Companies & Sectors
After USL shows him the door, Mallya vents his frustration on Twitter

The Board of United Spirits said it lost confidence in Vijay Mallya continuing as chairman. Mallya, insists he would continue while blaming others of character-bashing


The Board of United Spirits Ltd (USL), in which Diageo holds majority share, asked Vijay Mallya to resign as director and chairman of the company following certain irregularities related with doubtful loans given to United Breweries (UB) group. However, after the Board showed him door, Mallya, the once-upon-a-time 'King of good times' took out his frustration on Twitter.
The Company, in its regulatory filing had stated, "...without making any determination as to fault or culpability, the directors noted that they had lost confidence in Dr Vijay Mallya continuing in his role as a director and as chairman and therefore, the Board called upon Dr Mallya to resign forthwith as a director and as the Chairman of the Board and step down from his positions in the company's subsidiaries."
"ln the event Dr Mallya declines to step down, the Board also resolved that it would recommend to the shareholders of the Company, the removal of Dr Mallya as a director and as the Chairman of the Board," the filing says.
However, Mallya, in a tweet said, "People and media revel in speculation sensationalisation and character bashing. Unfortunately for you I intend to continue as USL Chairman."
The Board of USL stated that Diageo, the majority stakeholder in the company, had certain contractual obligations to support Mallya continuing as non-executive director and chairman, subject to certain conditions. "Therefore, in the event Dr Mallya declines to step down, the Board resolved to request Diageo to expeditiously review the position in relation to its contractual obligations and authorised sharing with Diageo a copy of the inquiry report and all the materials relating to the company's inquiry," USL said.
On 9 November 2012, Diageo, the world's largest spirits maker announced that it would buy 53.4% stake in United Spirits for Rs11,166.5 crore in a multi-structured deal. 
In September 2014, after reporting a full year net loss of Rs4,488.8 crore for FY2014 mainly on higher provisions due to certains loans given to UB Group companies, the Board of USL had ordered a probe in to matter. USL had made provisions of Rs1,012.75 crore for FY2014, due to ‘doubtful loans’ and exceptional items of Rs3,235.73 crore on the sale of Scottish subsidiary Whyte and Mackay.
The probe came after Mallya, the UB Group Chairman was declared a wilful defaulter by State-owned United Bank of India. However, Mallya disagreed with the action of the lender and said he would pursue legal action.
“We were not given a hearing, we have not appeared before them, we disagree with their action and we shall pursue legal action,” Mallya told reporters after the annual general meeting of United Breweries. 
Last year in December, minority shareholders of USL defeated a majority of the special resolutions during the company's extraordinary general meeting on 28th November at Bengaluru. This was seen as a major setback to the integration between the company and its new owner Diageo Plc. Out of the 12 special resolutions, shareholders rejected nine resolutions connected with entities related with USL chairman Mallya.
In a regulatory filing, USL said, a key resolution regarding approval of a loan agreement between USL and UB Holdings Ltd has not been approved by the shareholders. Another resolution regarding sale of immovable properties to USL by UB Holdings also did not find favour with the shareholders. These resolutions required approval from at least 75% of shareholders. During the voting, only 127 public shareholders participated, suggesting that institutions had a major role to play in the defeat of the majority of the resolutions.
Separately, in a report, proxy advisory firm Institutional Investor Advisory Services India Ltd (IiAS) has raised questions about the role of auditors in discerning the alleged financial irregularities and Diageo's management of the acquisition.

IiAS said it believes that Vijay Mallya must step down from the board of USL and allow an independent and unbiased investigation into the allegations. While Dr Mallya claims to be a victim of false allegation, IiAS questions whether there are any victims in this saga. Can Diageo claim to have not known about intragroup transactions?

Here are question IiAS has asked to Diageo...
  1. What compelled Diageo to not run a thorough due diligence, and miss asking the obvious questions?
  2. Why did Diageo vote its shares in favour of reappointing Dr Mallya at a time when he was named as a wilful defaulter?
  3. What prompted Diageo to nominate PA Murali (USL's CFO who resigned earlier this month) to the board as their epresentative? If PA Murali was Diageo's representative, can Diageo claim they were not in the know?
Asking the company auditors to justify their audit quality, the proxy advisory firm, said, "Auditor rotation typically brings fresh oversight thereby enhancing the quality and objectivity of the audit process. However, in USL's case, the two changes in auditors yielded no results. Moreover, the audit firm that conducted the forensic audit was the auditor for the period within which the alleged irregularities occurred! Do shareholders rely on PwC's statutory audit or PwC's forensic audit?




shanti Patel

2 years ago

The time has come to RAISE the VOICE against all the people who have failed to do the duty assigned to them.

