Force India team principal Dr Vijay Mallya has negotiated a five-year, $75 million golden handshake with the drinks giant Diageo to drop all allegations of financial irregularities against him and his companies.

The Hindustan Times newspaper is claiming that the deal will also mean that Mallya will be forced to relinquish his involvement in his Formula 1 team, which he has run since acquiring the Spyker team at the end of 2007.

As part of the deal, Diageo has increased Smirnoff’s sponsorship of Force India for the next five years at an estimated cost of $15 million per season. In exchange, Mallya agreed to a ‘non-compete’ agreement with Diageo and has stepped down as non-executive chairman of United Spirits Limited, the Mallya-founded drinks group which Diageo began to steadily buy out in 2013.

Mahendra Kumar Sharma, currently a non-executive director of United Spirits Ltd will now replace Mallya as chairman.

The final deal is the end result of a lengthy dispute between Diageo and Mallya following its buyout of United Spirits, which came with a payment of $135 million – and guarantees of a shareholding in Force India – to Mallya for a loan to the Mauritius-based holding form Watson Ltd, the company which held Mallya’s shares of the F1 team.

The money was instead used to pay another bank, but Diageo struck a deal that if Mallya defaulted, then it could seek to recover the monies from him. It commenced action to start claiming shares in the holding company, Orange India Holdings SLC – which is co-owned by Mallya and Force India shareholders Subrata Roy of Sahara and Spyker Cars.

In turn, Diageo has claimed that the shares it was originally guaranteed have lost so much of their value that it may not be able to recover the balance of the $135 million transfer. An added complication is that Mallya is pursued by countless creditors who are continuing to chase him for money related to his collapsed Kingfisher Airlines.

Despite Force India’s lack of any proper book value, Diageo may go down the path of trying to claim ownership of the Formula 1 team and rebuild it into a more valuable asset. Roy Subrata Sahara – currently in jail as a result of his own fraudulent activities – has indicated he wants to sell his shareholding, to which Mallya has first rights to purchase, if he could afford them…

Diageo had planned a few months ago to take control of Force India in league with Aston Martin to rebuild and rebrand it, with both parties able to use the sport to sell more alcohol and sports cars. The carmaker, however, doesn’t have the liquidity to make such a move and so the endeavour fell through, for now.

While Mallya deservedly should get plenty of credit for raising the sport’s profile in his homeland with a ‘national’ team, he conversely did little to actually build Indian motorsport at the grassroots level.

That he is effectively been paid out to go away – while still owing hundreds of millions in unpaid loans and having caused unspeakable grief to thousands of his own former employees – is a sorry reflection indeed.

The Force India F1 Team is yet to make an official announcement on Mallya’s future.

Image via XPB Images

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Richard Bailey

Founder & Chief Editor at MotorsportM8
Hasn't missed a Grand Prix since 1989. Has a soft spot for Minardi. Tattooed with 35+ Grand Prix circuits.