UB entities, others under multi-agency scanner

As Vijay Mallya fights it out with United Spirits to retain his Chairmanship, the role of some top executives, auditors and promoter entities linked to the UB Group have come under scanner of multiple regulatory agencies for alleged irregularities between 2010 and 2013.

While Mallya has refused to resign, citing 'certain contractual obligations' on part of USL's current owner Diageo to support his position, the UK-based parent is looking into the options available with it on whether to support the board resolution seeking his removal.

Sources said that an emergency shareholders meeting can be called by the company with a resolution to seek Mallya's eviction, if he continues to resist his ouster by the board.

In the meantime, USL is sending the copies of its inquiry report, including a forensic audit done by PwC, into alleged fund transfer and irregularities with regard to loans advanced to the UB Group entities, to various agencies.

The matter relates to the time when Mallya and UB Group were controlling shareholders of the company.

Without fixing individual responsibility for the alleged lapses, USL board resolved it has "lost confidence" in Mallya and therefore it asked him to quit as Chairman and Director.

Besides, USL has also initiated a process to take action internally against other employees responsible for the alleged irregularities.

Markets regulator Sebi has already initiated a probe into the entire matter to look into possible lapses on corporate governance, regulatory disclosures and other fronts.

It may soon approach the Corporate Affairs Ministry, the USL management and board of directors, the company's current and previous auditors, among others, in this matter.

Those under scanner include some top executives who quit recently while some of former independent directors might be approached for details.

The alleged irregularities also relate to possible violations of the Companies Act, which may lead to the Corporate Affairs Ministry separately looking into the matter, while accounting regulator ICAI might also look into the roles of the current and previous auditors.

Concerned over the ongoing boardroom battle and the alleged lapses in the past, the minority shareholders of USL have also approached Sebi.

Diageo has acquired 54.78 per cent stake in USL for about $3 billion, making it the controlling stakeholders, while the UB group firms continue to hold nearly 3 per cent stake.

In the event of Diageo deciding to vote in support of Mallya's removal from USL board, it might also seek declassifying UB Group entities and Mallya (who personally holds 0.01 per cent stake in USL) as promoters.

The non-promoter shareholders own nearly 40 per cent stake in the company, out of which FIIs have more than 24 per cent holding.

Besides, mutual funds have 4.13 per cent, while individuals own more than 6 per cent stake. The major non-promoter shareholders include Morgan Stanley, CLSA, Carmignac and Kotak Mahindra International.

Photograph: PTI