INDIA BUSINESS WORLD - FEBRUARY 2006
THE MONTH THAT WAS

Fresh trouble is brewing with the latter opposing Mr Mallya's plans to merge Herbertsons with a consolidated liquor conglomerate, United Spirits (USL). Kishore Chhabria's dissent came at Herbertson's court convened EGM to consider the composite scheme of merger held in Mumbai on February 7 .

Sources close to the Chhabria camp said the move was in response to UB's reluctance to stand by a commitment to drop an old legal case filed by Shaw Wallace & Co (SWC) against BDA, which is currently owned by Kishore Chhabria. While Herbertsons' shareholders approved the scheme of merger with requisite majority, Kishore Chhabria's next move is expected when the court sits to give its formal nod to the merger .

Sources close to Mr Mallya denied any commitment given to Kishore Chhabria on the matter of SWC case against BDA. “We will take a rational decision on the matter taking into consideration the track record of the involved person (Mr Chhabria),” added the sources. UB, which has sought legal opinion on the emerging development, stated it was confident of countering any fresh litigation from the Kishore Chhabria camp .

Significantly, the development shows that Kishore Chhabria still holds a small shareholding — 60,000 shares amounting to 0.60% stake — in Herbertsons, a company from which he walked out after selling the entire 51% stake in the wake of a Supreme Court consented settlement pertaining to ownership dispute with Mr Mallya.

The decade-old case in the Calcutta High Court against BDA was filed by former SWC chairman, late Manu Chhabria, at the height of his split with younger brother Kishore Chhabria. Mr Mallya acquired SWC from the Manu Chhabria estate for $300 million in March last year.

According to sources close to Kishore Chhabria, he settled the Herbertsons dispute with Mr Mallya and walked out with subsidiary company BDA in April last year following a commitment given by UB, which was then in the process of acquiring SWC, to drop the case in the Calcutta High Court. Sources claimed that Kishore Chhabria could also oppose the merger of Shaw Wallace Distilleries into USL if Mr Mallya remained reluctant to a compromise.

The industry observers said the recently launched litigation by Ranibai Chhabria, the mother of the two Chhabria brothers, against the Manu Chhabria estate citing that her eldest son had not left behind a will could be used by the younger Chhabria to call into court the SWC deal. At the time of acquisition, the mother had issued notice to UB stating that the Manu Chhabria estate could not get into a transaction because it did not possess a will.