Securities & Exchange Board of India (Sebi) in an order issued Saturday barred Bombay Dyeing & Manufacturing Company Ltd and its promoters Nusli N Wadia, Ness Wadia, and Jehangir Wadia from the securities markets for a period of up to 2 years.
The capital market regulator also imposed a fine totaling Rs 15.75 crore on the company, its promoters and directors for manipulating the company’s financial statements. Among those penalised by Sebi in the matter include Scal Services Ltd, a Wadia Group company, D S Gagrat, the then company director, and Durgesh Mehta, who was joint managing director and chief financial officer of Bombay Dyeing.
Those penalised have been given 45 days to pay the fine, said Sebi in a 100-page order issued Friday.
On the basis of certain complaints, Sebi conducted a detailed investigation into the affairs of Bombay Dyeing and Manufacturing Company Ltd (BDMCL) for the period covering FY 2011-12 to FY 2018-19.
The regulator concluded that these entities engaged in a fraudulent scheme of misrepresentation of financial statements of BDMCL, inflating sales of Rs 2,492.94 crore and profit of Rs 1,302.20 crore from the alleged sale of flats by BDMCL to Scal during FU 2011-12 to 2017-18.
The Sebi order further alleged that BDMCL, despite holding only 19% direct ownership in Scal, exercised complete control over the share capital of the latter through indirect holdings.
BDMCL deliberately capped direct ownership in Scal at 19% in order to avoid the tag of ‘Associate Company’ for the latter, thereby ensuring that Scal’s financial statements would not 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 said in its 100-page order, according to PTI.
BDMCL also failed to disclose all material transactions with its “related party” Scal in the quarterly corporate governance compliance report.
In light of these observations, the capital markets regulator has banned Bombay Dyeing, Nusli N Wadia, Ness Wadia and Jehangir Wadia from the securities market for a period of 2 years. Scal and the then directors have been banned for a period of 1 year.
Also, Sebi further refrained Wadias and Mehta from being associated with the securities market, including acting as a director or key managerial in a listed company for a period of 1 year.
