Sebi bans Mallya, 6 others from markets

Vijay Mallya
The Securities and Exchange Board of India (Sebi) has barred fugitive tycoon Vijay Mallya from accessing the capital markets anymore. The charge is fund diversion of Rs 1,880 crore from United Spirits (USL).

This came a day after the Central Bureau of Investigation filed a court charge sheet on Mallya in the Rs 1,300-crore IDBI Bank loan fraud case.

On Wednesday, along with Mallya, Sebi similarly barred six other from the capital markets, including Ashok Capoor, former managing director of USL. And, restrained them from holding any board or key managerial position (KMP) in any listed company. This is for alleged involvement in the diversion of funds from USL to other Mallya-owned companies. Sebi has given 21 days for USL to provide information on steps taken by the company to recover the Rs 1,880 crore from Mallya and companies to which the amount has been diverted. Citing reports from consultancies PwC and E&Y, which examined transactions involving USL and Mallya-owned UB Group companies, Sebi said those banned were “prima facie alleged to have committed fraudulent and unfair activities, prohibited under Section 12A(c) of the Sebi Act, 1992, and Regulations 3(d); 4(1), along with 4(2)(e), (f) and (k), of the Sebi (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.”

The violations observed were “serious and have larger implications on the safety and integrity of the securities market...Individuals holding key managerial positions in such listed companies have to follow high standards of integrity and ensure good governance. By diverting substantial funds from USL to companies of the UB Group, Mallya and other KMPs have engaged in an act or practice which prima facie operated as a fraud or deceit on the public shareholder/ investors of USL,” Sebi wholetime member S Raman said in a 32-page order.

Sebi is also examining the role of the auditors in question, for failiure to detect such a significant diversion from USL to UB Group companies and the now-defunct Kingfisher Airlines (KFA).

“The (initial) inquiry report stated 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, KFA. The role of the aforesaid auditors alia in the non–detection of this diversion is also being examined separately,” the order said. Sebi has also said it is separately examining the settlement agreement worth $75 million between Mallya and USL, following which he'd resigned as chairman and director. As on March 2016, Mallya held the chairman’s position in United Breweries, United Breweries (Holdings) and KFA.

Story so far

* July 4, 2013: Diageo acquires 25% in USL

* March 24, 2015: Funds diversion by Mallya at USL reported by PWC-UK 

* April 25, 2015: USL asks Mallya to resign from fund; Mallya refuses

* February 25, 2016: Diageo enters into $75 mn ‘settlement agreement’ with Mallya

* January 25, 2017: Sebi bars Mallya, six others from capital markets

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