Diageo has demanded former United Spirits Limited (USL) chairman Vijay Mallya to refund a $40m severance payment due to alleged agreement violations.

Last February, Diageo agreed to make a severance payment of $75m to Mallya in order to end uncertainty with regard to the USL governance, reported The Spirits Business.

In 2014, Diageo bought a majority stake in USL.

Diageo was quoted by The Economic Times as saying: “Owing to various reasons, including breaches of several provisions of the 25 February 2016 agreement by Dr Mallya, Diageo believes that it was not liable to pay the $7m installment in February 2017 and considers it very unlikely that it will become liable to pay future instalments in subsequent years.”

The firm also claimed in its latest financial results that it is 'very unlikely to become liable to pay future instalments' to Mallya.

"Diageo believes that it was not liable to pay the $7m instalment in February 2017 and considers it very unlikely that it will become liable to pay future instalments in subsequent years.”

Diageo also demanded Mallya to compensate for the losses it allegedly had to incur as a result of these breaches.

Following an initial probe, further investigations indicated diversions of a further $134m and a number of alleged improper deals worth $46m.

Under these improper deals, which occurred between 2010 and 2014, Mallya diverted funds to his Indian and offshore entities.

Following the additional investigations, the company 'filed civil suits for recovery of funds from certain parties, including Dr Mallya, before the relevant courts'.

Although Diageo and Mallya mutually agreed not to take file lawsuits against each other after the initial probe, this clause does not apply to the further investigations.