United Spirits fires Vijay Mallya as its Chairman, now officially the ‘king of bad times’

Years after his dream airlines grounded to a halt, the liquor baron, Vijay Mallya seems to be in a soup, once again. And this time the seriousness level has bumpered higher. A news report by The Economic Times has confirmed, after a PricewaterhouseCoopers (PwC) forensic audit into the company's books found "impropriety and violations in the records of United Spirits Limited (USL), the country's biggest distiller, Vijay Mallya’s position as the position of chairman is at stake.

USL on Monday is likely to submit three reports to its parent Diageo, requesting the British liquor giant to review their contractual obligations and vote against Mallya in the next EGM and seek his ouster as the company's non-executive Chairman.

As per the ET report, the first report is an audit by KPMG which first raised doubts over intra-company transactions and advances of roughly Rs2000 crore when Diageo launched an investigation last September after its auditors raised questions about various allegedly suspicious financial transactions while auditing USL's books for the year ended March 31, 2014.

USL will also forward the most recent report from PwC whose findings precipitated the crisis. After receiving the report USL's board asked Mallya to resign following an emergency meeting on Saturday.

In addition, USL's managing director Anand Kripalu will also send his own report that includes details from both the KPMG and PWC reports as well as his own findings and observations, along with views of otside legal counsels.

The ET report furrther states, after receiving these reports from the USL board, Diageo will investigate the matter on its own following which it will decide to vote for or against Mallya's removal. Diageo will also reach out to Mallya to obtain his version of events. The ten member USL board currently has three Diageo representatives including Nicholas Blazquez and Ravi Rajagopal. Mallya represents UB Group with a sole representative on the board -- he himself.

Sources confirmed the ET, as per the share purchase agreement between them, Diageo is supposed to vote along with Mallya over his tenure of his chairmanship tenure. No time line has been specified for this obligation. However, in case of any defaults, Diageo can vote against him. On the other hand, Mallya is supposed to vote in favor of Diageo on most strategic issues for a period five years.


Diageo in 2012 acquired USL for 1.8 billion pounds. Currently it owns nearly 55% of USL. After almost two years of on-off negotiations, Diageo only last year strengthened its grip over the company after an open offer that allowed it to hike its stake from the earlier 28%.

Confronting to the chain of events, Mallya said the turn of events was "surprising and unexpected" and pointed out that Diageo had carried out a lengthy due-diligence on USL before buying into it.

"I have certain contractual arrangements with Diageo and will now discuss bilaterally with them what is to be done next. The board of Directors cannot remove a director, only shareholders can remove a director," Mallya told ET adding that Diageo carried a four month due-diligence and issues that are raised now are of 2011 period. "After that, books of accounts at USL has been audited and approved by the board of directors and shareholders of USL. So the matter to suddenly surface now is surprise. What has happened is totally surprising and unexpected," Mallya said.

A PwC spokesperson has confirmed the financial daily, "The report being referred to has been done by our forensics team for Diageo. We stand by the work done and believe it to be of the highest professional standards." The USL board has also asked the company to report the latest PwC findings to the regulators. Capital market regulator Sebi is likely to be approached along with the ministry of company affairs. It is still not clear if criminal charges will also be pressed against Mallya by USL.

Saturday proved to be rough for Mallya, as the USL board cited 'lost confidence' in Mallya while asking him to resign without making any determination as to fault or culpability after PWC report corroborated the earlier investigation of financial irregularities at the company.

(Image: India Times)