New Delhi, Sebi on Friday barred Debock Industries Ltd and its managing director Mukesh Singh for seven years and ordered disgorgement of unlawful gains totalling Rs 59.30 crore from multiple individuals in a case involving an alleged accounting fraud.
Also, other entities have been barred from the securities market for periods ranging from three to five years, according to Sebi’s final order.
The markets regulator has also directed Debock Industries to bring back Rs 49 crore diverted from its 2023 rights issue, along with applicable interest.
The Securities and Exchange Board of India (Sebi) has also slapped penalties totalling more than Rs 29 crore on the company, Singh and others. Singh alone has been fined Rs 20.10 crore.
Summing up the alleged scheme, Sebi in its 121-page final order said Debock Industries, with Singh at the helm, inflated its financials through fictitious sales and purchases and circular transactions after its listing on NSE Emerge.
“Noticee No. 1 (Debock Industries) with Noticee No. 2 (Singh) at the helm of its affairs, post its listing on NSE Emerge, inflated its financials through fictitious sales and purchases and circular transactions. The inflation of financials allowed Noticee No. 1 to migrate to the main board of NSE,” Sebi said.
“On the main board, Noticee No.1 (Debock Industries) came up with fraudulent issuance of preferential allotments, bonus issue and rights issue, and increased its capital base,” it said.
Later, around 4.21 crore shares worth Rs 59.30 crore obtained through fraudulent preferential issue and bonus issue were dumped on gullible investors.
“The fraudulent scheme was masterminded by Noticee No. 2 (Singh) with aid and assistance of Noticee No. 3 (Sunil Kalot), 4 (Priyanka Sharma) and 27 (Gaurav Jain),” Sebi added.
The regulator quantified the unlawful gains at Rs 59.30 crore. Of this, Rs 37.67 crore was attributed to Sunil Kalot, Rs 4.24 crore to Singh, and Rs 17.40 crore to Singh jointly with Gaurav Jain.
The regulator found Debock Industries and Singh liable for claiming non-existent purchases and sales as genuine, showing fictitious receipt and utilisation of application money in preferential allotments, and inflating sales and purchases through circuitous transactions and fraudulent ledger entries.
These transactions resulted in misstatement of the company’s financials for FY 2021-22, FY 2022-23 and FY 2023-24, Sebi said.
The regulator also found that fictitious preferential issues and purchases and sales were used to create free reserves, which were subsequently utilised for a bonus issue.
Sebi also found that forged bank statements were submitted to conceal the fictitious preferential issues and inflation of the company’s books.
It held Singh liable for diversion of rights issue proceeds to persons and entities connected with the promoters and for failing to disclose changes in the objects of the issue to stock exchanges and in the annual report.
In its final directions, Sebi ordered Debock Industries to return the diverted rights issue money to its account.
“Noticee No. 1 (Debock Industries) shall, forthwith but not later than three months from the date of this order, bring back to its account, the amount of Rs 49 crore, which has been found to be diverted out of the proceeds of the rights issue, along with interest @ 12 per cent, to be computed from the date on which the money was diverted from it (i.e., July 24, 2023),” the regulator said.
Sebi also imposed a seven-year market ban on both the company and Singh.
“Noticees no. 1 (Debock Industries) and 2 (Singh) are debarred from accessing the securities market and are also prohibited from buying, selling and otherwise dealing in the securities market, directly or indirectly, in any manner whatsoever, for a period of seven years,” the markets regulator said.
Singh has additionally been prohibited from holding key positions in listed companies and Sebi-registered intermediaries.
Apart from Singh, Sebi imposed a Rs 1.1 crore penalty on Debock Industries, Rs 5 crore on Sunil Kalot, Rs 1 crore on Priyanka Sharma and Rs 50 lakh on Gaurav Jain. The regulator also levied fines ranging from Rs 5 lakh to Rs 1 crore on other entities.
Sebi barred Kalot from the securities market for five years and restrained him from holding key positions in listed companies or Sebi-registered intermediaries. Sharma and Jain have been barred for three years.
