sebi:WTM/AB/IVD/ID19/12999/2021-22

SEBI · SEBI · 2020-08-28

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Facts / Headnote

Noticee no.1 held liable for LODR violations and restrained from securities market for 1 year with monetary penalty; Noticee nos.3 to 7 held liable for board-function disclosure violations and penalized; fraud provisions under Section 12A/PFUTP not established for penalty under Section 15HA on this record with liberty to SEBI to further investigate.

Provisions invoked

• s. 11B
• s. 15A
• s. 19
• s. 11(1)
• s. 12A
• s. 12
• s. 11(2)
• s. 11
• s. 15H
• s. 27
• s. 15J
• s. 15F
• s. 21
• s. 23E
• s. 23H
• s. 17
• s. 14
• s. 29A
• s. 14(1)
• s. 186

Regulations

• Reg. 3
• Reg. 4(1)
• Reg. 4(2)
• Reg. 4(2)(f)
• Reg. 200
• Reg. 3(b)
• Reg. 2(1)
• Reg. 23
• Reg. 33
• Reg. 4
• Reg. 4(1)(a)
• Reg. 30(5)
• Reg. 30(4)
• Reg. 6(1)
• Reg. 48
• Reg. 18(3)
• Reg. 23(2)
• Reg. 33(2)(a)
• Reg. 25(5)
• Reg. 30(3)

Holding

Noticee no.1 violated LODR accounting/disclosure provisions by misrepresenting financials and is restrained for one year and liable to penalty under Sections 15A(a) and 15HB; Noticee nos.3 to 7 as directors violated board-function obligations under Regulations 4(2)(f) and 33 LODR and are liable to penalty, while fraud liability under Section 12A/PFUTP and auditor liability were not established on this record.

Full text

Final Order in the matter of Eskay K‘n’it India Limited Page 2 of 78 In the matter of Eskay K’n’it India Limited (Aforesaid entities are hereinafter individually referred to as by their respective name or noticee number and collectively as “the Noticees”.)

Final Order in the matter of Eskay K‘n’it India Limited Page 3 of 78 company (Noticee nos. 2 to 7) have failed to exercise duty of care by misrepresenting the financial statements/misusing the funds of the company. Based on the same, the SCN 1 alleged that the company (Noticee no.1) has violated Section 12A(a),(b) and (c) and Section 11(2)(i) and 11(2)(ia) of the SEBI Act, 1992 and Regulation 3(b), (c) and (d) and Regulation 4(1) and 4(2) (f) and (r) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulation, 2003”), Regulations 4(1)(a), (b), (c), (e), (g), (h), (i) & (j), 4(2) (f)(ii)(6), (7), (8), 4(2)(f)(iii)(3), (6) &(12), 6(1), 30(3), 33(2)(a) and 48 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as “LODR Regulations”) read with Section 21 of SCRA, 1956. The SCN 1 further alleged that the company’s directors, (ii) Ms. Manasi Indrajit Wadkar (Noticee no. 2), (iii) Mr. Naresh Chandra Sharma (Noticee no. 3), (iv) Mr. Manmohan Ahluwalia (Noticee no.4), (v) Mr. Narayan Ghumatkar (Noticee no. 5), (vi) Ms. Neha Nilesh Patil (Noticee no. 6) , and (vii) Mr. Trivendra Shambhu Singh (Noticee no. 7) have violated Section 12A(a) (b) and (c) and Section 11(2)(i) and 11(2)(ia) of the SEBI Act, 1992 and Regulation 3(b), (c) and (d) and Regulation 4(1) and 4(2) (f) & (r) of the PFUTP Regulations, 2003

Final Order in the matter of Eskay K‘n’it India Limited Page 4 of 78 11B and 11D of the SEBI Act, 1992. The SCN 2 alleged that Noticee no. 8 who was the statutory auditor of the company for the financial years 2017- 18, has been negligent in performance of its duties as it has not carried out proper due diligence in its audit report. Further, the SCN 2 alleged that since the company has not complied with AS-9, AS-18, AS-12, AS-13 and such non-compliance have not been pointed out in the audit report of the company, therefore, the books of accounts and financial statements of the company are incorrect, irregular and misleading. The SCN 2 further states that an unqualified audit opinion stating that financial statements give the information required by the Companies Act, 2013 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, has been given by the statutory auditor in the audit report of the company and that such certification of financial statements by the statutory auditor has resulted in not only the shareholders but also the public being misled about the financial health of the company. Based on the same, the SCN 2 has alleged that Noticee no. 8 has violated Section 12A (a), (b) & (c), Section 11(2)(i) and 11(2)(ia) of the SEBI Act, 1992 and Regulation 3(b) (c) & (d) and Regulation 4(1) and 4(2), (a), (e), (f) & (r) of the PFUTP Regulations, 2003.

Source: SecMarx — sebi:WTM/AB/IVD/ID19/12999/2021-22. 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.