Sebi imposes Rs 15.75 crore fine on Bombay Dyeing, Ness Wadia and others

Sebi imposes a fine of Rs 15.75 crore on Bombay Dyeing, Ness Wadia others

Photo: ET now digital

The Securities & Exchange Board of India (Sebi), in an order issued on Saturday, banned Bombay Dyeing & Manufacturing Company Ltd and its promoters Nusli N Wadia, Ness Wadia and Jehangir Wadia from accessing the stock exchanges for a period of up to up to 2 years.
The capital market regulator has 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 sanctioned by Sebi in the case are Scal Services Ltd, a Wadia Group company, DS Gagrat, then director of the company, and Durgesh Mehta, who was joint managing director and chief financial officer of Bombay Dyeing.

Those sanctioned were given 45 days to pay the fine, Sebi said in a 100-page order released Friday.

Based on some complaints, Sebi conducted a detailed investigation into the affairs of Bombay Dyeing and Manufacturing Company Ltd (BDMCL) for the period covering fiscal years 2011-12 to 2018-19.

The regulator concluded that these entities engaged in a fraudulent scheme of misrepresentation of BDMCL’s financial statements, inflating sales by Rs 2,492.94 crore and profit by Rs 1,302.20 crore from the alleged sale of apartments by BDMCL at Scal during FU 2011-12 to 2017-18.

The Sebi order further alleged that BDMCL, despite holding only a direct 19% stake in Scal, exercised full control over the latter’s share capital through indirect holdings.

BDMCL deliberately capped the working interest in Scal at 19% in order to avoid the label of “associated company” for the latter and thus ensure that the financial statements of Scal would not have to be consolidated with those of BDMCL.

“Had Scal’s financial statements been consolidated with BDMCL, the aforementioned sales and profits of BDMCL from transactions with Scal would not have been reflected in BDMCL’s consolidated financial statements, since the inter-se transactions between the two entities would have been eliminated from being reported in the consolidated financial statements,” Sebi said in his 100-page order, according to PTI.

BDMCL also failed to disclose any material transactions with its “related party” Scal in the quarterly corporate governance compliance report.

In light of these observations, the capital market regulator banned Bombay Dyeing, Nusli N Wadia, Ness Wadia and Jehangir Wadia from the securities market for a period of 2 years. Scal and its then directors were banned for a period of 1 year.

In addition, Sebi further refrained from being associated with Wadias and Mehta with the securities market, including acting as a director or key executive in a listed company for a period of one year.

Comments are closed.