India: The Securities and Exchange Board of India planning action against United Breweries for failing to rid itself of Vijay Mallya as chairman

The Securities and Exchange Board of India (Sebi) is planning action against United Breweries (UB) for failing to comply with the order barring Vijay Mallya, still chairman of the latter, from holding any key positions in listed companies, the Business Standard reported on June 22.

Sources say there could be strictures against UB under Clause 49 of the listing agreement, which allows suspension of trading and a monetary penalty. The role of independent directors (IDs) has also come under the scanner.

Earlier this year, the markets regulator had barred Mallya from any board position or acting as a key managerial person in listed entities. And, from accessing the securities market, citing allegations of fund diversion of Rs 1,880 crore from United Spirits (USL).

UB is now 43 per cent owned by Heineken and 30 per cent by Mallya and his holding companies. In February this year, when the BSE exchange asked for the status of compliance with the Sebi order, UB said it had urged Mallya to step down as chairman. Mallya had refused to do so and challenged the order at the Securities Appellate Tribunal (SAT).

Mallya had cited agreement he had with Heineken, that he'd be chairman and his son would succeed him. SAT is to hear the matter on June 23.

"It is a clear violation of corporate governance norms. An explanation has been sought from the company's board members," said a Sebi official.

This also puts a question mark on the role of IDs on the board, for not having intervened, hinted Sebi chief Ajay Tyagi on June 21. "We are conscious that the role of IDs in such cases is important," he'd said at a press conference. "We will wait for the corporate governance committee's recommendation and proceed accordingly."

Sebi is said to have also written to the Union ministry of corporate affairs on this. An e-mail and text message sent to the UB spokesperson remains unanswered.

This is the second time when Mallya is being made to step down by a listed company. In 2015, when he was chairman of USL, by then controlled by Diageo, his resignation was demanded over several financial irregularities. Mallya had refused to quit and Diageo agreed on $75-million (Rs 515 crore) as severance pay over the next four years. Later, Sebi directed Diageo to make an additional payment to minority shareholders, as the Diageo open offer price for their shares did not include the bank guarantee provided to Mallya.

Currently, in the UK, Mallya owes Rs 6,963 crore to a group of lenders led by State Bank of India, for loans taken to run his grounded Kingfisher Airlines. Investigative agencies are probing Mallya and associated entities and seeking his extradition. The matter is pending before a UK court.

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