The Whole Time Member, SEBI issued an ad interim ex parte order dated January 25, 2017 against Dr. Vijay Mallya and six other persons in relation to alleged fund diversions in United Spirits Limited (USL), whose shares are listed on BSE Limited and the National Stock Exchange of India Limited. The order prohibits the noticees from accessing the securities market and from buying, selling or otherwise dealing in securities in any manner whatsoever, and additionally, prohibits Dr. Mallya from holding position as director or Key Managerial Person (KMP) of any listed company.

As stated in the order, Relay B.V., a wholly owned subsidiary of Diageo Plc (Diageo), a public limited company incorporated in England & Wales acquired substantial shares and control in USL between July 2013 and April 2014. Pursuant to acquisition of control of USL by Diageo in July, 2013, in the Audit Report of USL for the Financial Year 2013–14, the statutory auditor of USL qualified certain transactions by USL amounting to Rs. 649.55 crores. Subsequently, USL appointed Pricewaterhouse Coopers, United Kingdom (PWC-UK) to examine the transactions qualified in the audit report. PWC-UK Report indicated diversion of funds from USL to certain group companies of United Breweries. Further, the order indicates that SEBI took cognizance of the matter relating to USL in March 2016 and sought information from USL in relation to the alleged diversion of funds from such time till June, 2016.

The WTM, based on the available material, found that Dr. Mallya, and other KMPs of USL were involved in alleged fund diversion and on the face of it, alleged fraudulent and unfair activities prohibited under the SEBI Act, 1992 and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.

Disclosure: Finsec Law Advisors is representing Dr. Vijay Mallya and three noticees in relation to the abovementioned order.