Securities and Exchange Board of India (SEBI) on Wednesday barred beleagured businessman Vijay Mallya and six officials of United Spirits Ltd (USL) from trading in the securities market in a case related to alleged fund diversions from USL.
Besides, Mallya and former United Spirits' official Ashok Capoor have been restrained from "holding position as directors or key managerial persons (KMPs) of any listed company".
Mallya and six other officials of USL were "restrained from accessing the securities market and prohibited from buying, selling or otherwise dealing in securities in any manner whatsoever, either directly or indirectly", according to a SEBI order released here.
The six others are: Ashok Capoor, P A Murali, Sowmiyanarayanan, S N Prasad, Paramjit Singh Gill and Ainapur S R.
The above directions shall come into force with immediate effect and shall be in force till further directions, the market regulator said.
The SEBI order comes on account of matters relating to improper USL fund diversions. According to the PWC-UK report, Rs 655.55 crore and according to the E&Y report, Rs 1,225.24 crore of USL funds were wrongly diverted.
Sebi has been looking into the matter pertaining to alleged fund diversions and improper transactions at USL). Mallya resigned as director and chairman of USL in March 2016.
SEBI's order also comes close on the heels of CBI naming Mallya, Kingfisher Airlines and nine others, in the charge sheet related to the 2015 loan default case.
In a 32-page order, SEBI Whole Time Member S Raman said the alleged prima facie violations observed in the case are serious and have larger implications on the safety and integrity of the securities market.
"It appears that Mallya in his capacity as Chairman of USL during the relevant period was instrumental in the diversion of funds from USL. In his endeavor to supply funds from USL to various companies/entities of the UB Group including KFA, he had exerted pressure on the key managerial persons (KMPs) to comply with his instructions," SEBI stated.
"Similarly, in his capacity as the Managing Director of USL during the period when funds were diverted, Capoor was in charge of and was responsible to USL, for the conduct of its business. It is therefore prima facie clear that Mallya, Capoor along with 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 order added.
The individuals holding key managerial positions in listed companies have to follow high standards of integrity and ensure good governance, the regulator said.
"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," it said.
SEBI said that the alleged violations observed in this case were serious and had larger implications on the safety and integrity of the securities market.
"Investors might have based their investment decisions on the manipulated books of accounts prepared and presented by these persons. It would therefore not be in the interest of the securities market and the interest of investors to allow persons of such doubtful demeanor to continue to act as KMPs in the company or in other listed companies or allow them to deal in the securities market," it said.
"Therefore, pending investigations in the matter, effective preventive and remedial actions needs to be taken against the persons in order to safeguard the integrity of the securities market," it added.
SEBI has sought replies from Mallya and six others within 21 days and indicate if they wished to avail an opportunity of personal hearing in the matter.
It has also asked USL to list, within next 21 days, steps taken by the company to recover the funds from Mallya and the companies to whom these were wrongly diverted.
(With agencies)
