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Sebi orders forensic audit against two companies

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Press Trust of India New Delhi
Last Updated : Nov 21 2017 | 10:45 PM IST
Sebi today ordered forensic audits against Eskay K'n'it (India) Ltd and K Lifestyle & Industries Ltd, which were among the suspected shell companies, to check possible misuse of funds even as the regulator lifted trading curbs imposed on them.
EKIL and KLIL were in the list of 331 suspected shell companies against whom action was taken by Sebi following reference from the corporate affairs ministry earlier this year.
Trading in the securities of EKIL as well as KLIL would be reverted to the status prior to August 7, when the curbs were imposed, according to two separate but similarly-worded orders.
In its 22-page order, Sebi said an independent forensic auditor would be appointed to verify whether there has been "misrepresentation, including of financials and/ or business" by the company.
Besides, the audit would check whether there has been misuse of the books of accounts, funds, "including facilitation of accommodation entries or compromise of minority shareholder interest, if any".
Shares held by EKIL's promoters and directors should not be allowed to be transferred for sale by depositories, the order said.

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Both companies have been given 30 days time to file their reply to the interim orders.
Securities and Exchange Board of India (Sebi) noted that there is prima facie evidence on the misrepresentation of financials by the company as well as suspicion of misuse of funds/ books of accounts, submission of partial and incomplete information.
Citing these factors, the regulator said, "... the persons who are in control of the company and the directors/ promoters of the company are prima facie liable for action by Sebi and should not be permitted to exit the company at the cost of innocent shareholders".
"Detailed examination/ forensic audit needs to be undertaking to unearth the entire extent of violations and possible compromise of minority shareholder interest," the order noted.
In a separate but similar order, the regulator has directed forensic audit against K Lifestyle & Industries Ltd (KLIL) to check whether there has been misrepresentation of financials.
An independent forensic auditor would be appointed wherein the possible misuse of books of accounts would also be verified, as per the order.

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First Published: Nov 21 2017 | 10:45 PM IST

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