United Spirits finds Rs 1,225 cr diversion, holds Mallya liable

Our Bureau Bengaluru | Updated on January 17, 2018 Published on July 09, 2016


Likely to review $75 million payout deal

United Spirits’ parent Diageo is likely to review its decision to pay the remaining part of the $75 million to Vijay Mallya after an internal probe against its former chairman Vijay Mallya revealed instances of fund diversion of upto Rs 1,225.30 crore.

The United Spirits Board said on Saturday that an additional inquiry prima facie has revealed further instances of actual or potential fund diversions amounting to Rs 913.5 crore as well as other potentially improper transactions involving USL and its Indian and overseas subsidiaries amounting to around Rs 311.8 crore. These transactions occurred between October 2010 and July 2014 when Mallya was the chairman of USL.

The new development puts Mallya in deeper trouble after a Mumbai court recently declared him a proclaimed offender involving money laundering in a Rs 900 crore loan default case.

The board has said that USL should conduct a detailed review of each case of fund diversion and has directed the MD & CEO of the company to take action against the employee concerned to recover the funds. The board noted that only a court or concerned regulatory authority would be in a position to make final determinations as to fault or culpability.

Sources told BusinessLine that there is a good possibility of its parent Diageo looking at the entire deal which was struck with Mallya recently wherein the London-based liquor major agreed to pay him $75 million in lieu of his resignation as the chairman of USL as well as relinquishing all his rights involving the company. Diageo paid Mallya $40 million immediately after he resigned from the chairman’s post. "It should be noted that the February 2016 agreement did not release the former Chairman from any claims arising out of the additional inquiry." a spoksperson for USL said.

The internal probe report revealed that the funds were diverted to overseas and Indian entities that appear to be affliated or associated with Mallya. The overseas beneficiaries of these funds include Force India Formula One, Watson Ltd, Continental Administrative Services, Modali Securities Ltd, Ultra Dynamix Ltd and Lombard Wall Corporate Services Inc in each of which Mallya appears to have a material, direct or indirect interest. The Indian beneficiaries of the funds identified by the additional inquiry included, in most cases, Kingfisher Airlines.

USL in its filings with the stock exchange said almost all the amounts identified in the additional probe have been previously provided for or expensed in the financial statements of USL. The USL management has recommended to the board that a further provision of Rs 21.7 crore should be made.

The spokesperson said the announcement to the Stock Exchange on Saturday shares outcomes of the board meeting held in relation to the additional inquiry into certain matters referred to in the company’s financial statements for the years ended March 31, 2015 and 2016. The findings relate to historical matters before Diageo consolidated the USL business in July 2014. "Based on our understanding as of today, we believe there will be no further material financial implications to USL," she said.

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Published on July 09, 2016
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