Suspecting serious lapses in financial dealings of various listed companies of the Vijay Mallya-led UB Group, the Securities and Exchange Board of India has expanded its probe into possible siphoning of funds by the promoters.
The matter is also being flagged to other agencies and government departments, including the corporate affairs ministry and its probe agency for white-collar crimes, the SFIO (Serious Fraud Investigation Office), PTI reports citing a senior official said.
Sebi is looking into violation of securities market regulations like strict disclosure requirements, including about the 'insider dealings' with the promoters and related parties.
Besides, Sebi is also probing any possible violation of norms aimed at checking fraudulent and unfair trades and compromising the interest of minority shareholders.
A forensic audit has found possible 'irregularities and mismanagement' in advances and investments made by Mangalore Chemicals and Fertilizers, where Mallya's UB Group remains a promoter entity despite Zuari Group having acquired a controlling stake, to his other group companies.
As a result, financial dealings of various other group companies with their respective promoters are also being probed, the official said. The Board of Mangalore Chemicals and Fertilizers Ltd (MCFL), which Zuari Fertilizer and Chemicals took over last year after wresting control from Mallya, had appointed Ernst and Young LLP to do a forensic investigation into the Rs200 crore investment MCFL had made in Bangalore Beverages Ltd. (See: Audit finds irregularities in MCFL advances to Mallya firm).
The audit was also asked to look into various advances made by MCFL to Mallya's flagship United Breweries (Holdings) Ltd (UBHL), of which a sum of Rs16.68 crore was outstanding as of 31 March 2016. Bangalore Beverages is a step-down subsidiary of UBHL and is facing liquidity crunch.
The audit found these ''transactions may have involved irregularities and elements of mismanagement in the company.''
On its part, MCFL is also taking necessary legal advice in connection with the findings of Ernst and Young. MCFL has made provision of Rs 200 crore for potential diminution in the value of investments in Bangalore Beverages Ltd. It has also provided for Rs16.68 crore advances receivable from UBHL in its books of account for 2015-16.
Earlier, alleged financial irregularities had come to fore at United Spirits Ltd (USL) relating to loans advanced to UB Group firms including for long-defunct Kingfisher Airlines. However, Mallya later inked a Rs 500-crore sweetheart deal with Diageo, to which he had sold controlling stake in USL in a multi-billion dollar deal.
Besides, various UB Group firms are already facing probes by Sebi relating to listing rule violations, while Corporate Affairs Ministry is also looking into alleged violations of certain provisions of the Companies Act. The role of previous auditors is also under the scanner.
Mallya, currently in the UK, had to resign from Rajya Sabha amid tightening of the noose by various enforcement agencies and lenders who are trying to recover over Rs9,000 crore dues from Kingfisher and its guarantors. His passport has been revoked and non-bailable warrant has been issued against him.