The Hindu Business Line : HK court offers Jumbo stay in SWC case

A HONG Kong court dealing with the dispute arising over the late Manu Chhabria's acquisition of Shaw Wallace & Co Ltd in 1986 has asked the defendants, including Jumbo Holdings International, part of the Jumbo Group managed by the deceased tycoon's estate, to deposit $20 million as surety for a conditional stay of proceedings against them. However, the defendants have decided to appeal against the offer for conditional stay.

On January 8 this year, the court on a 12-year-old suit ruled that Alexina Investments Ltd and Soverign Nominees Ltd, which were nominees of the Golden Eagle Trust of which the UB group Chairman, Mr Vijay Mallya, were partners of the late Manu Chhabria and his investment company, Keysberg, in the acquisition of SWC. The court's asking for deposit of $20 million followed an application moved by the defendants seeking postponement of the second part of the trial for quantifying damages in the wake of the liability.

The defendants had made a plea to postpone the second part of the trial scheduled for September 2004 as they have already appealed against the first part of the trial in the appeals' court and since this appeal was likely to be heard in November this year.

Responding to the development, a Jumbo Group spokesperson said: "The court has in a sense accepted the defendant's plea. The court has said it is willing to postpone the trial provided the defendants deposit $20 million with the court. The defendants feel that their request for stay of the second part of the trial is a logical plea since the appeal against the order on the first part of the trial has already been scheduled for hearing. The defendants therefore feel that the court's suggestion in respect of a deposit of $20 million is not in keeping with the spirit of equity and justice. The court has made a suggestion and it is not binding."

The original suit filed by Alexina and Sovereign stated that Mr Mallya's Amarante and Mr Chabbria's Keysberg were equal partners in Carrasco Investments Ltd, a corporate vehicle used for acquiring the liquor company from R.G.Shaw and Sime Darby for roughly $26 million.

The acquisition was funded through a $15-million loan from Amex and capital infusions to the tune of $4 million by Amarante and $7 million by Keysberg. However, trouble soon brew as CLB started investigating the deal following a formal complaint lodged by Mr S.P. Acharya, who headed SWC management at the time of the takeover.

Soon after the commencement of investigation, the partners of the joint venture agreed that pending the investigation there should be a distancing of Mr Mallya and the UB Group from the joint venture and the business. Accordingly, a new joint venture between Alexina and Keysberg was signed, but Mr Mallya was forced out of the joint acquisition of the domestic spirits company.

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