Bombay Dyeing case: SEBI imposes ₹59 lakh fine on 9 members

Capital market regulator SEBI (Securities and Exchange Board of India) has penalised nine members, including five directors of Bombay Dyeing and Manufacturing Company Ltd (BMDCL), with ₹59 lakh fine over alleged misrepresentation of the company’s financial documents in its real estate business. BMDCL is part of Wadia Group and is engaged in the business of real estate, polyester and textile.

According to the SEBI order passed on Monday, the nine members who have been penalised include directors Ishaat Hussain, SS Kelkar, RA Shah, S Ragothaman, and SM Palia. The other four members are chief financial officers Vinod Hiran, Raghuraj Balakrishna, Puspamitra Das and Vishnu Peruvamba. All nine members have been given 45 days to pay the fine. While Das has been fined ₹5 lakh, and Hiran and Peruvamba will pay ₹2 lakh each. All others members have been fined ₹10 lakh. “Mr R A Shah, Mr. S S Kelkar, Mr. S Ragothaman, Mr. S M Palia and Mr. Ishaat Hussain failed to carry out adequate due diligence and exercise independent judgment as members of the Audit Committee of a listed company i.e. BDMCL to ensure that financial statements are free from material misstatement,” the market regulator said.

“Mr. Raghuraj Balakrishna, Mr. Vinod Hiran, Mr. Puspamitra Das and Mr. Vishnu Peruvamba, in their capacities as CFOs of BDMCL have issued certificate in the Annual Reports of BDMCL during the IP interalia certifying that the financials of BDMCL presented true and fair view of its affairs and did not contain any misleading statement,” it added.

The market regulator conducted an investigation on the accounts books of BMDCL for the financial years from FY12 to FY19. The investigation revealed that BMDCL, by entering into various Memorandum of Understandings (MoUs) with its group company Scal Services Limited during FY12-FY18 and by subsequently recognising revenue based on such MoUs, inflated its sales and profits, with respect to its real estate segment during FY2011-12 to FY2017-18 to the tune of ₹2,492.94 crore and ₹1,302.20 crore, respectively. Scal, which is an unlisted company, has been engaged in the real estate and trading business since 1983.

The SEBI has alleged that BMDCL executed a scheme with Scal whereby BMDCL artificially inflated its sales and profits by booking non-genuine sales of flats in its two construction projects in Mumbai. Notably, last month, SEBI barred 10 entities of Wadia Group, including BMDCL, from security markets for two years and imposed a fine of ₹15.75 crore over alleged fraudulent activities.