SEBI slaps Rs 58.5 cr fine on Seya Industries' senior officials over fund diversion, financial fraud

New Delhi: Markets regulator SEBI has slapped penalties totalling Rs 58.50 crore on four Seya Industries' senior executives, including promoter and Chairperson Ashok Rajani and his son Amrit Rajani, for alleged siphoning of funds and manipulation of financial statements.

The regulator imposed a fine of Rs 28 crore each on Ashok Ghanshyamdas Rajani and Amrit Rajani (Chief Financial Officer of Seya), Rs 2 crore on Asit Kumar Bhowmik and Rs 50 lakh on Sivaprasada Rao Buddi, SEBI said in the final order passed on Friday.

In a 122-page order, SEBI found that Seya Industries had siphoned off funds worth Rs 81.26 crore to companies related to promoter entities (Whiz Enterprises, Aneeka Universal and Shri Balaji Entertainments) on the pretext of purchases and sales from/to them and/or through undisclosed fund transfers during FY19, FY20 and FY21, thereby flouting norms.

The money was routed through companies privately held by the family of Ashok Rajani, chairman and managing director (CMD), and CFO of Seya Industries Amrit Rajani. These transactions were not disclosed as related party transactions in Seya's financial statements, violating multiple SEBI's rules, the regulator said.

Further, Seya Industries had misrepresented its financials for FY19 and FY20 through fictitious sales and purchases, thereby contravening the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules and disclosure norms.

The accounting treatment of interest in FY20 to FY22 and quarter ended June, September and December 2022 by Seya was not in accordance with Indian Accounting Standards.

However, SEBI clarified that with the pending insolvency proceedings against Seya and prevailing moratorium...of the IBC rules, no orders are being passed against the company (Seya) at this stage and the proceedings against it will be decided through a separate order by the regulator.

The markets watchdog pointed out that the senior officials not only failed in their fiduciary duties but also actively participated in concealing fraud. The watchdog also found that Ashok Rajani, as CMD, was deeply involved in day-to-day affairs and was a signatory to the financial statements for FY19 to FY22, which were found to be misleading.

"I note that Amrit Rajani, being CFO of the company and looking after the day-to-day affairs of the company, was a KMP of the company at the relevant time and thus, is responsible for the violations committed by the company," SEBI's whole time member Ananth Narayan G said in the order.

Asit Kumar Bhowmik and Sivaprasada Rao Buddi were executive directors of Seya. They were responsible for ensuring that Seya was in compliance with all laws and the financials of the company were being represented in true and fair manner.

However, they failed to do so which resulted in eroding the investors' confidence in the sanctity of the securities market. Therefore, Bhowmik and Buddi flouted PFUTP, insider trading and disclosure rules.

Accordingly, the regulator has barred -- Ashok Rajani, Amrit Rajani, Asit Kumar Bhowmik and Sivaprasada Rao Buddi -- from the securities markets for five years as well as holding positions as directors or key managerial personnel (KMP) in any listed entity or SEBI-registered intermediary for five years.

The Securities and Exchange Board of India (SEBI) has also directed Amrit Rajani to ensure that funds worth Rs 81.26 crore were siphoned off through promoter-related entities will be brought back to Seya Industries within six months, along with 12 per cent interest per annum from the date of transfer till repayment.

The order came after SEBI received multiple complaints from SC India Fund Manager between 2020 and 2021, alleging private placement of securities based on inflated books. Thereafter, SEBI initiated an investigation and appointed Ernst & Young in September 2021 for a forensic audit after the company failed to cooperate with the NSE.

The period of investigation was financial years ending March 2019, March 2020 and March 2021.