United Spirits (USL) AGM is scheduled for November 24 and it is likely to be a stormy one over the move to remove Vijay Mallya as company chairman in a Rs 2,000 crore case of fund diversion from company.
1. According to a deal entered between Vijay Mallya and British liquor giant Diageo Plc in November 2012, Mallya was to continue as United Spirits 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.
2. In April this year, Vijay 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 United Spirits to other United Breweries Group firms.
3. United Spirits had demanded Vijay Mallya 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 Rs 2,000 crore from United Spirits by Vijay Mallya. However, Mallya refused to quit stating that he would pursue contractual obligations with Diageo.
4. United Spirits 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 Vijay 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,” United Spirits said in its annual report for 2014-15.
5. However, even though the company has not proposed any resolution for the removal of Vijay Mallya as chairman at the upcoming AGM, the board of United Spirits has recommended to Diageo, which controls United Spirits, to expeditiously review the position in relation to its contractual obligations. Diageo does have contractual obligations to support Mallya continuing as non-executive director and chairman of the company, subject to certain conditions.