Mumbai: The Securities Appellate Tribunal (SAT) on Friday dismissed Vijay Mallya’s appeal against the Securities and Exchange Board of India’s (Sebi) interim order which had barred him from accessing the capital markets.
“We are inclined to dismiss the appeal with a direction to the appellant to appear before Sebi, in person or through a legally authorized representative, and make his submissions before Sebi within 21 days from today," said SAT in the order.
On 25 January, Sebi had barred the former United Spirits Ltd (USL) chairman and six former executives of the company from accessing the securities market for alleged violations of the listing agreement, diversion of funds and fraud.
Mallya had approached SAT against the directive on 7 April alleging violations of principle of natural justice. His appeal said that Sebi has based its order on two forensic audit reports and without its own investigations.
SAT said that considering the gravity of the situation (allegations of diversion of funds) Sebi was justified in using its powers under Section 11 (B) to pass an interim order. That section of the Sebi Act allows the regulator to pass interim directions pending investigations.
In a 30-page order, Sebi’s whole-time member S. Raman had said that funds from USL were diverted to some group companies of United Breweries Ltd, including the now defunct Kingfisher Airlines Ltd (KAL).
To come to this conclusion, Sebi had relied on two forensic audits conducted by Price Waterhouse Coopers (PwC) and Ernst & Young (EY). Both audits examined transactions during 2010-2014.
While the audit by PwC observed that Rs655 crore was diverted and misappropriated, EY found that Rs1,225 crore was mis-utilised.
However, during the course of hearing, Sebi submitted that it also relied on its own evidence.
This evidence includes a January 2012 letter by Mallya authorizing the waive-off of Rs190 crore worth of dues, an email in March 2012 that USL ‘would need to come up with’ Rs44 crore that was due in income tax payments against KAL, and authorizing interim fund support from USL to United Breweries Holdings Ltd (UBHL).
“The ex-parte impugned order has been passed on prima-facie view and the appellant, instead of rushing to the tribunal, should have defended himself before Sebi by availing of the opportunity granted to him," said SAT in the order.
The counsel for Mallya had also requested that SAT allow the business tycoon to continue as chairman of United Breweries Ltd (UBL). In reply, SAT asked Mallya to make a representation to Sebi, which the regulator would consider on its merits.
On Thursday evening, UBL had informed the stock exchanges that Vijay Mallya has ceased to be the director of the company.