USL boss faces losing place on board
18th August, 2014 by Neal Baker
Vijay Mallya, the boss of Indian producer United Spirits (USL), may have to quit the company’s board if he is found to be a “wilful defaulter” of debts — a tag some lenders are attempting to put to his name.
USL boss Vijay Mallya, who is challenging banks’ attempts to brand him a ‘wilful defaulter’ (Photo:Wiki)
Mallya, 58, chairs the board of USL, in which Diageo and Heineken are the major shareholders.
Three lenders – State Bank of India, Punjab National Bank and United Bank of India – have sought to declare Mallya a “wilful defaulter”.
He has already challenged United Bank of India’s move in the court and may follow suit with the other two, reports The Times of India.
Currently the company is yet to release their half-year reports as internal auditors attempt to get to grip’s with the company’s financial arrangements after the recent takeover by Diageo.
It is thought that USL’s inability to explain loans of around 1,400 crore (about £140m) to parent company UB Holdings is one of the major reasons behind the troubled accounts.
This loan was reportedly used to prop up the failing UB Group company Kingfisher Airlines, which is has been grounded since 2012 due to defaults in payments.
“RBI guidelines and Companies Act suggest that a wilful defaulter won’t attract automatic disqualification unless there is criminal conviction,” Shriram Subramanian of InGovern Research Services – a firm that advises large investors on corporate governance – told the newspaper.
“But shareholders and creditors can demand the removal citing the negative business impact it carries,” he continued.
Any company with a wilful defaulter on its board cannot access banks or capital markets for funding needs, which would be disastrous for the stability of a company.