Diageo Plc on Monday said it has received inquiry reports from United Spirits (USL) and will consider its position under the agreements it has with Vijay Mallya, who has refused to heed a call by the USL board to step down as chairman and director.

The British drinks giant, the majority shareholder in USL with 54.78% stake, has a contractual obligation to support Mallya as non-executive director and chairman of USL, subject to certain conditions, and in the absence of certain defaults by him or his investment firm United Breweries Holdings (UBHL).

“Subsequent to its announcement on 25 April 2015, USL has provided its inquiry report and all related materials to Diageo. Diageo notes the recommendation of the USL board and will now consider its position under its agreements with Mallya and UBHL in light of the inquiry report and materials provided to it,” the company said in an update on its website.

“Diageo is obliged, under the Shareholders Agreement and a separate agreement with Mallya, to support Mallya continuing as non-executive director and chairman of USL. These obligations of Diageo are subject to the conditions and the absence of certain defaults by UBHL and Dr Mallya,” the British liquor company said.

The USL board had resolved to recommend Mallya’s removal to the company’s shareholders in the event of his refusing to resign. The inquiry by USL’s managing director Anand Kripalu into certain transactions between 2010 and 2013, when the firm was being run by Mallya, has alleged “various improprieties and legal violations” though the board has said it was not in a position to make any final determination with regard to the roles of individuals involved. Mallya has disputed the allegations, saying he will discuss the issue with Diageo Plc.

He had easily won shareholder votes to get re-appointed to the USL board during an annual general meeting in September 2014 with Diageo’s support. The agreement inked with Diageo in November 2012 allows Mallya to nominate himself to the USL board as long as UBHL holds 1,307,950 shares (0.9%) in the firm.

The firm currently holds 2.90% stake in USL and Mallya’s total shareholding is around 4.09%.

USL’s share price fell 3.49% on the BSE on Monday, when the Sensex declined 0.95%. The company on Monday also informed the BSE that it has appointed Vinod Rao as head of finance in place of PA Murali,  who resigned suddenly on Thursday.

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