In a fresh twist to the boardroom battle at Diageo-owned United Spirits, stock exchange NSE has asked the company to make public its inquiry report on alleged fund diversion to Vijay Mallya’s UB Group, but the liquor maker has rejected the demand citing ‘confidentiality’.
The matter is already being looked into by several agencies, including markets watchdog Sebi and the stock exchanges which act as front-end regulators.
Taking forward its probe into the entire matter, the National Stock Exchange had asked United Spirits Ltd (USL) to provide a detailed report on its inquiry for “the public dissemination purpose”.
Besides, the company was also asked to clarify on any submissions made by it to the Central Government or other authorities in connection with this matter.
To this, the company said that the “key findings of the inquiry and the steps taken by the USL Board were promptly and transparently disclosed” on April 27.
“However, we are not in a position to make the Internal Report available to the NSE for onwards public dissemination,” the company said, while citing various reasons.
A major boardroom battle has broken out at USL after its board asked Vijay Mallya to quit as Chairman and Director on the basis of this report, which indicated alleged fund diversion to various UB group firms between 2010-2013.
Mallya has refused to quit, while majority owner Diageo is yet to take a public position on the entire matter.
“The Internal Report contains sensitive commercial and operational information concerning the company and transactions and dealings involving various parties, and is confidential to the Company.
“A public disclosure of the Internal Report would provide the company’s competitors and other third parties with vested interests an access to such sensitive commercial and operational information of the company, and thereby provide an opportunity for such parties to use such information in a manner that is prejudicial to the interests of the Company and its shareholders,” it added.
USL further said that the inquiry suggested that the manner in which certain transactions were conducted, prima facie, indicates various improprieties and legal violations.However, USL board “was not in a position to make any final determinations with regard to the roles of any individuals involved, and accordingly directed the company to report such transactions to the authorities as required under applicable law”.
Making the Internal Report public would potentially prejudice and even interfere with investigations by the relevant authorities. It could also potentially lead to misuse of evidence contained in that report, USL said.
“Such a consequence would be detrimental to the interests of not only the company and its shareholders, but also of the public at large, in ensuring a fair and proper investigation,” it said.
According to USL, a copy of the Internal Report has been provided to its auditors for their review and further steps as may be required.
“… the diverted amounts in connection with the receivables, advances and deposits owing to the company have already been included in the provision made by the company in the financial statements for the year ended March 31, 2014,” the company said.
Citing the April 27 announcement, USL said, “all of the dues owing to the company from United Breweries (Holdings) Ltd (UBHL) aggregating Rs 1,337 crore were consolidated into a single loan agreement dated July 3, 2013 entered into between the company and UBHL”.
The company noted that any further implications of the contents of the Internal Report on its accounts would be duly examined by the auditors.
Its financial results for the year ended March 31, 2015 are to be published by May 31. “Pending the finalisation and publication of the audited accounts, it would be premature for any further public disclosures to be made in this regard,” the firm said.
According to the clarification, in the event of a public disclosure of the Internal Report, the company and its directors would stand exposed to the risk of allegations of having caused reputational damage to the persons against whom adverse findings have been reported.
Such a situation would also risk “potential claims or criminal charges of defamation being made by such persons, all of which would also be adverse to the interests of the company and its shareholders”, it noted.
USL has demanded ouster of Mallya but he has rejected the demand saying that Diageo has “contractual obligations” to support his continuance as chairman and director at USL.
Multiple regulators, including Sebi and ICAI, have started gathering details about the alleged irregularities that happened between 2010 and 2013.
In a statement, an USL spokesperson said that public disclosure of the Internal Report would be detrimental to the interests of company, its shareholders and public at large, in ensuring a fair and proper investigation.