Sebi on December 31 barred four individuals of Deccan Chronicle Holdings Ltd from the securities market for two years and imposed restrictions on an auditor as well as a company secretary for manipulation of the company's financials and disclosure lapses. Chairman T Venkattram Reddy, Vice Chairmen T Vinayak Ravi Reddy and Parasuraman Karthik Iyer, and Managing Director N Krishnan have been restrained from the market for two years.
Mani Oommen, Partner at C B Mouli & Associates, has been barred from rendering auditing services to any listed company for one year. Company secretary V Shankar has also been directed not to provide company secretarial services to any listed company for one year, Sebi said in an order.
The regulator found that the company manipulated its financials and made announcement for buyback of shares even in the absence of adequate reserves.
Liabilities of Rs 2,905.32 crore and interest and finance charges of Rs 753.91 crore were diverted from the books of the firm on the last date of every accounting year and were reintroduced to the books on the next day just to avoid disclosure of the same to the public, as per the 65-page order.
The watchdog said there would be no proceedings against Deccan Chronicle Holdings Ltd -- the publisher of Deccan Chronicle and Asian Age newspapers, among others -- taking into consideration that Hyderabad bench of the National Company Law Tribunal (NCLT) has approved a resolution plan for the company, which was also compulsorily delisted from the BSE since August 2017.
"...actions of the noticees are replete with glaring manipulations, fraudulent intents and exaggeration of accounts to the extent that it went on for a number of years with the connivance of the company secretary and auditors.
"Such blatant and egregious misconduct on the part of the noticees is not conducive for the integrity of the securities market and cannot be spared to be viewed leniently, rather such misconduct of the noticees deserve to be dealt with strictly," Sebi Whole-Time Director S K Mohanty said in the order.
The noticees are the individuals.
During the financial year 2008-09, the firm understated its outstanding loans of Rs 1,339.17 crore. The differences between the actual and reported outstanding were Rs 2,982.07 crore and Rs 3,347.41 crore in 2009-10 and 2010-11, respectively.
Additionally, the company made a buyback announcement at a price that was 234 per cent higher than the ongoing market price.
The company and the individuals also concealed the series of encumbrances created on the promoters' shareholding in favour of financial institutions under the garb of non-disposal undertaking which were nothing but pledge agreements signed with these institutions and also failed to make such disclosures to shareholders, the order said.
According to Sebi, the individuals blatantly made "specious" claims about the ownership of brands such as Deccan Chronicle and Andhra Bhoomi saying that these brands were owned by Deccan Chronicle Marketers (DCM) and not by the company. This was done only to accommodate their manipulative accounting adjustments and to waive financial obligations of Rs 2,905.32 crore which DCM owed to the company, it added.
Sebi said the company, its directors and management in cahoots with its company secretary and auditor, have manipulated the accounts by understating the liabilities and expenditure over many years from 2005-06 onwards.
"The attempt to buyback shares of the company by the directors and promoters based on the falsely reported reserves amount despite the company actually lacking the requisite free reserves was another attempt to hoodwink innocent investors and to sell the company's misplaced false story about its strong fiscal position to its shareholder/investors," it noted.
The four individuals have also been prohibited from holding any managerial post or being associated directly or indirectly with any listed company that intends to raise money from the public, or any intermediary registered with Sebi for two years.
"For a period of one year, listed companies and intermediaries registered with Sebi shall not engage the Noticee 6 (V Shankar) for company secretarial services, or engage any audit firm associated with Noticee 7 (Mani Oommen) in any capacity, for issuing any certificate with respect to compliance of statutory obligations which Sebi is competent to administer and enforce, under various laws," the order said.