BGR Energy Systems Slapped with Rs9 Lakh Penalty by SEBI

Moneylife Digital Team 25 September 2024

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) penalised Rs9 lakh on BGR Energy Systems Ltd (BGR) for disclosure lapses to the stock exchanges and flouting market norms.

In his 36-page adjudication order, Barnali Mukherjee, adjudicating officer (AO) of SEBI, says, "It is noted that if any person who is to make such disclosures does not make it and are depriving the investing public of the statutory rights available to them, then SEBI is duty bound to ensure that the investing public is not deprived of any statutory rights available to them. Timely, accurate and proper disclosure is the cornerstone of good corporate governance. Hence, the non-disclosure or delayed by BGR as brought out in the preceding paragraphs clearly shows the violation committed by it and calls for appropriate penalty."

During the investigation, SEBI discovered that BGR failed to upload the financial statements for FY22-23 for its subsidiaries, BGR Boilers and BGR Turbines, on its website. The company cited a focus on revival efforts as the reason for the delay, which led to an advisory from the National Stock Exchange (NSE) for non-compliance.

Additionally, BGR informed the exchange on 12 October 2023 about securing a Rs112.74 crore contract from Mangalore Refinery and Petrochemicals Ltd (MRPL). However, this contract was cancelled on 13 March 2024 due to BGR's non-compliance and the required disclosures regarding the impact of this termination were not made.

Similarly, contracts with the Tamil Nadu and UP Power Transmission Corporations, worth Rs224.29 crore and Rs173.47 crore, respectively, were also terminated without timely disclosures of their impact.

SEBI noted several other compliance failures by BGR, including failing to disclose the initiation of the corporate insolvency resolution process (CIRP) by 31 applicants within the required 24-hour window. For instance, BGR did not initially disclose the application for CIRP by Premium Transmission Pvt Ltd. Although the company later reported on 3 September 2023 that Premium Transmission would withdraw its petition to the NCLT, it did not mention the initial application, violating Regulations 30(1) and 30(2) and Clause 16(b) of the LODR Regulations.

Furthermore, BGR disclosed on 27 February 2024 that several independent directors had resigned on 23 February 2024 and 24 February 2024. The company was required to notify the stock exchange promptly but failed, submitting the disclosure late by over 24 hours.

In addition, BGR also delayed its loan repayment disclosures to the stock exchanges. The disclosures submitted on 13 February 2024 were four to 94 days late, including a significant 42-day delay for ICICI Bank and a 53-day delay for Canara Bank.

BGR also borrowed Rs200 crore from related party Arjun Govind Raghupathy without obtaining prior approval from the audit committee and shareholders. Although these loans were ratified later, prior approval was mandatory, confirming BGR's violations, SEBI says.

Moreover, the company did not appoint independent directors to the boards of its material unlisted subsidiaries, Sravanaa Properties Ltd and BGR Turbines. While BGR claimed that independent directors were unwilling to serve, this does not exempt them from compliance.

According to SEBI, the absence of demonstrated efforts to appoint directors further confirms this violation.

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