Sebi bars Bombay Dyeing, Ness Wadia, others from securities marketplace for as much as 2 yrs; imposes fines of Rs 15.75 cr

Sebi has barred 10 entities, together with Bombay Dyeing & Manufacturing Company Ltd and its promoters — Nusli N Wadia, Ness Wadia and Jehangir Wadia — from the securities markets for as much as two years and levied a high-quality totalling Rs 15.75 crore on them for being concerned in a fraudulent scheme of misrepresenting the corporate’s monetary statements.

Others banned and penalised by Sebi are — Scal Services Ltd, a Wadia Group firm, its then administrators D S Gagrat, N H Datanwala Shailesh Karnik, R Chandrasekharan, and Durgesh Mehta, who was joint managing director and chief monetary officer of Bombay Dyeing.

They have been directed to pay the penalty inside 45 days, the Securities and Exchange Board of India (Sebi) stated in its order handed on Friday.

On the premise of sure complaints, Sebi performed an in depth investigation into the affairs of Bombay Dyeing and Manufacturing Company Ltd (BDMCL) for the interval masking FY 2011-12 to FY 2018-19.

In its probe, Sebi discovered that these entities have been concerned in a fraudulent scheme of misrepresentation of economic statements of BDMCL, by inflating gross sales of Rs 2,492.94 crore and revenue of Rs 1,302.20 crore arising from the alleged sale of flats (by way of memoranda of understanding or MoUs) by BDMCL to Scal throughout FY 2011-12 to 2017-18.

The regulator famous that the shareholding construction of Scal was intentionally designed in such a way that although BDMCL immediately held solely 19 per cent stake, by way of its oblique holdings in different shareholders of Scal, BDMCL was capable of train full management over the whole share capital of Scal.

The direct shareholding of BDMCL in Scal was intentionally by design saved at 19 per cent in order to make sure that definition of ‘Associate Company’ is just not attracted and due to this fact, the monetary statements of Scal wouldn’t be mandated to be consolidated with that of BDMCL.

“Had the financial statements of Scal been consolidated with BDMCL, the aforesaid sales and profits of BDMCL from transactions with Scal, would not have been reflected in the consolidated financial statements of BDMCL, since inter-se transactions between the two entities would have been eliminated from being reported in the consolidated financial statements,” Sebi stated in its 100-page order.

Further, BDMCL did not disclose all materials transactions with its “related party” Scal within the quarterly company governance compliance report.

Accordingly, Sebi has prohibited Bombay Dyeing, Nusli N Wadia, his sons — Ness and Jehangir — and Mehta from the securities markets for 2 years, whereas the identical for Scal and its then administrators is one 12 months.

Further, Sebi has restrained Wadias and Mehta from being related to the securities market, together with as a director or key managerial personnel in a listed firm, for a interval of 1 12 months.

Wadias have performed an energetic in addition to a deliberate passive function within the perpetration of the scheme of deliberate misrepresentation of economic statements of BDMCL, it stated.

“The planned reduction of shareholding in Scal to 19 per cent to avoid consolidation of financial statements of Scal, execution of non-genuine sales to Scal through MoU’s, granting deferment of payment to Scal (and not any other bulk buyer), inflation of sales and profit of BDMCL, non-realization of payments from Scal etc, were all different legs of the broad ‘scheme of fraud’ perpetrated under the supervision and control of Noticee no. 3, 4 and 5, (Wadias) while they were at the helm of affairs at BDMCL,” Sebi famous.

Overall, the regulator levied a high-quality of Rs 2.25 crore on Bombay Dyeing, Rs 4 crore on Nusli Wadia, Rs 5 crore on Jehangir Wadia, Rs 2 crore on Ness Wadia, Rs 50 lakh on Mehta, Rs 1 core on Scal and Rs 25 lakh every on the then administrators of Scal.