Zuari Agro Chemicals Ltd and four of its senior officials have settled adjudication proceedings with the market regulator Securities and Exchange Board of India (SEBI) by paying about ₹2.91 crore as settlement amount, in a case involving alleged financial misstatements, improper accounting treatment and failure to obtain mandatory approvals for related-party transactions. Officials named in the SEBI order are Sunil Sethy, former managing director and chief executive officer (MD&CEO); Nitin Manguesh Kantak, executive director (ED); RK Gupta, ex-chief financial officer (CFO); and Vijayamahantesh Khannur, the former company secretary.
The settlement follows SEBI's investigation into alleged violations of provisions under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the SEBI Act, 1992, and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.
According to the regulator, Zuari Agro Chemicals had under-reported its losses for FY19-20 and failed to correctly reflect the impact of impairment in its financial statements for FY18-19 and FY19-20. SEBI noted that the company recorded impairment of investments worth ₹117.79 crore in the comparative figures instead of recognising the impact in the appropriate financial year, resulting in a misrepresentation of its financial position.
SEBI also observed that the company transferred certain businesses to its wholly owned subsidiary through a slump sale, recording an exceptional gain of ₹698.97 crore, which the regulator said was structured in a manner that concealed the company’s true financial position and misrepresented its financial statements.
Further, the regulator found that the company had entered into material related-party transactions worth ₹811.33 crore with Paradeep Phosphates Ltd without obtaining prior approval from its audit committee and shareholders, as required under the listing regulations.
The proceedings also examined the roles of several company officials. Mr Sethy was held responsible for failing to ensure accurate financial disclosures and for signing CEO and CFO certifications linked to the allegedly misstated financial statements. Mr Gupta, the CFO, was found to have failed in his responsibilities relating to financial reporting and approval processes for related-party transactions.
Additionally, Mr Kantak and Mr Khannur were held responsible for lapses related to obtaining prior approval from the audit committee and shareholders for related-party transactions during FY20-21.
During the course of adjudication proceedings, Zuari Agro Chemicals and its officials opted to settle the matter without admitting or denying the findings and filed settlement applications with SEBI in March 2025 under the SEBI (Settlement Proceedings) Regulations, 2018.
Following discussions with the SEBI internal committee (IC) and recommendations of the high-powered advisory committee, the regulator accepted revised settlement terms. Under the settlement, Zuari Agro Chemicals will pay ₹1.19 crore, while Mr Sethy and Mr Gupta will pay ₹73.12 lakh each. Mr Kantak and Mr Khannur will each pay ₹12.67 lakh.
Apart from the monetary payments, Zuari Agro Chemicals has also agreed to voluntarily refrain from buying, selling or trading in the securities market for three months, while Mr Sethy and Mr Gupta will face a four-month voluntary debarment from the securities market.
After confirming receipt of the settlement amounts, SEBI disposed of the adjudication proceedings initiated through a show-cause notice (SCN) issued in January 2025.
The order clarifies that the settlement is without prejudice to SEBI’s right to take enforcement action under Regulation 28 of the settlement regulations. The regulator may restore or initiate proceedings if it later finds that the applicants failed to make full and true disclosure of relevant facts or violated any undertakings or waivers given as part of the settlement process.
