Zuari Agro Chemicals settles case with SEBI, pays Rs 2.91 crore; executives face trading ban

Zuari Agro Chemicals settles case with SEBI, pays Rs 2.91 crore; executives face trading ban

• Zuari Agro settled SEBI case on misreporting financial statements
• Company and officials paid Rs 2.91 crore to resolve proceedings
• SEBI flagged under-reporting losses and lapses in approvals

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Zuari Agro Chemicals Limited has settled a case with the Securities and Exchange Board of India (SEBI) involving alleged misrepresentation of financial statements and lapses in related-party transaction approvals, according to a settlement order issued today.

The company and four of its officials paid a total settlement amount of Rs 2.91 crore to resolve the proceedings without admitting or denying the findings.

SEBI had alleged that Zuari Agro Chemicals under-reported its losses for FY20 and misrepresented its financial statements by recording an impairment of Rs 117.79 crore in the comparative financials of FY19 instead of reflecting it in FY20. The regulator also flagged a slump sale of certain businesses to a wholly owned subsidiary, which resulted in an exceptional gain of Rs 698.97 crore, saying the move concealed the company’s actual financial position. SEBI’s show-cause notice alleged, “Applicant 1 has under-reported its losses for FY 2019-20 and also the real impact of the impairment was reflected neither in the financial statement of FY 2019-20 nor in the financial statements of FY 2018-19. Thus, ZACL has misrepresented its financial statement for FY 2019-20’."

Show cause notice also mentioned that, ‘The acts of Applicant 1 i.e. i) inappropriately recording impairment of investment amounting to INR 117.79 Crore in the comparatives of FY 2019-20 (i.e. FY 2018-19) and ii) transferring certain businesses under slump sale to its wholly owned subsidiary at an exceptional gain of INR 698.97 Crore, was fraudulent’.

The regulator further alleged that the company failed to obtain prior approval from the audit committee and shareholders for material related-party transactions worth Rs 811.33 crore with Paradeep Phosphates Limited.

As part of the settlement terms, Zuari Agro Chemicals paid Rs 1.19 crore and agreed to a three-month voluntary debarment from trading in the securities market. Company’s Managing Director Sunil Sethy and Chief Financial Officer R K Gupta paid Rs 73.12 lakh each and accepted a four-month voluntary trading ban. Whole-time Director Nitin Manguesh Kantak and Company Secretary Vijayamahantesh Khannur paid Rs 12.67 lakh each.

SEBI had initiated adjudication proceedings alleging violations of provisions under the SEBI Act, SEBIs listing regulations and PFUTP Regulations. The matter was settled under the regulator’s settlement framework after approval from its panel of whole-time members.

Settlement orders are without prejudice to SEBI’s right to initiate or restore enforcement proceedings if it later emerges that the applicant failed to make full and true disclosure or breached any undertakings or waivers given as part of the settlement.

Also read: SEBI weighs scrapping Close-to-Money norms in options on goods to ease compliance: Sources