SAT Stays SEBI Order on Bombay Dyeing
Moneylife Digital Team 11 November 2022
The Securities Appellate Tribunal (SAT) on Thursday stayed the Securities and Exchange Board of India (SEBI)’s 21st October order against Bombay Dyeing & Manufacturing Co. Ltd and its promoters over misrepresenting financial statements from FY11-12 to FY17-18.
 
A tribunal bench led by Justice Tarun Agarwala said it will list the matter for hearing in January 2023.
 
 SEBI had imposed a penalty of Rs2.25 crore on Bombay Dyeing and restrained its promoters Nusli Wadia, Ness Wadia, and Jehangir Wadia from accessing the securities market for two years on charges of inflating financial statements. The Wadias were also fined Rs11 crore.
 
SEBI’s counsel Gaurav Joshi said the “fraudulent scheme of misrepresenting the financial statements" included inflating sales of Rs2,492.94 crore and profit of Rs1,302.20 crore resulting from the alleged sale of flats through memoranda of understanding by Bombay Dyeing to group company Scal Services Ltd during FY12 to FY18.
 
The SEBI investigation showed that Scal’s ownership was intentionally structured so that Bombay Dyeing could exert total control over its share capital despite directly owning only a 19% stake. Bombay Dyeing did this by indirectly owning shares in other Scal shareholders.
 
Thursday’s SAT order said, “Considering the fact as to whether the company Bombay Dyeing was obligated to consolidate the financials of its associate company Scal in view of the Section 129 (3) of the Companies Act, coupled with the fact that there was no diversion of funds nor there is any finding of any disproportionate gains or loss caused to any investor, nor we find that there was any disproportionate gains or loss caused to any investor, nor we find that there was any market impact regarding the financials of Bombay Dyeing, we consequently direct that the effect and operation of the impugned order shall remain stayed during the pendency of the appeal."
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