Sebi restrains Mallya from securities trade
CRACKDOWN Also bars six former USL directors from the market
The Securities and Exchange Board of India (Sebi) on Wednesday barred Vijay Mallya and six others former executives of United Spirits Ltd (USL) from accessing the securities market for alleged violations of listing agreement, diversion of funds and fraud.
Mallya and the six others have also been barred from holding directorship in any listed company. They six other USL officials are Ashok Capoor, a former managing director; Sowminarayanan, a former assistant vice president; PA Murali, a former chief financial officer; SN Prasad, a former senior vicepresident finance and accounts; Paramjit Singh Gill, a former president of India operations; and Ainapur SR, a former divisional vice president.
In a thirty-page order, Sebi whole-time member S Raman said that funds from USL were diverted to some group companies of United Breweries Ltd, including the now defunct Kingfisher Airlines Ltd.
“Investors (of USL) might have based their investment decisions on the manipulated books of accounts prepared and presented by these persons,” said Sebi.
The market watchdog’s order comes at a time when the Central Bureau of Investigation (CBI) has charged Mallya with fraud and criminal in connection with the grounded airline’s unpaid loans of over ₹950 crore that it owed to IDBI Bank.
Sebi considered two forensic audits conducted by PwC and EY for transactions between 20102014. While the audit by PwC observed that ₹655 crore was diverted and misappropriated, EY found that ₹1,225 crore was misutilised. The diverted amounts were included as provision in the financial statements, according to the Sebi order.
“Certain transactions were conducted in a manner that violated of provisions of Companies Act, 1956, and listing agreement,” said Sebi.
Sebi observed that Mallya, a former chairman and non-executive director of USL, exerted pressure over USL employees to arrange funds for Kingfisher Airlines.
When officials of USL protested that it would impact the companies’ books, Mallya wrote to them saying that refusal to sanction these funds would have consequences. “I know the USL position exactly. It is my final call. If you cannot accept my instructions, you are free to decide your further steps .... but let me repeat, my call is final and an instruction,” Mallya was quoted as saying in an email to employees in the Sebi order.
Mallya stepped down from USL in February 2016 after striking a sweetheart deal with Diageo Plc. Diageo had agreed to drop all charges of irregularities under his watch, and pay him $75 million over five years in return for getting him to go.
Diageo had completed a purchase of a majority stake (54.7%) in United Spirits in July 2014.
In April 2015, the board of United Spirits had asked Mallya, to resign from the board after an internal probe allegedly found financial irregularities at India’s largest liquor company.
“The individuals holding key managerial positions in such listed companies have to follow high standards of integrity and ensure good governance” said Sebi.