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Vijay Mallya re-appointed USL chairman
Billionaire Vijay Mallya has been re-elected chairman of United Spirits (USL), despite being declared a “wilful defaulter” and against the advice of shareholder advisory firms.
Mallya was given the tag by the United Bank of India (UBI) last month following a long-running court dispute over a loan of US$66 million taken out by Mallya with UBI.
The bank claimed Mallya deliberately failed to pay an emergency overdraft lent to him to support his grounded Kingfisher Airlines venture, despite being able to.
The “wilful defaulter” tag prohibits an individual or company from accessing banks and capital markets for funding needs.
However last week the Calcutta High Court temporarily suspended the tag with Diageo today confirming Mallya’s re-appointment as chairman of United Spirits’ board.
Diageo acquired a 55% stake in USL earlier this year in a deal worth £1.1 billion.
A statement from Diageo said: “Dr Mallya remains United Brewery’s nominated director and therefore, in accordance with the terms of the Shareholders Agreement, Diageo voted in favour of the resolution at the USL AGM to re-appoint Dr Mallya as a director of USL.”
The statement added that since the reduction in its shareholding, United Spirits’ parent company UB Holdings was no longer entitled to recommend an independent director.
Advisory firm InGovern Research Services told the Times of India that a “willful defaulter” tag would not result in automatic disqualification unless there is a criminal conviction, but that “shareholders and creditors can demand the removal citing the negative business impact it carries”.
However the Reserve Bank of India advises companies seeking to borrow money from banks to take “expeditious and effective steps” to oust directors who are willful defaulters from their boards.
Last month USL, India’s largest liquor groups, reported a net loss of £445 million in full-year 2013/14 end of year results.
This was put down to a large write down on the sale of its Whyte & Mackay Scotch whisky business, however it also prompted Diageo to launch an investigation into loans paid out by the company to UB Holdings to prop up Mallya’s Kingfisher Airlines.