India: Regulator Sebi closes proceedings against 3 companies of Vijay Mallya’s

Indian regulator Sebi has closed its adjudication proceedings against three group firms of defaulter businessman Vijay Mallya for alleged disclosure lapses in a 17-year-old case citing liquidation of a holding company, but did not rule out any penal action at a later date, Livemint reported on May 16.

Sebi said it had observed certain non-compliances by three UB group companies while examining the letter of offer made by Zuari Fertilizers and Chemicals Ltd, along with other entities including United Breweries (Holdings) Ltd, Kingfisher Finvest India Ltd and McDowell Holdings Ltd to acquire shares of Mangalore Chemicals and Fertilizers Ltd (MCFL).

MCFL had seen a fierce takeover battle in 2015 between Pune-based Deepak Fertilisers and Kolkata-based Zuari group which had support of Mallya-led promoters. However, the present case relates to a transaction in January 2001 when promoter—United Breweries (Holding) Ltd—had acquired 2 crore shares representing 16.88% of MCFL pursuant to the allotment made under the Board of Industrial and Financial Reconstruction Rehabilitation Scheme.

The acquisition was exempted from open offer obligations, but no disclosure was made by the UB group firms, all of whom were promoters and UB Group firms at that time, as required under Sebi’s takeover regulations.

Sebi had initiated adjudication proceedings in February 2017 for alleged violation related to share purchase disclosures and takeover norms and had issued show-cause notices to three UB group entities. The regulator, however, has now said that one of the three noticees—United Breweries (Holdings) Ltd—was later ordered to be wound up following a court order and the liquidator has taken possession of all its assets.

It observed that the adjudication process cannot be taken to a logical conclusion at this juncture against a company under liquidation. About United Breweries Ltd, Sebi said the documents available on record show that the company was later demerged into UB Beer Ltd and subsequently, a fresh certificate of incorporation was issued in the name of UB Breweries Ltd.

The liabilities and obligations of the demerged company were deemed to be transferred to the resulting company and therefore liabilities incurred by United Breweries Ltd in the present case are deemed to be transferred to the United Beer Ltd.

Since this company later after a fresh incorporation became United Breweries Ltd, it was under obligation to discharge the liabilities of the erstwhile United Breweries Ltd which existed in 2001, Sebi said.

About another firm, United Spirits Ltd (which was earlier known as McDowell & Co Ltd), Sebi said it was also part of the promoter group during the relevant time and was under obligation to make disclosures along with other promoters.

However, the shares were received by only United Breweries (Holdings) Ltd, which is under liquidation and it may not be just to proceed ahead against two other companies at this juncture. In a six-page order, the regulator said “taking into consideration the facts/circumstances of the case and material available on record”, the matter cannot be proceeded with, but “this order shall not prejudice the right of Sebi to initiate any action including adjudication at a later stage”.

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