NEW DELHI: Capital markets regulator Sebi on Friday imposed fines totaling Rs 2.46 crore on two companies and seven individuals, including promoters, for flouting regulatory norms.
In addition to sanctions, the regulator has also banned Girish Talwalkar, Prashant Talwalkar, Madhukar Talwalkar, Vinayak GawandeAnant Gawande and Harsha Bhatkal for different periods.
The two companies are Talwalkars Better Value Fitness Ltd (TBVFL) and Talwalkars Healthclubs Ltd (THL), while Girish Talwalkar, Prashant Talwalkar, Madhukar Talwalkar, Vinayak Gawande, Anant Gawande and Harsha Bhatkal are the initiators.
The fines were imposed for violations related to disclosure standards and PFUTP (Prohibition of fraudulent and unfair commercial practices), according to two separate decisions.
The regulator imposed a fine of Rs 36 lakh each on Girish, Prashant, Anant, Harsha; Rs 24 lakh each on TBVFL, Vinayak, Madhukar; Rs 18 lakh on Girish Nayak and Rs 12 lakh on THL.
In the case of TBVFL, the regulator has banned Girish Talwalkar, Prashant, Madhukar, Vinayak, Anant, Harsha and Girish Nayak from the securities market for a period of 18 months and further restrained them from being associated with any listed company or a Sebi company. -registered intermediary for the same period.
Moreover, Sebi has also barred Girish Talwalkar, Prashant, Anant, Harsha and Girish Nayak from the market for a period of 18 months in the THL case and the barring will take effect after the expiry of the period of restrictions imposed on the entities in the case. case of TBVFL.
The order came after Sebi received several complaints against THL and TBVFL during August-October 2019. The complaints indicated non-payment of interest on term loans despite having a significant cash balance.
As per the financial results ended March 2019, both companies (TBVFL and THL) had a total cash balance of around Rs 77 crore and the total default of both companies on interest payment as of July 2019 was only Rs 3.5 crore (term loan). ), which raised suspicions about the authenticity of their account book.
After a preliminary investigation, the regulator took up the matter for detailed investigation and KPMG was appointed as forensic auditor to assist the investigating authority in conducting forensic examination of the accounts of both TBVFL and THL for 4 financial years (2016-17 to 2019-2019). 20).
Following this, Sebi initiated an investigation into the companies when there were suspicions that their financials were being misrepresented to give a healthy picture to the investors.
According to the order, TBVFL and THL misrepresented their financial statements by inflating the bank balance shown in the financial statements, inflating income through revaluation of investments, and making advances without any reason to associated companies not in the interests of the company, inappropriate recognition of revenues and costs and unjustified investments in entities with low equity and failure to provide for impairment losses.
‘I am of the opinion that withholding information relating to the misuse of funds by a public company, which, if made public, could affect the stock price of that public company, is undoubtedly a fraudulent and unfair trading practice in respect of the securities . market and falls under the PFUTP regulations,” Sebi’s Executive Director VS Sundaresan said in the order.
In addition to sanctions, the regulator has also banned Girish Talwalkar, Prashant Talwalkar, Madhukar Talwalkar, Vinayak GawandeAnant Gawande and Harsha Bhatkal for different periods.
The two companies are Talwalkars Better Value Fitness Ltd (TBVFL) and Talwalkars Healthclubs Ltd (THL), while Girish Talwalkar, Prashant Talwalkar, Madhukar Talwalkar, Vinayak Gawande, Anant Gawande and Harsha Bhatkal are the initiators.
The fines were imposed for violations related to disclosure standards and PFUTP (Prohibition of fraudulent and unfair commercial practices), according to two separate decisions.
The regulator imposed a fine of Rs 36 lakh each on Girish, Prashant, Anant, Harsha; Rs 24 lakh each on TBVFL, Vinayak, Madhukar; Rs 18 lakh on Girish Nayak and Rs 12 lakh on THL.
In the case of TBVFL, the regulator has banned Girish Talwalkar, Prashant, Madhukar, Vinayak, Anant, Harsha and Girish Nayak from the securities market for a period of 18 months and further restrained them from being associated with any listed company or a Sebi company. -registered intermediary for the same period.
Moreover, Sebi has also barred Girish Talwalkar, Prashant, Anant, Harsha and Girish Nayak from the market for a period of 18 months in the THL case and the barring will take effect after the expiry of the period of restrictions imposed on the entities in the case. case of TBVFL.
The order came after Sebi received several complaints against THL and TBVFL during August-October 2019. The complaints indicated non-payment of interest on term loans despite having a significant cash balance.
As per the financial results ended March 2019, both companies (TBVFL and THL) had a total cash balance of around Rs 77 crore and the total default of both companies on interest payment as of July 2019 was only Rs 3.5 crore (term loan). ), which raised suspicions about the authenticity of their account book.
After a preliminary investigation, the regulator took up the matter for detailed investigation and KPMG was appointed as forensic auditor to assist the investigating authority in conducting forensic examination of the accounts of both TBVFL and THL for 4 financial years (2016-17 to 2019-2019). 20).
Following this, Sebi initiated an investigation into the companies when there were suspicions that their financials were being misrepresented to give a healthy picture to the investors.
According to the order, TBVFL and THL misrepresented their financial statements by inflating the bank balance shown in the financial statements, inflating income through revaluation of investments, and making advances without any reason to associated companies not in the interests of the company, inappropriate recognition of revenues and costs and unjustified investments in entities with low equity and failure to provide for impairment losses.
‘I am of the opinion that withholding information relating to the misuse of funds by a public company, which, if made public, could affect the stock price of that public company, is undoubtedly a fraudulent and unfair trading practice in respect of the securities . market and falls under the PFUTP regulations,” Sebi’s Executive Director VS Sundaresan said in the order.
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