Market regulator Securities and Exchange Board of India (SEBI) debarred four individuals from the promoter group and management of Suumaya Industries Ltd (SIL) (noticee 1) from accessing the market for allegedly manipulating financials, engaging in fraudulent transactions, and diverting funds.
The promoter members, including Ushik Gala (noticee 2) and Ishita Gala (noticee 3), held key positions such as chairman & managing director (CMD) and chief executive officer (CEO) at different intervals. SEBI also barred Ushik Gala from holding any directorial post or key position in any listed company or SEBI-registered intermediary.
In an ex-parte order-cum-show-cause, Ashwani Bhatia, whole-time member (WTM) of SEBI, stated, "The exposure of inflated revenues, lack of genuine cash flows, and the misuse of the company's funds highlight the deliberate and coordinated nature of this financial fraud. Senior management at Suumaya Industries, with the complicity of the audit committee's inaction, fostered an environment where deception thrived, regulatory norms were consistently ignored, and investor trust was severely damaged."
SEBI's investigation revealed that the company projected a facade of exponential growth, claiming to have increased revenue from Rs210.70 crore in FY20 to Rs6,754.23 crore in FY22. This remarkable growth, attributed to ventures in medical textiles and agro-commodities, was not supported by actual cash inflows. Instead, it resulted in inflated trade receivables and fictitious revenue figures.
Among others implicated by SEBI are Sumit Pal Singh (noticee 4), India Credit Risk Management LLP (noticee 5), Karishma Kaku (noticee 6), Sneha Shah (noticee 7), Dhwani Dattani (noticee 8), Sharad Jain(noticee 9), Ishtiaq Ali(noticee 10), Satish Khimawat (noticee11) and Sejal Doshi (noticee 12).
An interim order by SEBI highlighted that Suumaya Industries' financial reports painted a misleading picture of strength and rapid growth while concealing fraudulent practices aimed at deceiving stakeholders and manipulating the market. The illusion of growth was shattered during a slump sale in FY22-23 to Suumaya Agro Ltd (SAL), which revealed that the real revenue for FY21-22 was just Rs155.43 crore.
Further investigation uncovered widespread discrepancies. Many of Suumaya Industries' transactions were routed through First Orgacon Pvt Ltd (FOPL), Veda Multicorp LLP and Wonderkids Metrics Pvt Ltd. "These entities engaged in suspicious dealings, such as using journal entries to balance accounts and recording deliveries to residential addresses. First Orgacon alone accounted for 40% of Suumaya Industries sales during the period under review, yet out of the Rs3,364 crore reported as sales to the entity, only Rs29.39 crore was received," SEBI says.
The market regulator also identified irregularities in related-party transactions. According to SEBI, convertible warrants issued to promoters Ushik and Ishita Gala were funded using circular transactions between Suumaya Industries and Suumaya Agro Ltd, artificially inflating share capital. "Promoters were found to have misused company funds, transferring Rs7 crore to Musk Investment Pvt Ltd and Rs18.09 crore to Veda Beauty LLP. These funds were then routed back to the promoters."
"Additionally, cash withdrawals amounting to Rs2.36 crore were made without proper documentation, in clear violation of SEBI's Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations," the market regulator says.
SEBI investigation also revealed that Suumaya Industries misled investors with false corporate announcements, including fabricated orders worth Rs525 crore during the COVID-19 pandemic. Weak internal controls and misrepresented financial statements further compounded the company's regulatory violations.
Key managerial personnel, including CMD Gala, were found to have personally benefited from these practices, prioritising personal gain over shareholder interests. Other executives were either complicit or negligent in addressing these violations. SEBI has barred the CMD from serving as a director or key managerial personnel (KMP) in any listed company or SEBI-registered intermediary until further notice.
Additionally, several individuals, including Ushik and Ishita Gala, Mr Singh, India Credit Risk Management LLP, have been restrained from accessing the securities market and engaging in capital market activities.
The market regulator directed all noticees to explain why further sanctions should not be imposed under the SEBI Act, including the recovery of funds siphoned from the company.
