LEEL Case: SEBI imposes Rs 14 Cr fine on 7 Individuals for Accounts Fraud
SEBI imposes Rs 14 Cr fine on 7 Individuals for Accounts Fraud, in LEEL Case
LEEL Case – SEBI imposes – fine – Individuals – Accounts Fraud – taxscan
LEEL Case – SEBI imposes – fine – Individuals – Accounts Fraud – taxscan
The Securities and Exchange Board of India ( SEBI ) imposed Rs 14 Crores fine on seven individuals for accounts fraud in the much-celebrated LEEL case.
The SEBI Investigation noted that various violations of the provisions of the securities laws and, based on the same, a Show Cause Notice, was issued to the Company, its Whole-Time Directors, Independent Directors and certain KMPs. It was alleged in the SCN that the Company misused/diverted funds to the tune of Rs. 472.11 Crore in the years prior to the investigation period.
It was stated in the SCN that the Forensic Auditor, based on an analysis of the Vendor Ledger, noted that a single journal entry amounting to Rs. 148.88 Crore was recorded on March 31 2016 whereby the receivable balance from FEEL (related party of LEEL) was transferred to Mettube, one of the vendors of LEEL for the purchase of Copper tubes (HSN code 74110000), located in Malaysia.
Ashwani Bhatia, the Whole Time Member noted that “The scale and the brazen manner in which funds were diverted to related entities all the while mispresenting the financials to present a rosy picture attracting public investors to deal in the securities of the company, in my view, requires stringent action be taken against the Noticees. The penalties, in such cases, should be such that they will not be taken as cost of doing business and would instead serve as an effective deterrent. It is also noted that certain Noticees received monetary incentives for their role in the entire scheme. This factor will be taken into consideration while imposing monetary penalty.”
SEBI directed LEEL's MD Bharat Raj Punj to pay a penalty of Rs5 crore, Anita Kakar Sharma, company secretary and vice-president for finance, a penalty of Rs3 crore. Three people, viz., Achin Kumar Roy, WTD, who had signed FY17-18 statements as chief executive officer ( CEO ) or chief financial officer (CFO), Nipun Singhal, WTD and in charge of LEEL's CD business and Mukat Behari Sharma, WTD and CFO, to pay a fine of Rs2 crore each. LEEL's two independent directors (IDs) Surjit Kishan Sharma and Geeta Tekchand, are asked to pay Rs10 lakh penalty each.
"I note that the ledger of Mettube International SDN BHD was used as an accounting pass-through ledger to pass adjustment accounting entries for inflating the profits of the Company over many years. The same practice was continued by LEEL during the investigation period (IP) by passing a journal entry on 28 February 2018, for recognising a fictitious inventory of Rs320.60 crore. In view of the same, I have no hesitation in holding that the aforesaid adjustment entries have led to misrepresentation of the financial statements of the Company," the Bench noted.
The Bench further noted that "I note the purchases and sales reported by the Company have resulted in inflating the sales and purchases at least to the extent of Rs224.87 crore and Rs225.21 crore respectively in the FY 17-18, thereby resulting in misrepresentation of the financial statements. Further, the related party disclosures made by the Company for purchases and sales to the related parties are incomplete, inadequate and misleading.
To Read the full text of the Order CLICK HERE
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