THE FORMER managing director of Duncan Bannatyne's business empire is seeking a multi-million pound payout from the entrepreneur, The Northern Echo can reveal.

Graham Nigel Armstrong, former managing director and chief executive of the Bannatyne Group and one-time close friend of the ex-Dragons' Den star, has been cleared of any wrongdoing over a fraud investigation at the Darlington-based business.

The 43-year-old, who is known by his middle name, was arrested on suspicion of fraud in December last year and released on bail, with no criminal charges ever brought.

It was revealed in July that Mr Armstrong would not be facing fraud charges.

Durham Police confirmed this week that no further action would be taken against Mr Armstrong, as it emerged he is taking his former friend and boss to court following his departure from the business after 17 years.

Last night a spokesman for the Bannatyne Group confirmed 'legal issues' were ongoing.

A source close to Mr Armstrong said a court case against Mr Bannatyne – whose business includes fitness clubs, spas and hotels – began at the High Court in Manchester on Monday this week.

The case, which is understood to include a claim for several million pounds after Mr Armstrong was dismissed from his job, has been adjourned.

It will reconvene before Christmas, unless an out-of-court settlement is reached in the meantime.

Mr Armstrong has chosen not to comment publicly so far, either on the court case or the months he spent as a subject of a police investigation.

The Northern Echo understands he is relieved to have seen his name cleared and eager to move on with his life and seek fresh employment.

A spokesman for the Bannatyne Group said: "Nigel Armstrong was dismissed last year and subsequently removed from the board.

"There are ongoing legal issues that we can not discuss."

A spokesman for Durham Police said: “We can confirm that no further action will be taken in relation to a 43- year-old man who was arrested on suspicion of fraud as part of an investigation involving a Darlington-based business.”

It is understood Mr Bannatyne is out of the country at the present time.

The former Dragon talks at length about his one-time admiration and respect for Mr Armstrong in several of his books, writing that he identified his talents and earmarked him for bigger and better things.

In his autobiography, Mr Bannatyne wrote: "Nigel is much better at running the company than I am.

“The company went from strength to strength under Nigel’s leadership.”

* Christopher Watson, a former finance director for Mr Bannatyne's business, is due in court later this month on fraud charges arising from the investigation. At an earlier appearance at Teesside Crown Court in July, his barrister Andrew Langdale indicated Watson, from Darlington, would plead guilty to plundering millions of pounds from the company accounts.