United Spirits officials face ED heat

They are facing probe transfer of Rs 4,000 crore by the company in 2007 to its overseas arm based in British Virgin Islands

Top officials of Diageo-owned United Spirits are facing an investigation by the Enforcement Directorate under the Prevention of Money Laundering Act (PMLA) for transfer of Rs 4,000 crore by the company in 2007 to its overseas arm in British Virgin Island, a tax haven.

The company, then owned by UB group chairman Vijay Mallya, informed its shareholders that ED had summoned one of its senior officials in May to provide a statement and tender evidence in connection with its investigation. “The company’s officer duly responded to the summons and the company has also provided additional information, as requested by the ED, and is cooperating fully with the authorities,” the company said.

Summoning of United Spirits official was follow-up to a letter dated October 29, 2015 by ED in which United Spirits was asked to give information and documents regarding USL’s present and former joint ventures and wholly-owned subsidiaries abroad, including USL Holdings Ltd (BVI) and its subsidiaries. The company has responded to the ED and provided the information, the company said.

British liquor giant Diageo took over United Spirits in 2012 in a $2.1-billion transaction. The proceeds of the sale were not used by Mallya to repay banks, which were running from pillar-to-post to get back their loans worth Rs 9,100 crore to Mallya-owned airline. Mallya is reportedly in London.
 

 

Earlier, in a related case, USL had argued in a Karnataka High Court hearing in 2013 that the money was transferred to British Virgin Island company for the acquisition of Whyte & Mackay in May 2007 for $1.2 billion. After Diageo took over USL, it sold Whyte & Mackay in 2014 at a 25% discount to the 2007 acquisition price. The proceeds of the sale were not brought to India and were used to repay foreign loans, United Spirits – under its new management - had said. 

In its annual report for fiscal 2016, United Spirits said in February this year certain directors of the company, including its independent directors, were requested to provide statements and information to the Serious Frauds Investigation Office (SFIO) in relation to the SFIO investigation into Kingfisher Airlines.

United Spirits has also received a notice from the Ministry of Corporate Affairs  for an inspection of the books of accounts and other books and papers of the company and after the inquiry, the company and its directors and officers (including former directors and officers) also received a notice from the Joint Director, MCA requesting explanations  as to why action should not be initiated in relation to various contraventions alleged by the Joint Director.  A notice under Section 131 of the Income Tax Act, 1961 has also been received. The company is cooperating fully with the authorities in relation to the same, it said. 

United Spirits is also under investigations by the market regulator Sebi for payment of a non-compete fees to Mallya, and by the ICAI which sought a forensic audit conducted on the company by Price Waterhouse.