New Delhi, Sebi on Monday barred nine entities, including Tarapur Transformers and its promoters, from the securities markets for up to five years in a case involving diversion of funds and fictitious transactions of company’s books of accounts.
The regulator also imposed a fine of Rs 30 lakh on Rajendra Kumar Choudhary, a promoter of Tarapur Transformers Ltd (TTL), and Rs 2 lakh on Ganesh Gangaram Madhari. Choudhary has also been prohibited from the markets for five years.
Besides Tarapur, the entities debarred from the securities market for three years are Choudhary Global Ltd (a promoter group entity), Veedhata Towers, Lorraine Finance, Rohit Steel Lamination, Deekay Iron and Steel, Kumudini Engineering and Ashadeep Multitrade.
The order followed Sebi’s investigation into the affairs of Tarapur Transformers for the period April 1 2018, to March 2023.
According to Sebi, the company transferred Rs 31.46 crore in the form of interest-free loans and advances to connected and related entities. It found that the funds were allegedly diverted by writing off, creating provisions for or not recovering such loans and advances.
Sebi also observed that Tarapur Transformers wrote off trade receivables of Rs 14.37 crore.
The regulator said transactions with connected entities involved fictitious sales and purchases, resulting in the inflation of TTL’s revenue and net worth and misrepresentation of its financial statements.
The investigation also found corporate governance lapses, including non-disclosure of related-party transactions and misleading disclosures regarding audit committee meetings and its constitution, besides non-compliance with Sebi summons by Ganesh Madhari.
Describing Choudhary as the “mastermind of all plans and acts” in the case, Sebi said he had violated his legal and fiduciary duties towards the company and its shareholders and abused his position.
The regulator said the diversion of funds, fictitious transactions and manipulation of the company’s books of accounts demonstrated fraudulent behaviour that affected fairness in the securities market.
However, Sebi did not impose a monetary penalty on Tarapur Transformers, observing that any such penalty would ultimately be borne by shareholders.
The regulator also refrained from levying monetary penalties on the other entities, describing them as non-operational paper companies, while retaining the market ban.
