Markets regulator Sebi penalises 9 persons in Bombay Dyeing case

Markets regulator Sebi has slapped a penalty totalling Rs 59 lakh on nine persons in a case pertaining to alleged fraudulent scheme of misrepresenting financial statements of Bombay Dyeing and Manufacturing Company Limited.

These persons were either members of the audit committee of Bombay Dyeing or CFOs of the company during the violations.

They have been asked to pay the fine within 45 days, the Securities and Exchange Board of India (Sebi) said in its order passed on Monday.

The regulator conducted an investigation to ascertain whether the books of accounts of Bombay Dyeing and Manufacturing Company Limited (BDMCL) were manipulated for the financial years from FY12 to FY19.

 

The investigation revealed that BDMCL, by entering into various Memoranda of Understanding with its group company Scal Services Limited during FY12 to FY18 and by subsequently recognising revenue on the basis of such MoUs and not consolidating the transactions carried out with Scal, had inflated its sales and profits with respect to its real estate segment during FY12 to FY18 to the tune of Rs 2,492.94 crore and Rs 1,302.20 crore, respectively

Sebi noted that because of the failure of these persons to carry out their responsibilities laid down in the LODR Regulations, the revenues and profit of BDMCL were inflated during the period from FY12 to FY18. Subsequently, Scal's real estate business was ultimately merged with BDMCL with effect from July 1, 2018.

"I find that as noticee nos. 1 to 5 (R A Shah, S S Kelkar, S Ragothaman, S M Palia and Ishaat Hussain) as members of the audit committee failed in their duty to exercise oversight of BDMCL's financial reporting process and disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible," Sebi's Adjudicating Officer Anitha Anoop said.

Further,Vinod Hiran, Puspamitra Das and Vishnu Peruvamba as CFOs "wrongly certified that the financial statements of the company do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; and that the statements together present a true and fair view of the company's affairs and are in compliance with existing accounting standards, applicable laws and regulation", she added.

Accordingly, Sebi has levied a fine of Rs 10 lakh each on members of the audit committee, Rs 5 lakh on Das and Rs 2 lakh each on Hiran and Peruvamba.

Last month, the regulator had barred 10 entities, including Bombay Dyeing & Manufacturing Company Ltd and its promoters -- Nusli N Wadia, Ness Wadia and Jehangir Wadia -- from the securities markets for up to two years and levied a fine totalling Rs 15.75 crore on them for being involved in a fraudulent scheme of misrepresenting the company's financial statements.