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December 23, 1999

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The Rediff Business Interview/Vijay Mallya

'Two brothers who fought each other publicly, have joined hands to take on UB'

Sick of fighting the two Chhabria brothers in various courts, liquor baron Vijay Mallya has finally thrown the gauntlet. He has bid Rs 2.50 Kishore ChhabriaVijay MallyaManu Chhabria
billion for the top three Shaw Wallace brands and hijacked its managing director. Shaw Wallace creditors, many of whom have filed winding up petitions, are delighted by the offer which has left Manu Chhabria fuming and his younger brother Kishore has realised that Mallya will not give up his control over Herbertsons without a tough, bloody fight. In this no-holds-barred interview with
Pritish Nandy, Mallya tells all.

Email this interview to a friend By bidding for the top three Shaw Wallace brands, are you not declaring war against Manu Chhabria?

I have not declared war. The purpose of the bid was not to adopt a hostile posture. There is a long background to my very unfortunate relationship with both Chhabria brothers. I have differences of opinion with Manu Chhabria who has several unfulfilled obligations which are as yet outstanding. He claims to be a very wealthy man and a very successful businessman which makes me wonder why he cannot be honourable enough to honour his commitments which he has acknowledged both privately as well as in the presence of several renowned people here as well as overseas.

As far as his brother Kishore is concerned, it is ironical that when he first came to me, when his troubles with his brother started, he said to me: 'I know you will not very receptive to me because I am a Chhabria. I am aware that my brother has let you down very badly. But please let that not cloud your thinking. Accept me as Kishore, not as a Chhabria. I want to be under your umbrella. I want your protection. I want to fight my brother and rightfully retain BDA as well as help you acquire Shaw Wallace as well.'

Did you believe him?

Well, he said: 'Without you and the UB Group I am virtually nobody. I am just a babe in the woods.' I have eyewitnesses for all these emotion-charged statements. Of course, as events turned out, there can be no better description of crocodile tears.

What more did he offer you?

He brought BDA to the table and, naturally, since I am the largest player in the business I wanted to have a distillery in Maharashtra. Also, the brands he brought on offer were complementary to the UB portfolio. So my decision to take on Kishore was business driven and I had no other agenda.

What was the understanding between the two of you?

Very clear. There was a very clear draft agreement that was never signed for various reasons and I now think that the fact that he did not sign the agreement was the beginning of his sinister intentions.

Why did you allow that to happen?

It was not a question of allowing it to happen. The pace of events was such that many things were done in parallel and, of course, the transaction itself was structured in a tax-efficient manner. So, it wasn't really a precondition at that point in time that the agreement had to be signed before the deal could go through. Kishore later very conveniently backed out of signing it altogether. I am not very worried about it because my own solicitor, a very reputable man from a very reputable firm, has given an affidavit confirming that he participated in the drafting of the agreement which I am sure any judge would find very difficult to ignore.

Why did you give him the Herbertson shares?

I first offered in Carew Phipson shares. But he insisted on Herbertson. On hindsight it was certainly a mistake, Pritish.

He obviously had a strategy in mind?

I am sure. But it was a very, very clear understanding that whichever company he came into, if he ever wanted to sell his shares I would have the first option to buy them. The second clear understanding was that he would never increase his share holding. But he started clandestinely buying shares. He brought his uncle into the picture, formed myriad sham companies and proceeded to acquire Herbertson shares in a very stealthy operation. This whole gameplan was discovered, curiously, when he was raided by the income tax department! That is when we all realised what he was up to!

What did you do?

The Chhabria brothers are famous litigants. They go to various courts in various parts of the country to initiate frivolous legal action. This seems to be their style. They filed over 200 cases against each other when they were fighting! That is the same strategy they are deploying against me. But it has been demonstrated without doubt that the acquisition of shares was done by Kishore in violation of the agreement we had as well as in violation of the SEBI guidelines.

He went about this entire thing in a very clandestine manner. That is why we have initiated action against him before the Company Law Board on the basis of the income tax findings, where we believe that he has to account for Rs 1.80 billion of money from BDA where there is no satisfactory explanation of expenditure. The auditors have not only severely qualified the accounts of BDA but have now resigned expressing their inability to continue. It is an ironical fact that he may have used the money of Herbertsons' own 100 per cent subsidiary to purchase Herbertsons' shares!

So now you are fighting both brothers?

Yes and I assure you that there will be no compromise. I am absolutely amazed how the two brothers have got together for the purpose of convenience. Two brothers who threw their blood relationship to the winds for ten years and fought each other, abused each other publicly, have for the sake of taking on Vijay Mallya, decided to join hands again. They are playing all sorts of Mickey Mouse games. But whether it is two of them or four of them, I really don't care. There is still justice in this country and I have great faith in the courts, in our judicial system. I am sure truth will prevail and they will not succeed.

Will you succeed?

I am very confident I will.

What about the Hong Kong case regarding the acquisition of Shaw Wallace?

It is due for trial. The preliminaries are over. Witness statements have been exchanged. My counsel is confident that we have a rock solid case.

What about your bid for the Shaw Wallace brands?

Shaw Wallace is the No 2 liquor company in India and I have great respect for it. My offer for the brands is purely based on business considerations. I see a clear opportunity here. Shaw Wallace is cash strapped and neck-deep in debt. They are facing a large number of winding-up petitions. So there is no option for the judge but to liquidate some Shaw Wallace assets and pay the creditors.

That is where I come in. I say: Here is Rs 2.50 billion in cash and I would like to purchase these assets. The judge in his wisdom may decide to give me all three brands for Rs 2.50 billion or he may give me one brand or two brands at a given price. That is up to him.

You are just offering to buy the brands? No facilities? No plants? No hard assets?

The rest we can make. There is no rocket science involved. Basically, Indian Made Foreign Liquor is made in a particular way and there are no recipe secrets like Coca-Cola. Once we get the brands, we will make the stuff ourselves or manufacture it through contract distilleries as everyone else does. That is no issue at all.

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