Millennium Post

Mallya-USL dispute: ICAI asks Sebi for info on auditors’ role

Accounting regulator ICAI has sought details from markets watchdog Sebi on role of auditors in the alleged financial irregularities at United Spirits, where Chairman Vijay Mallya is locked in a boardroom battle to retain his position.

The board of United Spirits Ltd (USL), where UK-based Diageo has acquired controlling stake from Mallya's UB Group, has asked the Indian businessman to step down as Chairman and Director after a probe showed financial irregularities in fund transfer to Kingfisher and other group firms between 2010 and 2013.

While Sebi is already looking into the matter, sources said the Institute of Chartered Accountants of India (ICAI) has now written to the capital markets regulator seeking the details. The ICAI has powers to initiate disciplinary action against auditors if they are found to have indulged in malpractices. While Mallya has refused to resign, citing 'certain contractual obligations' on part of USL's current owner Diageo to support his position, the UK-based firm is looking into the options available with it on whether to support the board resolution seeking his removal. Without fixing individual responsibility for the alleged lapses, USL board resolved it has "lost confidence" in Mallya and therefore it asked him to quit as Chairman and Director. Besides, USL has initiated a process to take action internally against other employees responsible for the alleged irregularities. The alleged irregularities also relate to possible violations of the Companies Act, which may lead to the Corporate Affairs Ministry separately looking into the matter.

Concerned over the ongoing boardroom battle and the alleged lapses in the past, the minority shareholders of USL have also approached Sebi. Diageo has acquired 54.78 per cent stake in USL for about $3 billion, making it the controlling stakeholders, while the UB group firms continue to hold nearly 3 per cent stake. 

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