India Inspects Carlsberg Accounts for Alleged Impropriety

Labels for bottles of Carlsberg beer move sit in an automated labeling machine. (Photographer: Andrey Rudakov/Bloomberg)

India Inspects Carlsberg Accounts for Alleged Impropriety

India’s government is inspecting the account books of the local unit of Carlsberg A/S, according to people with knowledge of the matter, following allegations of potential fraud.

The Registrar of Companies has issued a notice to Carlsberg India seeking its response and is preparing to summon the board of directors soon, the people said, asking not to be identified as the details are private. PricewaterhouseCoopers LLP -- which quit as auditor of Carlsberg India in November after a boardroom dispute at the brewery spilled into its bookkeeping -- had subsequently complained to the Ministry of Corporate Affairs, the people said.

Carlsberg’s joint venture partner -- Nepal-based Khetan Group -- had in 2019 written to the Indian ministries of Corporate Affairs and Commerce alleging that Carlsberg India was offering illegal trade discounts and engaging in potentially fraudulent practices for sales promotion, the people said. They added that the board hasn’t resolved the dispute, prompting the PwC complaint and the Indian government’s examination.

Earlier: PwC Quits as Carlsberg India Auditor, Won’t Approve Accounts

Divergent views among the Carlsberg India board are the main reason for disclaimers of opinion by the auditor, a representative for Carlsberg said by email. It added that complaints made in 2019 and 2020 by its joint venture partner were closed last year without any sanctions against Carlsberg India.

“We continue to be in a difficult dispute with the JV partner in India,” Carlsberg said. “A dispute which is expected to escalate for some time, as the partner still owes Carlsberg $43 million and still wants to sell his share of the business ahead of time and at a completely unreasonable price.”

A representative for Khetan Group declined to comment. A spokesperson for the Ministry of Corporate Affairs declined to comment. An email to PwC was unanswered.

Carlsberg in its Sustainability Report 2020 disclosed that an investigation during 2019 and 2020 found evidence of potential unethical practices at the India unit but found no evidence of actions aimed at personal gain for Carlsberg employees. A separate internal probe in 2018 had identified underage laborers in a warehouse operated by a third party. The contract was terminated, Carlsberg said.

It added that a director nominated by the JV partner, who didn’t cooperate with the investigation, is unwilling to resign and the Khetan Group is unwilling to replace him despite a resolution of ‘no confidence’ passed by the board.

©2021 Bloomberg L.P.

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