Lens on Foreign Investment Promotion Board approvals given to Diageo under Chidambaram

MUMBAI: Diageo’s run in with authorities since the United Spirits acquisition continues with investigative agencies looking for links between the British spirits company hiring P Chidambaram as its lawyer and the investment approvals it got when the Congress leader was the finance minister.
The CBI and Enforcement Directorate are probing the Foreign Investment Promotion Board (FIPB) approvals given to a few companies, including Diageo Scotland, when Chidambaram was the finance minister in the first UPA government, people in the know said. They suspect that these were given in contravention of rules and that there were payments of kickbacks.

The two agencies are working on certain “leads” that allegedly suggest laundering of the proceeds, and are looking into the role of Chidambaram and his son, Karti, in the transactions, the people said.

They also find a conflict of interest in the former minister arguing on behalf of United Spirits in an ongoing case against IDBI Bank in the Karnataka High Court.

Diageo did not comment on the matter.

Executives close to Diageo called FIPB approvals a dated matter, pertaining to 2005, and said the company would answer any queries by regulators.

Chidambaram is currently in the custody of the CBI, which had arrested him in the INX Media case. He had earlier denied any wrongdoing and involvement in the FIPB clearance process.

Karti Chidambaram had also denied any wrongdoing.

A top Mumbai-based lawyer said if the former minister was part of key Diageo-related decision-making, then the company should have refrained from engaging him as a lawyer and Chidambaram should have abstained from representing Diageo. “Now this is something Diageo should have ensured. Legally they may be right, but corporate governance also includes conflict of interest which allows no room for such business dealings,” he said.

The FIPB nod to Diageo Scotland is one of the six cases that are being probed by the two agencies.

While the CBI is probing if these approvals were given in lieu of kickbacks paid to shell companies linked to the former minister and his son, the ED is looking for possible money laundering and whether funds were diverted to purchase movable and immovable assets, said an official ET spoke to.

Another official said they had seized several papers pertaining to the approvals given to Diageo and communication between Chidambaram and the company during the same period. “This is an ongoing development and early days yet. We will take decisions accordingly,” he said.