Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of ₹8 lakh on Pawan Kumar Malsaria, former chief financial officer (CFO) of Golden Tobacco Ltd (GTL), for certifying financial statements that were found to be misleading and not presenting a true and fair view of the company’s affairs.
The order follows an investigation into GTL’s financial statements for the period between FY09-10 and FY20-21, which examined the alleged diversion of funds routed through its subsidiary, Golden Realty & Infrastructure Ltd (GRIL).
SEBI findings indicate that GTL had advanced over ₹175 crore to GRIL, ostensibly for acquiring development rights in land parcels in Delhi. However, the regulator observed that a substantial portion of these funds was further transferred by GRIL to other entities, including WGF Financial Services Ltd and General Exports and Credit Ltd, and eventually to several promoter-linked entities.
SEBI’s adjudicating officer (AO) noted that GRIL had no meaningful business operations during the relevant period and lacked commercial substance, raising concerns about the legitimacy of the transactions. Financial data reviewed by the market regulator showed negligible revenue and persistent losses in GRIL’s accounts, despite large inflows of funds.
According to the order, GTL continued to disclose these advances in its annual reports as utilised to acquire development rights, even though the underlying project had not received approval from the Delhi Development Authority (DDA). SEBI concluded that this resulted in misrepresentation of the company’s financial position and deprived investors of a true and fair picture of its affairs.
The regulator also noted that a significant portion of GTL assets comprised these advances which remained outstanding over several years without recovery or accrual of interest. In FY20-21, such advances accounted for over 93% of the company’s total assets.
Mr Malsaria, who served as CFO from February 2016, had certified the company’s financial results for the period FY15-16 to FY20-21. Under SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations, both the CEO and CFO are required to certify that financial statements are free from material misstatements and present a true and fair view.
In his defence, Mr Malsaria argued that the advances were made prior to his appointment as CFO and that decisions regarding fund transfers were taken by the company’s board. He also maintained that he acted in good faith and in accordance with management instructions and that disclosures during his tenure complied with applicable requirements.
However, SEBI rejected these arguments, stating that the violation pertained specifically to the certification of financial statements during his tenure as CFO. The adjudicating officer held that once a statutory obligation is breached, the absence of intent or personal gain is not relevant for imposing a penalty.
SEBI concluded that Mr Malsaria had violated Regulations 17(8) and 33(2)(a) of the LODR Regulations by certifying financial results that did not reflect the true financial position of the company.
While determining the penalty, the regulator noted that there was no quantifiable evidence of disproportionate gains or investor losses arising from the violation and no record of repetitive default. Nevertheless, it held that non-compliance with disclosure norms warranted enforcement action.
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