I think till today nobody was much bothered about AUDITORS. Now the voices are raised against the Statutory Auditors too.

If in the instant case if the Statutory Auditors who carried out the audit of the relevant years and failed to do the duty cast upon under the companies act 1956 or 20013, must be punished.

The Central Council of The Institute of Chartered Accountants of India must take action sou moto and take appropriate action against the firm of auditor if found guilty.

Or shareholders should request the Council about such instances and request to look in to the matter.

NESL is the latestest case, I have been told that a PIL has been filed in the court for taking an appropriate action against auditors who have prima facie seems to have not carried out the audit in accordance with generally accepted practice.


In our country, Chal ta hay attitude can be changed with persistence follow up of all the related parties.

I request even MONEYLIFE also to keep one section for the same


TN has no authority to name SPP in Jayalalithaa case: SC
The Supreme Court on Monday ruled as bad in law Tamil Nadu's appointment of a special public prosecutor (SPP) in the hearing of J. Jayalalithaa's plea by the Karnataka High Court against her conviction in disproportionate assets case.
Holding the appointment of Bhavani Singh as flawed, the apex court bench of Justice Dipak Misra, Justice R.K. Agrawal and Justice Prafulla C. Pant also said there was no need for fresh hearing in Jayalalithaa's appeal in the disproportionate assets case. 
Pronouncing the judgment, Justice Misra said the Tamil Nadu government has no authority to appoint Bhawani Singh as the SPP as the Karnataka government being the prosecuting agency has the right to appoint the SPP. 
The apex court verdict came on the plea by DMK leader K. Anbazhagana, challenging the Tamil Nadu government's appointment of Bhavani Singh as the SPP before the high court. 
Former Tamil Nadu chief minister Jayalalithaa has approached the high court, challenging her conviction along with three others in disproportionate assets case by a Bangalore trial court on September 27, 2014. 
The Bangalore court has sentenced Jayalalithaa to four years in jail with a fine of Rs.100 crore.
Besides Jayalalithaa, her aides N.Sasikala, V.N. Sudhakaran and J. Elasvarasi were sentenced by the trial court. They too have appealed before the high court. 
The matter was heard by the three-judge bench of the Supreme Court following April 17 split verdict by the bench of Justice Madan B. Lokur and Justice R. Banumathi. 
While Justice Lokur held that the appointment of Bhavani Singh vitiated the hearing of the appeal before the Karnataka High Court, Justice Banumathi found no legal infirmity in Bhavani Singh's continuation as SPP as he was appointed for the case and his appointment was not revoked by the Karnataka government. 
The disproportionate assets case against Jayalalithaa and three others related to the period from 1991-1996 involving Rs.66.65 crore when she became the chief minister of Tamil Nadu for the first time. The case lasted for about 18 years. 


Tax Burden on the Husband
This is with regard to “‘Women are no longer proxies,’ says Nirmala Sitharaman”. There is a point about income tax which requires attention. Many husbands invest their savings in the name of the wife. Under Section 64 of the Income-Tax Act, income from such investments is added to the husband’s total income and taxed at the highest rate. 
Nirmala Sitharaman says that women are not proxies; but the Income-Tax Act treats them as such. The quirk is that the asset does not belong to him and she can do what she likes with the income, but the husband has to pay tax on that. Many may not know about this position and are likely to be blackmailed by some taxmen. 
While a working wife is entitled to tax-free income of Rs2,50,000, why not a wife who is given money by her husband, which is not only out of love, but also as a recompense for all the domestic services that she renders? 
It is high time that Section 64 is repealed. This will reduce the artificial tax burden on men who don’t insist on the wife earning an income. 
Rangarajan TNC, online comment

Awareness of Black Money

This is with regard to “Will the Black Money Law Work?” by Sucheta Dalal. With the exception of Moneylife and, perhaps, some regional newspapers, media participation in creating awareness about black money, or the methods to unearth a part of the black money, or ‘black assets’ hoarded inside and outside the country, is not significant. Political parties use the issue for their limited pur-pose of winning elections. Government policy, including its taxation policy, has a role in the further growth of the black money monster. The banking system should also cooperate in handling this issue.
MG Warrier, online comment

II. Abominable Delays

The Black Money Bill does not inspire confidence on the prospect of curbing the evil as no account-ability and timelines have been prescribed for disclosures and punishments. Justice in this country carries the notoriety of abominable delays. 
If laws are meant for implementation, the contours of interpretation by different layers need stat-utory prescription, so that one would fear approaching the higher court for remedy if one failed in the lower court. The remedy should not be worse than the disease. 
Earlier, I mentioned in one of the responses that dealers in waste and scrap, on par with those dealing in real estate, are havens of black money and this can be curbed by vigilant tax officials. All major cities and metros are generators of huge black money from such waste and scrap.
B Yerram Raju, online comment

