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Vijay Mallya may be forced to quit United Spirits

The chairman of United Spirits Limited (USL), Vijay Mallya, could be expelled from the company’s boardroom if declared a “wilful defaulter” of debts.

Vijay Mallya United Spirits Kingfisher
Vijay Mallya could lose his position as chairman of USL if declared a “wilful defaulter”

The State Bank of India, Punjab National Bank, United Bank of India and IDBI bank are all seeking to declare the boss of the Indian beverage company – recently acquired by Diageo for £1.1 billion – a wilful defaulter due to approximately US$1.5bn worth of loans owned by Mallya’s Kingfisher Airlines business.

A wilful defaulter tag prohibits an individual or company from accessing banks and capital markets for funding needs, and could potentially lead to investigations and legal proceedings.

Mallya has already challenged the United Bank of India’s move in court, The Times of India reported.

“RBI guidelines and Companies Act suggest that wilful defaulter won’t attract automatic disqualification unless there is criminal conviction,” Shriram Subramanian of InGovern Research Services – a firm that advises large investors on corporate governance – told the news site.

“But shareholders and creditors can demand the removal citing the negative business impact it carries.”

As it stands, USL is yet to publish its full-year sales results for 2013/2014, thought to be due to the company’s inability to explain loans of approximately 1,400 crore (around £140m) to parent company United Breweries Holdings, during which time billionaire Mallya was leading the group.

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