Premier Polyfilms Fined Rs3 Lakh for Related-party Transactions

Moneylife Digital Team 10 December 2024

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has imposed a fine of Rs3 lakh on Premier Polyfilm Ltd for failing to seek approvals from its audit committee and shareholders for related-party transactions (RPTs).

In an order, Asha Shetty, adjudicating officer (AO) of SEBI, says, "I am of the opinion that Premier Polyfilm, being a listed company since 1994, is reasonably expected to understand the nuances of compliances. Being a listed company for two decades, Premier Polyfilm cannot plead ignorance of law. I note that it is a cardinal principle of law that 'ignorantia juris non excusat'. In other words, ignorance of the law cannot be an excuse."

SEBI's investigation began following an exception report submitted by the National Stock Exchange of India (NSE) which highlighted that Premier Polyfilm had not secured the prior approval of its audit committee for RPTs executed between 1 April 2022 and 21 May 2023. The company sought approval for these transactions only on 22 May 2023, well after they had occurred.

Additionally, Premier Polyfilm entered into a material RPT with RMG Polyvinyl India Ltd for FY22-23, exceeding 10% of its turnover, without first obtaining shareholder approval. This approval was granted retroactively at the annual general meeting (AGM) on 18 September 2023.

SEBI investigation also revealed inaccuracies in the company's half-yearly RPT disclosures submitted to the NSE for FY22-23. Premier Polyfilm admitted to erroneously categorising RMG Polyvinyl as a non-related party, an oversight only rectified after being flagged by its statutory auditor.

Further, the regulator observed that Premier Polyfilm's repeated plea of ignorance regarding the definition of related parties, as per the Companies Act, 2013 and applicable accounting standards, was untenable for an entity listed since 1994.

In its adjudication order, SEBI emphasised that listed companies are expected to operate with the highest regulatory compliance and governance standards.

SEBI underscored that the intent behind RPT regulations is to safeguard stakeholders' interests by ensuring that related party transactions are not misused for personal gain by company insiders.

While imposing the Rs3 lakh penalty under Section 15HB of the SEBI Act, the market regulator noted that there was no quantifiable evidence of disproportionate gains, unfair advantages, or losses to investors resulting from the violations.

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