empire built by Manu Chhabria. "In fact, I am surprised that no other shareholder brought up the issue before us," he added.
McDowell's contention is that assets were transferred to these subsidiaries at a heavy discount allowing Jumbo's promoters to pick up equity at reduced prices. In this context, it is pertinent to note that that legal wrangling has prevented the Jumbo Group from picking up direct equity in SWC.
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