Mallya in ED's net again for Rs 900 crore fund diversion

The Enforcement Directorate (ED) has started investigating a complaint by United Spirits of foreign exchange violations to the tune of Rs 900 crore against former chairman Vijay Mallya said a report in The Economic Times. This is the second fund diversion case against Mallya that the ED is pursuing, the first being that of IDBI funds routed through Kingfisher Airlines. The funds have been routed through USL subsidiaries to around seven entities related to Mallya including four in the UK, two in the Bahamas and one in Europe," said an official, adding that USL has evidence of all the remittances made.

The Indian beneficiary was mostly Kingfisher Airlines, which is at the heart of Mallya's current debt woes. Lenders to the carrier, grounded since 2012, are seeking more than Rs 9,000 crore from Mallya for loans to Kingfisher. The USL management is said to have sought a dialogue with Mallya on the subject over the past three months but has been rebuffed. Diageo will also pursue alleged violations by Mallya related to other shareholder commitments, executives said. Mallya has steadfastly rejected the accusations against him, reiterating this in a statement issued to ET. "I have absolutely no knowledge about the purported enquiry by E$Y nor the suggested allegations," Mallya said with regard to the latest allegations. "USL has not contacted me for any response. I can only reiterate that all transactions were legal, above board and approved by USL auditors, the USL board and shareholders. Over and above this, Diageo conducted an extensive due diligence on USL prior to acquiring shares. It is surprising and unfortunate that unfounded allegations are now being made without any reference to me whatsoever which obviously I will challenge."

USL executives said they will pursue Mallya through every possible legal avenue. "Mallya claiming that Diageo during its due diligence didn't find any foul play does not make his transactions legal," said one of them. "It's like saying if the police did not arrest a man for committing a crime done two years back, the man must have not committed any crime." A USL spokesperson said the company has submitted all documents to the authorities and will cooperate fully with investigators. Mallya did not respond to an email query sent to him on the latest investigation. After having acquired control of USL from Mallya in 2013, Diageo agreed in February to give him $75 million to step down as chairman of the Indian unit and exit the company. Diageo had faced criticism over agreeing to the February deal despite the USL board's complaints over initial findings that he had violated several company laws. Diageo, the maker of Johnnie Walker scotch and Smirnoff vodka, bought a controlling stake in USL from Mallya in July 2013 and subsequently increased its holding to 55 per cent. Consultancy firm KPMG had first raised doubts over the matter in a 2014 audit of intra­-company transactions and advances of roughly Rs 2,000 crore.

The matter was investigated internally by Diageo and USL's board asked Mallya to resign last April following an emergency meeting after a report from PwC that also examined the transactions. The PwC report indicated that between 2010 and 2013, funds were diverted from USL to certain UB Group companies including Kingfisher Airlines. Mallya was told of the investigations and about the need for him to clarify matters with the USL management.

• vijay mallya
• enforcement directorate
• fund
• diversion