The Karnataka High Court has allowed two writ petitions filed by Diageo Holdings Netherlands B.V. in a dispute over United Breweries Limited (UBL) shares linked to Vijay Mallya and loans extended to the now-defunct Kingfisher Airlines. The Court set aside the challenged orders of the Debts Recovery Tribunal (DRT), the Debts Recovery Appellate Tribunal (DRAT) and the Recovery Officer.
A Division Bench of Justice D K Singh and Justice T M Nadaf delivered the judgment on October 14, 2026. The dispute concerned competing claims over shares pledged as security for different financial obligations.
Background
Kingfisher Airlines had obtained loans amounting to ₹6,203 crore from a consortium of banks. After the airline defaulted on repayment, the lenders initiated recovery proceedings and sought to secure their claims against assets associated with Vijay Mallya, including his UBL shares.
Separately, Watson Limited, an overseas company associated with Mallya, had borrowed money from ICICI Bank UK. The loan was subsequently refinanced by Standard Chartered Bank (SCB). As part of the refinancing arrangements, Vijay Mallya and Sidhartha Mallya executed a share pledge deed on July 29, 2013, covering the disputed UBL shares.
When Watson defaulted on its loan from SCB, Diageo Holdings paid approximately $140.97 million under a guarantee agreement on January 29, 2016. Diageo claimed that, after making this payment, it acquired the relevant rights associated with SCB’s security over the pledged shares.
The consortium of banks, meanwhile, pursued recovery proceedings before the DRT. The tribunal passed orders restricting dealings with the shares, and the Recovery Officer subsequently ordered their attachment. Diageo challenged these orders before the High Court.
The Bench examined the competing security arrangements, the personal guarantees and the legal effect of an undertaking not to dispose of assets. It held that a mere undertaking not to transfer property does not automatically create a charge over that property.
The Court also found that Vijay Mallya’s personal guarantee could not, by itself, create a charge over shares jointly owned with Sidhartha Mallya. It further observed that the consortium’s claim had to be considered alongside the substantial asset recoveries already made.
The judgment recorded:
“The assets worth INR 14,131.6 crores, besides the UBL shares, have been restored from Dr. Vijay Mallya to the Consortium of Banks against their claim to an extent of INR 6,203 crores with interest.”
On the question of settling the outstanding bank claims, the Bench stated:
“It is for the Consortium of Banks and the Government of India to give quietus to the proceedings when INR 14,131.6 crores worth of assets have been restored to the Consortium of Banks against their loan of INR 6,203 crores.”
The Karnataka High Court allowed both writ petitions and set aside the impugned judgments and orders. It also disposed of the pending applications that no longer survived for consideration.
