sebi:QJA/GR/CFID/CFID/31170/2024-25

SEBI · SEBI · 2024-09-02 · G Ramar, Chief General Manager

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Facts / Headnote

Directions issued under Sections 11(1), 11(4), 11(4A), 11B(1) and 11B(2) of SEBI Act; penalties imposed under Sections 15A(a), 15HA and 15HB of SEBI Act; Noticees 2 & 3 restrained from securities market for 3 years and prohibited from holding Director/KMP positions in listed companies for 1 year; Noticees 4 & 5 restrained for 1 year

Provisions invoked

Regulations

Parties

Holding

CITL and its Noticees were found to have violated PFUTP Regulations, LODR Regulations and SEBI Act provisions through misstatements in financial statements, misappropriation of funds, failure to make impairment provisions, non-cooperation with investigation, and failure to obtain audit committee/shareholder approvals for related party transactions. Penalties were imposed and market access restrictions were ordered against the Noticees.

Full text

Order in the matter of Misstatements in the financial statements of Cerebra Integrated Technology Limited Page 2 of 61 Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”) and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as “LODR Regulations”). The investigation period is FYs 2019-20, 2020-21, 2021-22 and 2022-23 (hereinafter referred to as “Investigation period” or “IP”). However, whenever deemed necessary, references were made to the events/ timeframes outside this period.

Order in the matter of Misstatements in the financial statements of Cerebra Integrated Technology Limited Page 3 of 61 v. CITL misappropriated/ misutilised the entire amount of the funds of Rs.26.88 crore in the guise of the advances to vendors for supply of plant and machinery in violation of the provisions of Regulation 4(2)(f)(i)(2), 4(2)(f)(ii)(2), 4(2)(f)(ii)(6) 4(2)(f)(ii)(7), 4(2)(f)(iii)(1), 4(2)(f)(iii)(3), 4(2)(f)(iii)(6), 4(2)(f)(iii)(7) 4(2)(f)(iii) (12) and 17(8) Regulation of LODR Regulations, read with Regulations 4(1), 4(2)(e), 4(2)(f), 4(2)(k), 4(2)(r) of the PFUTP Regulations and Section 27(1) of SEBI Act. vi. CITL overstated its sales by Rs.51 crores and Rs.120 crores in the FYs 2017-18 & 2018- 19 and purchases by Rs.43 crores and 104 crores in the FYs 2017-18 & 2018-19 respectively, which led to misrepresentation/misstatements of the financials of the company. Further, CITL failed to make impairment provision of investment/advances/ loan to Cerebra LPO India Limited in terms of Ind AS-36 which resulted in overstatement of its financial statements by an amount of Rs.5.98 crore during the investigation period i.e. for FYs 2018-19, 2019-20, 2020-21, 2021-22 and. 2022-23 in violation of provisions of Regulation 4(1) of the PFUTP Regulations. And also as the aforesaid act of manipulated financial figure impact on the CITL scrip’s price, it is in violation of the provisions of Regulations 4(2)(e) of PFUTP Regulations. Further, by publishing and disseminating the

Order in the matter of Misstatements in the financial statements of Cerebra Integrated Technology Limited Page 4 of 61 iv. failed to provide information sought vide summons dated October 12, 2023, November 21, 2023, December 22, 2023 and February 21, 2024, required for the investigation in the matter, v. failed to take approval of audit committee and shareholders for RPTs; and vi. failed to disclose material events adequately

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Source: SecMarx — sebi:QJA/GR/CFID/CFID/31170/2024-25. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.