Govt annuls Vijay Mallya's Kingfisher chairmanship
02 December 2014
In a double blow to businessman Vijay Mallya, the government has annulled his reappointment as managing director of the grounded Kingfisher Airlines, while he also had to quit from board of another group company, Mangalore Chemicals and Fertilizers Ltd
This comes close on the heels of minority shareholders of United Spirits, once a prized entity of the Mallya-led UB group, rejecting proposals regarding financial dealings of company with entities connected to him.
Kingfisher, which had to be grounded in October 2012 due to severe financial crunch and mounting debt, had sought approval of the corporate affairs ministry for Mallya's reappointment for a period of five years beginning 16 October 2013 "without remuneration", The Times of India reported.
The airline said in a regulatory filing on Monday that its application has been rejected, without disclosing reasons.
Government sources however said the decision was taken because Kingfisher failed to get necessary approvals from its lenders and shareholders for Mallya's reappointment (See: Mangalore Chemicals shares spurt as Vijay Mallya resigns from board).
The disclosure came on a day when another UB Group firm Mangalore Chemicals and Fertilizers Ltd (MCFL) announced Mallya's resignation as a director without giving any reason.
Trading in shares of Kingfisher and another group firm UB Engineering also got suspended from the same day because of the companies' non-compliance to listing norms.
Kingfisher, which once prided itself as India's most luxurious airline, used to command a market value of over Rs10,000 crore; this now stands at just about Rs100 crore.
The overall UB group market value has tanked by over half in the past one year excluding United Spirits.
The penal action by stock exchanges followed the companies' inability to prepare and publish financial results in time, which the firms have attributed to lack of staff.
Kingfisher has previously faced strong staff protests for non-payment of salaries, while it is also under the regulatory scanner for various accounting lapses.
As per the latest disclosures made to the stock exchanges, Mallya was serving as chairman and managing director of Kingfisher, which has been without a full-time CEO ever since Sanjay Agarwal left the company early this year.
As per the norms, a company which is in the red or has inadequate profits needs to approach the ministry to get approval for appointment of key managerial personnel and directors and get no-objection certificates from shareholders and lenders.
The ministry rejected the proposal in this case as it was already turned down by shareholders and lenders, sources said, while adding that this particular decision was not directly linked to Mallya being declared a 'wilful defaulter'.
Default on loan payments has already seen a number of banks resorting to legal options to reclaim their funds, while some of them have also declared Mr Mallya as a wilful defaulter.
Among various key assets, UB Group sold a controlling stake in United Spirits Ltd (USL) to UK-based global liquor giant Diageo, while MCFL recently saw two rival bidders slugging it out in the marketplace for getting a control of the company.