Informist, Friday, Jul 26, 2024

MUMBAI – The Securities and Exchange Board of India in a fresh order today barred Vijay Mallya, former chairman of the UB Group, from the Indian securities market for three years and from associating himself with any listed company for the same period. Mallya committed fraud by routing funds via sub-account of a foreign portfolio investor to indirectly trade in shares of his then group entities, United Spirits Ltd, and Herbertsons Ltd, SEBI said in its order.

According to SEBI, the FPI sub-account route was taken to conceal the true identity of his investments in his group companies in the Indian securities market. SEBI held Mallya to be in breach of the FPI and Prohibition of Fraudulent and Unfair Trade Practices regulations.

SEBI said that the funds were routed through overseas bank accounts with UBS AG in 2006 and 2007. The market regulator said the probe took several years to complete as "the matter was complex, tedious and time consuming given the fact that it involved approaching cross border regulators for assistance in procuring information and documents in respect of entities located outside India from many jurisdictions."

As a result of the routing, the FPI sub-account held nearly 10% of shares of Herbertsons, but these were shown as non-promoter public shareholders. SEBI said this misrepresented the truth and concealed the material fact of the FPI investments being indirectly funded by promoters. The whole artifice deployed by Mallya was "manipulative and deceptive," SEBI said in its order today.

SEBI had debarred Mallya through an earlier order in Jun 2018 for three years till May 2021 for diversion of funds and fraudulent transactions in the shares of United Spirits. In that, Mallya was also restrained from holding a managerial or director position in any listed company. Mallya had challenged the SEBI order before the Securities Appellate Tribunal but lost the appeal. End

Reported by Rajesh Gajra

Edited by Manisha Baxla

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