SEBI fines two former Brightcom Group directors for audit lapses

The Securities and Exchange Board of India (SEBI) has imposed penalties totalling Rs 35 lakh on two former independent directors of Brightcom Group Ltd. for lapses in their oversight duties related to the company’s falsified financial statements, according to a latest statement.

In a final order, SEBI held Allam Raghunath and Subrato Saha responsible for failing to ensure the accuracy of Brightcom’s accounts between FY 2014–15 and 2019–20. SEBI’s investigation revealed that the company engaged in multiple accounting irregularities. Brightcom failed to recognise impairment losses of Rs 411.76 crore in 2018–19 and Rs 868.30 crore in 2019–20, arising from a failed acquisition of Lycos and the impact of Europe’s General Data Protection Regulation (GDPR).

It also wrongly capitalised research and development expenses worth Rs 504.49 crore and misclassified impairment losses under “Other Comprehensive Income” instead of “Profit and Loss,” thereby overstating its profits. SEBI concluded that these actions led to an artificial inflation of profits amounting to Rs 1,280.06 crore and enabled the promoter group to sell shares at inflated prices.

Raghunath, who also chaired the audit committee, was fined Rs 30 lakh for negligence and for falsely declaring himself as an independent director while his daughter was employed with a Brightcom subsidiary. Saha was fined Rs 5 lakh for failing to exercise due diligence as an audit committee member.