Sebi has fined the Chairman and Managing Director of Excel Realty N Infra, Lakhmendra Khurana, has been fined Rs 1 crore, while his wife and Executive Director Ranjana Khurana Lakhmendra and his son and Executive Director Arpit Lakhmendra Khurana have been fined Rs 25 lakh each. The company itself was fined Rs 10 lakh and its Chief Financial Officer (CFO) during the examination period Pramod Yeshwant Kokate was also fined Rs 15 lakh.
A company was found to have misrepresented its financial statements, which hid risk to 66 percent of its total assets, including the one from making an investment of Rs 7.3 crore in a company that was struck off — from the Ministry of Corporate Affairs’ registry — two years prior to that.
The order from the Securities and Exchange Board of India (Sebi) dated July 28 also restrained Lakhmendra Khurana from accessing the securities market for two years and from being associated with any listed company or any market intermediary or market infrastructure institution for one year. It restrained the executive directors and the CFO from accessing the market for one year and Excel Realty for six months.
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Sebi had investigated the company between April 2016 and March 2021. They levelled allegations including misrepresentation of financial statements by continuously showing balance outstanding from eight struck-off and declared-defaulter companies; and carrying forward — on the assets side of the balance sheet — transactions with 26 entities for eight to nine financial years without providing for any impairment or write-off.
“Such ‘advances/ investments’ constituted around 67%... of the total assets of Excel in any of the Financial Years from 2016-17 to 2020-21,” stated the Sebi order.
If the impairment had been recorded accurately, then profit entries would have also come down and would have given a more accurate picture to the investors in the company.
The company responded by saying that these transactions were part of a plan to buy properties from these entities to expand Excel Realty’s BPO business. It claimed that its financial health weakened and so these purchases could not be carried out and therefore cancelled the earlier “Agreements for Sale” in FY20.
The company said that the property-seller entities undertook to refund the amount paid by Excel and, since the amount was fully recoverable, it had not made any provision for impairment.
However, Ananta Barua, whole-time member of Sebi, who passed the final and recent order pointed out various problems with the "Agreement for Sale" made between Excel and the other companies.
For instance, none of the agreements for sale contained the time period within which the final sale deed was to be executed and the consequences of non-execution of the registered sale deed; almost all the agreements executed with different seller parties were verbatim the same; and none of the copies of the agreements had mentioned name, designation or title of the signatory who was executing the contract on behalf of the company.
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In one of the agreements, the address of the land parcel to be bought is incomplete with no mention of the taluka, district or state in which it is located. Yet, Rs 9 crore was transferred by Excel to the seller entity.
Barua noted that transactions made by Excel with 24 seller entities added to Rs 119 crore, constituting 66 percent of the total assets of the company during the examination period.
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