The annual general meeting of United Spirits (USL), which is scheduled for November 24, is likely to see some stormy scenes over the move to remove Vijay Mallya as company chairman.
Even though the company has not proposed any resolution for the removal of Mallya as chairman at the upcoming AGM, the board of USL has recommended to Diageo, which controls USL, to expeditiously review the position in relation to its contractual obligations. Diageo has contractual obligations to support Mallya continuing as non-executive director and chairman of the company, subject to certain conditions.
According to a deal entered between Mallya and British liquor giant Diageo Plc in November 2012, Mallya was to continue as USL chairman for the next five years starting 2013. Between 2013 and 2014, Diageo Plc acquired a 54.8% for around $2.1 billion in United Spirits, making it a subsidiary.
In April this year, Mallya had refused to quit the board when asked by the board after an inquiry report by auditor PricewaterhouseCoopers India indicted him of diverting funds from USL to other United Breweries Group firms.
USL had demanded Mallya to resign at an emergency board meeting on April 25, 2015. The board had met to discuss a PwC report on allegations of fund diversion to the tune of over R2,000 crore from USL by Mallya. However, Mallya refused to quit stating that he would pursue contractual obligations with Diageo.
USL has also provided Diageo a copy of the internal inquiry report and the materials relating to the company’s inquiry as directed by the Board.
“In the event Mallya declines to step down, the Board resolved that it would recommend to the shareholders of the company, the removal of Mallya as a director and chairman of the Board,” USL said in its annual report for 2014-15.