New Delhi: Markets regulator Sebi on Friday imposed fines totaling Rs 3.75 crore on former promoter and managing director of dairy company Kwality, Sanjay Dhingra, and other entities for misrepresenting the company's finances.
Kwality entered insolvency proceedings in December 2018 and was acquired by Sarda Mines through the liquidation process in 2022.
Individually, the regulator imposed a fine of Rs 1.5 crore on Sanjay Dhingra and Sidhant Gupta (former director and audit committee member of Kwality) and Rs 75 lakh on Satish Kumar Gupta (chief financial officer).
The regulator also banned these people from the stock market for two years.
In March 2018, the Income Tax Department (ITD) carried out search and seizure operations on Kwality Ltd and referred the matter to the Securities and Exchange Board of India (Sebi) to examine possible violations of the law. of values.
Sebi has launched an investigation for the period 2016-2018 to ascertain whether there was any violation of the provisions of Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) and Listing Obligations and Disclosure Requirements (LODR) rules.
The market watchdog noted that the show cause notice recorded Rs 7,574.88 crore as misrepresentation amount calculated by auditor Bagchi and Gupta.
"I note that the financial statements of Kwality were fraudulently manipulated and the figures contained therein were materially misrepresented or misrepresented, including revenues and sales, expenses, capital assets, inventories, debtors payable, creditors receivable, etc., which led to publication of false information and misleading financial results of the company during the financial year 2016-17 to 2018-19," Sebi CEO K Saravanan said in the final order.
Sebi noted that if the instances of misstatement/misrepresentation in the financial statements of Kwality had been correctly reflected and published in the form of actual financial statements, the profit/loss and financial position of the company would have been different from the reported financial statements.
Accordingly, this violates the provisions of PFUTP rules and LODR norms, Sebi said.
Further, Sebi also noted that Dhingra was the promoter and managing director of Kwality as per disclosures in the company's annual reports for the period FY 2016-17 to FY 2018-19.
"...Notee 1 (Sanjay Dhingra), being the Managing Director of the Company, is responsible for providing false and fraudulent compliance certificates to the board of directors as required under the LODR Regulations," Saravanan said.
In its investigation, Sebi also found that Sidhant Gupta was also a member of the audit committee and attended meetings from fiscal year 2016-17 to fiscal year 2020-21. He (Sidhant) was identified by the regulator as one of the decision makers looking after the day-to-day affairs of Kwality.
Sidhant Gupta's involvement in the fraudulent schemes was instrumental as he facilitated the manipulation of financial records and coordinated with several shell entities, according to the order.
According to Sebi, Satish Gupta was the chief financial officer of the dairy company during the financial years 2016-17, 17-18 and 18-19, and played a major role in the financial misreporting.
Gupta was responsible for overseeing financial operations and ensuring the integrity of financial statements. However, Satish grossly misrepresented financials, which contributed to the deceptive practices.
Accordingly, Sebi also restrained Dhingra, Sidhant Gupta and Satish Gupta from holding any directorship or associating with any listed public company or a public company intending to raise money from the public for two years.
Kwality entered insolvency proceedings in December 2018 and was acquired by Sarda Mines through the liquidation process in 2022.
Individually, the regulator imposed a fine of Rs 1.5 crore on Sanjay Dhingra and Sidhant Gupta (former director and audit committee member of Kwality) and Rs 75 lakh on Satish Kumar Gupta (chief financial officer).
The regulator also banned these people from the stock market for two years.
In March 2018, the Income Tax Department (ITD) carried out search and seizure operations on Kwality Ltd and referred the matter to the Securities and Exchange Board of India (Sebi) to examine possible violations of the law. of values.
Sebi has launched an investigation for the period 2016-2018 to ascertain whether there was any violation of the provisions of Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) and Listing Obligations and Disclosure Requirements (LODR) rules.
The market watchdog noted that the show cause notice recorded Rs 7,574.88 crore as misrepresentation amount calculated by auditor Bagchi and Gupta.
"I note that the financial statements of Kwality were fraudulently manipulated and the figures contained therein were materially misrepresented or misrepresented, including revenues and sales, expenses, capital assets, inventories, debtors payable, creditors receivable, etc., which led to publication of false information and misleading financial results of the company during the financial year 2016-17 to 2018-19," Sebi CEO K Saravanan said in the final order.
Sebi noted that if the instances of misstatement/misrepresentation in the financial statements of Kwality had been correctly reflected and published in the form of actual financial statements, the profit/loss and financial position of the company would have been different from the reported financial statements.
Accordingly, this violates the provisions of PFUTP rules and LODR norms, Sebi said.
Further, Sebi also noted that Dhingra was the promoter and managing director of Kwality as per disclosures in the company's annual reports for the period FY 2016-17 to FY 2018-19.
"...Notee 1 (Sanjay Dhingra), being the Managing Director of the Company, is responsible for providing false and fraudulent compliance certificates to the board of directors as required under the LODR Regulations," Saravanan said.
In its investigation, Sebi also found that Sidhant Gupta was also a member of the audit committee and attended meetings from fiscal year 2016-17 to fiscal year 2020-21. He (Sidhant) was identified by the regulator as one of the decision makers looking after the day-to-day affairs of Kwality.
Sidhant Gupta's involvement in the fraudulent schemes was instrumental as he facilitated the manipulation of financial records and coordinated with several shell entities, according to the order.
According to Sebi, Satish Gupta was the chief financial officer of the dairy company during the financial years 2016-17, 17-18 and 18-19, and played a major role in the financial misreporting.
Gupta was responsible for overseeing financial operations and ensuring the integrity of financial statements. However, Satish grossly misrepresented financials, which contributed to the deceptive practices.
Accordingly, Sebi also restrained Dhingra, Sidhant Gupta and Satish Gupta from holding any directorship or associating with any listed public company or a public company intending to raise money from the public for two years.
