Sebi Steps Up L'affaire Mallya Probe; To Seek Overseas Help

USL Board had ordered an 'additional inquiry' to plug gaps found in an initial probe launched in April 2015 that showed improprieties in loans worth Rs 1,337 crore given by USL to the entities linked to its erstwhile promoters.

"The additional inquiry prima facie reveals further instances of actual or potential fund diversions amounting to approximately Rs 913.5 crore (using exchange rate as on March 31, 2015) as well as other potentially improper transaction involved USL and its Indian and overseas subsidiaries amounting approximately Rs 311.8 crore," USL said.

The transactions occurred during the review period covered by the additional inquiry -- from October 2010 to July 2014 -- although certain transactions appear to have been initiated in years prior to the review period, USL said.

"These improper transactions identified in the additional inquiry involved, in most cases, the diversion of fund to overseas and Indian entities that appear to be affiliated or associated with USL's former non-executive Chairman, Dr Vijay Mallya," the USL filing said.

The company said its mutual release agreement with Mallya in February this year, under which Diageo agreed to pay him USD 75 million dollars, will not cover the matters arising out of the 'additional inquiry'.

"The USL Board has directed the management to pursue recovery from the relevant companies and individuals and undertake any action, including legal and regulatory as deemed necessary. It should be noted that the February 2016 agreement did not release the former Chairman from any claims arising out of the additional inquiry," a USL spokesperson said.

USL said the overseas beneficiary or recipients of the diverted funds include entities such as Force India Formula One, Watson Ltd, Continental Administrative Services, Modall Securities Ltd, Ultra Dynamics Ltd and Lombard Wall Corporate Service Inc "in each of which Dr Mallya appears to have a material, direct and indirect interests".

The Indian beneficiaries or recipients of the funds identified by the additional inquiry included, in most cases, Kingfisher Airlines (KFA), USL said.

USL said it will be reporting the findings of its additional inquiry spearheaded by its Managing Director and CEO Anand Kripalu to concerned authorities for further action.

The Board has also directed its MD and CEO to take appropriate action in relating to the employees named in the Additional Inquiry, while a further review would be conducted of the "ongoing relationships with the counter-parties involved in the improper transactions indemnified by the Additional Inquiry".

Last month the Enforcement Directorate had attached assets worth Rs 1,411 crore belonging to Mallya and one of his companies in connection with its money laundering probe in the the alleged IDBI bank loan default case.

Mallya is currently in the UK after leaving India in March this year. His passport has been revoked by Indian government. He has been indicating against any imminent return in the wake of various legal and regulatory troubles.

Refuting the charges by USL, Mallya said Diageo had conducted an extensive due diligence before buying the shares and it was "surprising and unfortunate" that these allegations were being made now.

"I have absolutely no knowledge about this purported enquiry by E+Y nor the suggested allegations. Surprisingly neither USL nor E+Y have given me any details of the allegations or any opportunity to respond," he said.

"I can only reiterate that all transactions were legal, above board and approved by USL auditors, the USL Board and shareholders. Over and above this Diageo conducted an extensive due diligence on USL prior to acquiring shares. It is surprising and unfortunate that unfounded allegations are now being made without any reference to me whatsoever," he said.

While USL did not name 'E+Y' among those that conducted the enquiry, it said that the company's CEO had engaged "independent experts with specialised forensic skills" to assist in the inquiry and provide inputs and expert advice.

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