India: Panel confirms Vijay Mallya’s position as chairman of United Breweries

Vijay Mallya's position as chairman of United Breweries doesn't seem to be under threat, at least for now, after a panel that included a former chief justice of India informed the company's board that he is well within his rights and in compliance with all regulations to continue, The Economic Times reported on July 28.

The UB board had sought legal opinion from the panel following a Securities & Exchange Board of India notification that said any person named wilful defaulter cannot be nominated to board position. Former Chief Justice VN Khare was a member of the panel.

Mallya as chairman and promoter of UB doesn't require nomination to be on the board and hence doesn't come under purview of the Sebi regulation, executives with knowledge of the panel's views said, speaking on condition of anonymity. The panel opined that the businessman also complies with Sebi, Reserve Bank of India and Company Law Board rules to be the chairman of UB, they said.

UB's board includes those nominated by Heineken, the Dutch beer maker that holds largest stake in the company, as well as independent members such as Kiran Mazumdar-Shaw, CY Pal and Sunil Alagh. The company, which owns Kingfisher brand, is India's largest producer of beer with market share of around 48% by volume. Confirming the development, Pal, chairman of UB's audit committee, said: "We will be reviewing the legal opinion and the related issues in our next board meeting scheduled to be held on 12 August, 2016." Mallya, who banks say owes them more than Rs 9,000 crore, didn't respond to an email seeking comment. Heineken declined to comment.

But Mallya's position remains edgy in other ways. A Delhi court cancelled the exemption granted to him from personal appearance in a case lodged for allegedly evading summons in connection with a FERA violation case and directed him to appear before it on September 9. Failure to do so will lead to contempt of court, the punishment for which can be imprisoned for 6 months or fine, or both, and will get him off the board seat, say legal experts.

On a separate plea by banks, the Supreme Court this week asked Mallya why contempt proceedings shouldn't be initiated for allegedly not declaring details of all his assets as directed. Mallya has legally challenged the application of the new rules by the capital market regulator on wilful defaulter, and its implication to his board position at UB. His contention is that he is a company shareholder and promoter.

At United Breweries's last board meeting, Heineken and the board decided to support Mallya. Mallya shares a cordial equation with Heineken and the Dutch partner too has no issues with him continuing as chairman, executives said after the legal view has come in.

Executives close to the development on conditions of anonymity said regulators need to have more clarity in their rules and notifications regarding financial offenders. "Mallya has a battery of good lawyers around him to protect his rights by finding loopholes in some of the archaic laws of our country," one of them said.

Manish Jain, senior partner at law firm Map Corporate Legalsaid a director can attend board meeting through video conferencing. "The act of a person can be ethically incorrect, for instance a director may be a defaulter, but there is no remedy in the law currently to prevent it."

28 July, 2016