United Spirits Limited (USL), controlled by Diageo, on Saturday said that an internal inquiry had found instances of fund diversion from the company to entities associated with troubled tycoon Vijay Mallya. According to a filing by USL to the Bombay Stock Exchange, the amount under consideration is about Rs. 1,225.3 crore said a report in The Hindu.
“The additional inquiry prima facie reveals further instances of actual or potential fund diversions amounting to approximately Rs. 913.5 crore as well as other potentially improper transaction involved USL and its Indian and overseas subsidiaries amounting approximately to Rs. 311.8 crore,” USL said in its regulatory filing.
KFA is beneficiary
The transactions occurred during the review period covered by the additional inquiry i.e. from October 2010 to July 2014, the period in which the UB Group had control over the company. The company also said that only a court or a regulatory authority would be in a position to make final determinations over fault, culpability.
As per the additional inquiry, some of the overseas beneficiaries of the diverted funds includes Force India Formula One, Watson Ltd, Continental Administrative Services, Modall Securities Ltd., Ultra Dynamics Ltd. and Lombard Wall Corporate Service Inc. in each of which Mr. Mallya “appears to have a material, direct and indirect interests.”
“The Indian beneficiaries or recipients of the funds identified by the additional inquiry included, in most cases, KFA (Kingfisher Airlines),” it said.
British alcoholic beverages company Diageo had acquired controlling stake of United Spirits in 2013 and it holds about 55 per cent stake in USL through its arm Relay BV. Mr. Mallya had resigned as the non-executive chairman of Unites Spirits Limited (USL) February 25, 2016.
Mutual agreement
Diageo had entered into a mutual release agreement with Mallya to pay him $75 million over a five-year period. As per the agreement, Mallya has also signed a global five-year non-compete arrangement.
However, USL, in its Saturday’s filing said that the mutual release agreed with Mallya announced on February 25 does not extend to matters arising out of the additional inquiry.
The additional inquiry was conducted by the board following an initial inquiry which found fund diversions from USL and its subsidiaries to UB Group companies, including KFA. Following the findings of the initial inquiry that was ordered in April 2015, Diageo had asked Mallya to step down as chairman of the company.
The filing further said, “USL’s management has recommended to the board that a further provision of Rs. 21.7 crore should be made for the value of certain improper transactions identified by the additional inquiry, which have not been previously expensed or provided.”
The board also directed the MD and CEO to take appropriate action in relation to employees named in the additional inquiry.
