Sebi fines former CMD, director, CFO of Kwality Rs 3.75 cr for misrepresenting co's financials

The investigation was referred to Sebi by the Income Tax Department, after the department did search and seizure operations on March 23,  2018. The National Company Law Tribunal (NCLT) ordered the liquidation process of Kwality in January 2021.

Sebi investigated the company's operations between December 11, 2016, and December 1o, 2018. It issued a showcause notice to the company on May 23, 2023.

After hearing the noticees' submissions, the regulator passed its latest order in which Sebi's Chief General Manager K Saravanan noted, "the financial statements of Kwality were fraudulently manipulated and the figures contained therein were significantly misstated/ misrepresented including revenue and sales, expenses, capital assets, inventories, debtors payable, creditors receivable, etc. leading to publication of untrue and misleading financial results of the company during FY 2016-17 to 2018-19".

It resulted in the violation of various provisions under the Listing Obligations and Disclosure Requirements (LODR) Regulations and the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations.

The order stated that Dhingra and Sidhant Gupta "misrepresented the financials of Kwality by inflating revenue and expenses, misrepresenting receivable accounts and payables position, through scheme discount write off, undertaking irregular transactions in capital expenditure, through deficiency in internal controls and due to absence of records and documentation for sales transactions" and thus violated provisions the LODR Regulations and PFUTP Regulations.

The regulator found Satish Kumar Gupta's submission that he was not aware of the misrepresentation of the company's financials and inflating of numbers as "wholly untenable".  He was also found to have violated provisions under the LODR Regulations and PFUTP Regulations