Drinks company United Spirits’ new owner Diageo has asked Vijay Mallya to step down as chairman and director of the Indian liquor firm, alleging diversion of funds to Kingfisher and other United Breweries (UB) group entities. Mallya has rejected the demand.
Diageo, which bought a controlling stake in United Spirits from the UB Group, asked Mallya to step down after “various improprieties and legal violations” were found during a probe into loans given by USL to various UB Group companies.
Mallya refused to resign and said the inferences and allegations are unjustified and false. USL, the erstwhile flagship firm of Mallya-led UB Group, has already seen a number of exits from its board and management since the probe was launched by UK-based Diageo.
“At its meeting held on April 25, the board discussed and considered in detail the report submitted by the MD and CEO in relation to the inquiry… it revealed that between 2010 and 2013, funds involved in many of these transactions were diverted from the company and/or its subsidiaries to certain UB Group companies, including in particular, Kingfisher Airlines Ltd,” the USL board said in its report.
The company added that “in the event Mallya declines to step down, the board also resolved that it would recommend to the shareholders of the company, the removal of Mallya as a director and as the chairman of the board.”
USL said it would also move to recover diverted funds and that action would be taken against other employees found to be involved in the matter.
Mallya has been in the dock ever since his ambitious airline venture Kingfisher landed in financial troubles and got eventually grounded in October 2012.
The Indian businessman had to sell some of his assets, including a controlling stake in USL to Diageo.
Last September, the board of United Spirits ordered a probe into the loans given to UB Group companies as it posted a net loss of Rs 44.88 billion for the financial year ended March 31, 2014.
Mallya, already battling a number of cases including against banks over ‘wilful defaulter’ tag related to loan defaults by Kingfisher, refused to resign and said the inferences and allegations are unjustified and false.
He said USL has “parroted” the PwC report, whose finding was based on “half truths and twisted facts against the previous management”.