Mallya resigns from USL; indicates amicable pact with Diageo

Last year, Diageo had asked Mallya to step down as Chairman and Director of USL alleging fund diversion to Kingfisher and other UB group companies, a demand that was outrightly rejected by Mallya.
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Feb 26, 2016, 08.39 AM | Source: CNBC-TV18

Mallya resigns from USL; indicates amicable pact with Diageo

Last year, Diageo had asked Mallya to step down as Chairman and Director of USL alleging fund diversion to Kingfisher and other UB group companies, a demand that was outrightly rejected by Mallya.

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Mallya resigns from USL; indicates amicable pact with Diageo

Last year, Diageo had asked Mallya to step down as Chairman and Director of USL alleging fund diversion to Kingfisher and other UB group companies, a demand that was outrightly rejected by Mallya.

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Vijay Mallya today resigned from the post of Chairman of United Spirits and will become the Founder Emeritus of the company.

“The time has now come for me to move on and end all the publicised allegations and uncertainties about my relationship with Diageo and United Spirits Limited. Accordingly, I am resigning my position with immediate effect,” said a statement released by Mallya.

In the release, Mallya said: “I am pleased to have been able to agree terms with Diageo and United Spirits Limited. The agreement we have reached secures my family legacy.”

Last year, Diageo had asked Mallya to step down as Chairman and Director of USL alleging fund diversion to Kingfisher and other UB group companies, a demand that was outrightly rejected by Mallya.

USL, in a report by PWC, had said that various improprieties and legal violations were found in a probe into loans worth Rs 1,337 crore given to UB Group firms.

The UK firm has agreed to drop all charges for alleged irregularities against Mallya and will pay him USD 75 million over five years in return as per the deal.

“Disappointed that Mallya has been relieved from all charges,” says Hetal Dalal of IiAs. Diageo, she says, is focused on a clean break and thus, has decided to pay Mr Mallya for his resignation. 

While the move is a positive one, any agreement between Mallya and Diageo is not good, says JN Gupta, Former ED, SEBI. The agreement must be made public to all shareholders, he adds.

Hitesh Jain of ALMT Legal says that the move indicates a move to cut losses by Mallya. However, Jain adds that irrespective of his resignation, Mallya will have to face the legal issues.

Diageo, in a statement, has said that Mallya resignation “brings to an end the uncertainty relating to the governance of USL.” The company has put in place “five year global non-compete, non-interference and standstill arrangement with Dr Mallya.”

Mahendra Kumar Sharma, an independent director, will be the new chairman of United Spirits.

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