Standards of Efficiency In Consumer Forums

This is with regard to “What is the secret of winning cases in consumer courts?” No doubt, a con-sumer redressal forum provides relief and it is literally free of cost, except some incidental charges to pursue the case after filing. 
One of the problems that one could enlist against the forums relates to delay in taking decisions. We are expected to fight cases individually, even if the decision remains the same in identical cas-es. Once a decision is taken against a consumer grievance, similar and identical cases should be giv-en the verdict based on the decision already arrived at. 
Further, consumer forums can definitely take some initiatives to reduce delays by improving the infrastructure and by enhancing the standards of efficiency. This could be done by circulating the decisions taken in respect of cases to district, state and national forums. Forums can also levy some reasonable cost from the aggrieved party and the service-providers against whom the cases are filed.
The cases should be disposed within a maximum period of six months. Deficiency of service from service-providers can thus be taken care of.
Gopalakrishnan Krishnan, online comment

Music to Harried Citizens!

This is with regard to “Can the Right to Services Act transform Maharashtra into a true participative democracy?” I am delighted to read the summary of proceedings of the public meet with Hon chief minister (CM) Devendra Fadnavis. He has provided a welcome change as a CM responding to the citizen’s concerns. If the promise of time-bound response is honoured, it will be music to the har-ried citizens of Maharashtra, who usually need to visit government offices thrice, or four times, to get a simple issue attended.
Vijay Merchant, online comment

Exemption for Term Insurance?

This is with regard to “Health Insurance: How to Benefit from Enhanced Mediclaim Deduction Limit” by Raj Pradhan. Does this exemption limit also apply for someone paying an annual premium for Rs25,000 for term insurance? Or, is it just limited to health insurance?
Aditya Kumar Pandey, online comment
Raj Pradhan replies: Premium for term insurance qualifies for Section 80C deduction.

Rigidity of the Product!

This is with regard to “Is the Extra Tax-saving from NPS Worth It?” by Debashis Basu and Jason Monteiro. I am not sure why everyone is stuck with the EET (exempt-exempt-tax) clause. For a 30-40-year-old taxpayer, who knows what the I-T rules will be 20-30 years from now? Maybe NPS will be changed and be treated like non-equity products. Or, maybe all products will be taxed on ma-turity.
My biggest concern is the rigidity of the product.  There are restrictions on the percentage of equi-ty allocation and switches. Further, lack of history and the annuity clause are also issues of concern.
Just too many restrictions for one’s comfort.
Arnab Banerjee, online comment 

Stock Information

This is with regard to “Buying Stocks Vs Equity Funds” by R Balakrishnan. Could you please suggest some sources of historical stock information (like PE and other ratios)? Mostly, what I could find on the net has only 5 years or so.
Akshat Agarwal, online comment

Black Money in Locker?

This is with regard to “Bank Lockers: How To Make the Best Use of Them” by Sucheta Dalal, Yogesh Sapkale and Vayshnavi Ganesh. As is evident, a CCTV camera is fixed in each safe deposit locker vault of a bank. If that is so, how can unaccounted or black money be kept or withdrawn partially without getting photographed? If that is so, then no one will feel that it is safe to deposit their assets, when they are unaccountable. In case of theft, fire or loss, the proof can always be dished out from the camera images.
Mohan Siroya

Tobacco Ban?

This is with regard to “Do anti-smoking labels encourage smoking?” by Debashis Basu. If any government is serious about the impact of smoking on public health and finances, the only way out is to ban production and sale of all tobacco products. Simply having photos and warnings will not help. It is like keeping a cat to guard the milk. The government sees the tobacco industry as a cash cow. So, no government is actually moving forward to put a halt.
R Balakrishnan

Will Dispute Resolution be Quick?

This is with regard to “What is the secret of winning cases in consumer courts?” With consumer courts, consumers now have a window to redress their grievances. It was hoped the dispute resolution will be quick. Unfortunately, this purpose has not been served.
I went to a district forum in the middle of 2008. The judgement was delivered in August 2011. Not satisfied with the compensation, I went to the state commission in October 2011. For over a year, now, the case is pending at the final hearing stage. Only once, there was a lack of quorum. Each visit costs money which is an unnecessary burden. I believe the posts of members have not been filled up; hence, the delay.
Harish Kohli


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