Sebi bars Vijay Mallya from accessing markets; can't hold directorship in any company

Securities and Exchange Board of India (Sebi) on Wednesday announced seven names of people including Kingfisher Airlines owner Vijay Mallya who have been restrained from accessing the stock markets on account of fund diversions or improper transactions in the United Spirits Limited (USL). 

The markets regulator has barred these people in the matter of fund diversions and improper transactions in United Spirits Limites (USL), cited the regulator in a release.

Apart from Mallya, Sebi has barred following people from accessing the markets:
 

1. Ashok Capoor
2. Sowmiyannarayanan 
3. S N Prasad 
4. P A Murali 
5. Paramajit Singh Gill 
6. Ainapur S R 

Sebi said, "Mallya and the other KMPs i.e. Mr. Ashok Capoor, Mr. P.A. Murali, Mr. Sowmiyanarayanan, Mr. S.N. Prasad, Mr. Paramjit Singh Gill and Mr. Ainapur S.R. are therefore prima facie alleged to have committed fraudulent and unfair activities prohibited under Section 12A(c) of the SEBI Act , 1992 (“SEBI Act”) and Regulations 3(d); 4(1) alongwith 4(2)(e), (f) and (k) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 (“PFUTP Regulations, 2003”)."

Sebi said, "It appears that Mallya in his capacity as Chairman of USL during the relevant period was instrumental in the diversion of funds from USL."

The order further siad, "In his endeavor to supply funds from USL to various companies/entities of the UB Group including KFA, he had exerted pressure on the aforementioned KMPs to comply with his instructions and the same were complied with as noted from the e– mails extracts reproduced at paragraph 2.1(A). Similarly, in his capacity as the Managing Director of USL during the period when funds were diverted, Mr. Ashok Capoor was in charge of and was responsible to USL, for the conduct of its business. It is therefore prima facie clear that Mallya, Mr. Ashok Capoor alongwith the other KMPs were active in facilitating and/or had knowledge of the diversion of funds from USL to the companies of the UB Group."

The aforementioned persons (Mallya and Capoor) may file their replies to SEBI within 21 days from the date of receipt of this Order. They may also indicate in their replies whether they wish to avail an opportunity of personal hearing in the matter.

PWC–UK in its report relied upon the e-mails showing that Mallya, the then Chairman and Nonexecutive Director of USL, exerted pressure and influence over USL employees to arrange funds for KFA.

Certain instances of the same are provided as under:

i. Mallya issued a letter dated January 5, 2012, authorizing Wave to withhold ₹190 Crores due to USL. An identical letter of the same date was sent by Mr. Ashok Capoor to Wave on behalf of USL.

ii. Vide an e-mail dated March 25, 2012, Mallya wrote to Ashok Capoor and PA Murali that KFA had significant dues towards the Income Tax Appellate Tribunal and instructed that USL “would have to come up with ₹ 44 Crores, if needed.”

iii. Vide an e–mail dated April 19, 2012, addressed to PA Murali, USL’s Chief Financial Officer, Mallya stated: “1. You are aware of my compulsion to keep KFA flying. Any slippage will be a disaster for the Group. 2. To set the record straight, I confirm that you have been acting under my direct authorization for which I take responsibility. 3. You are aware that I have been following up 3 fund raising proposals – A) HDFC B) Bank of Maharashtra C) Pelican funding The Pelican funding is to ensure that UBHL meets its obligations as well as to fund KFA. 4. As the Pelican funding is complex and time consuming despite best efforts, I am asking for interim funding support from USL. Once this is in place, UBHL can return funds to USL with the appropriate accounting entries.”

iv. Mr. Ashok Capoor, vide an e-mail dated July 13, 2012, inter alia informed Mallya that it was not possible for USL to support UB Group companies to meet any of their needs and in fact, USL needed support from UB Group companies in those circumstances. In response, Mallya vide his email dated July 18, 2012, stated that “I know the USL position exactly. It is my final call. If you cannot accept my instructions, you are free to decide your further steps…. but let me repeat, my call is final and an instruction.”

Sebi said, "The individuals holding key managerial positions in such listed companies have to follow high standards of integrity and ensure good governance. By diverting substantial funds from USL to companies of the UB Group, Mallya and other KMPs have engaged in an act or practice which prima facie operated as a fraud or deceit on the public shareholder/investors of USL."