Market regulator Sebi today imposed fine of Rs 90 lakh on N Narayanan and V Natarajan, directors of Pyramid Saimira Theatre Ltd (PSTL), for indulging in fraudulent and unfair trade practices.
The case relates to PSTL's involvement in committing irregularities in its books of accounts and showing inflated profits and revenues in financial statements for 2007-08.
PSTL and its directors lured the general public to invest in the shares of the company based on such false financial statements.
"After taking into consideration all the facts and circumstances of the case ... Impose a penalty of Rs 50 lakh on the Noticee N Narayanan and Rs 40 lakh on the Noticee V Natarajan respectively, under Section 15 HA of the Sebi Act which will be commensurate with the violations committed by them," the market regulator said in an order.
The Section 15 HA has provisions for imposing penalties in case of fraudulent and unfair trade practices.
The order comes a day after the Securities and Exchange Board of India imposed a penalty of Rs 1.1 crore on M S Swaminathan, promoter and Managing Director of PSTL, in the same case.
Both Narayanan and Natarajan were whole-time directors of PSTL during the period when the irregularities took place and were alleged to have published false and misleading financial results of company.
Sebi had initiated inquiry on the irregularities in November, 2009 and a show-cause notice was issued against Narayanan and Natarajan in April 2010.
PSTL claimed to have entered into lease/hire agreements with 765 theatres in various states as on March 31, 2008, and with 802 theatres as at the end of June 2008. However, during investigation it was able to show copies of only 257 such agreements.
The market regulator also found that no money was paid by PSTL to some theatres for creation of security deposits.
Sebi also observed the duo failed in their duty to exercise due care and diligence and allowed the company to fabricate the figures and making false disclosures.
