 "Kirit Somaiya")
Even as the Modi government has come under attack from the Opposition for letting Mallya flee from India, a BJP Member of Parliament has written to the Reserve Bank of India (RBI) today seeking a forensic audit into all transactions between Mallya, United Spirits and Diageo.
Kirit Somaiya, a Member of Parliament and a member of Parliament’s Finance Committee and Public Accounts Committee, said sale of assets by Mallya in the last few years should be probed – considering the huge liabilities to banks, tax authorities, provident fund authorities and employees. The complex money transfer between various Mallya entities in India, United Spirits and Virgin Island entities should also be looked into, he said. Besides, Somaiya also sought an investigation into other wilful defaulters who owe close to Rs 65,000 crore to Indian banks.
Somaiya’s communication to the RBI assumes significance as it was way back in December 2013 that a division bench of Karnataka High Court had ordered an investigation by the Enforcement Directorate and the RBI on diversion of Rs 4,000 crore to the tax haven of British Virgin Islands from USL in 2007. There was no follow up action from either the ED or the RBI since December 2013 order by the Karnataka HC order.
Diageo had taken over United Spirits in October 2012 in a $2.1 billion transaction and later increased its stake to 54% by making open offers to other shareholders. Most of the proceeds of the sale from USL sale was diverted to offshore accounts of Mallya and was not used to repay PSU bank loans.
As per the HC order, UB had told Rs 4,000 crore were diverted for payment of the acquisition of Whyte & Mackay. But lenders argued that there were no supporting documents to show why such an asset was parked in a tax haven. Within months of Karnataka order, United Spirits, under Diageo, sold White and Mackay in May 2014 for Rs 4,345 crore to Philippines’ Emperador.
The Karnataka High Court had blasted the UB group saying said the company has not come to court with clean hands and the transaction was not a bona fide one. Hence, the diversion of funds needs to be investigated. UB later moved the SC, which had ordered a status quo on sale of 7% of USL shares.
Interestingly, in April 14 2013, in order to get clearance of the sale to Diageo, the UB Group gave an assurance to the bankers that it will make a significant payment to Kingfisher lenders out of the proceeds of the sale of USL shares to Diageo. UB Group also requested the bankers not to take any action to sell USL shares in the market which may derail the Diageo deal. But the UB group did not return any money to the Indian public sector banks and instead sued them in various courts.
The lenders had also raised queries over Diageo’s $35 million investment in Mallya’s South African Brewery and guarantee facilitation of $135 million by Diageo to Force One racing team. This, lenders alleged, was a part of Diageo deal but the money was not bought to India.
Mallya fund transfers
* 2007: United Spirits transfers Rs 4,000 cr to tax haven British Virgin Islands to buy W&M
* May 2007: United Spirits buys Whyte & Mackay
* November 2012: Diageo buys United Spirits for $2.1 bn
* December 2013: Karnataka HC orders probe into Rs 4,000 cr fund transfer, says UB group’s sale of 7% stake to Diageo is void
* February 2014: SC orders status quo on sale of 7% stake to Diageo
* May 2014: United Spirits sells W&M to Emperador for Rs 4,345 cr
* April 2015: Diageo accuses Mallya of cooking USL accounts, asks Mallya to quit
* February 2016: Mallya quits United Spirits board, gets $75 million non-compete fees from Diageo
* March 2016: ED/RBI begin probe into Kingfisher, Mallya transactions as banks fail to get dues
