Sebi slaps Rs 2.46 crore fine on two companies, 7 individuals

New Delhi, Sep 15 Capital markets regulator Sebi on Friday imposed penalties totalling Rs 2.46 crore on two companies and 7 individuals, including p..

Capital markets regulator Sebi on September 15 imposed penalties totalling Rs 2.46 crore on two companies and 7 individuals, including promoters, for flouting regulatory norms. Apart from penalties, the regulator also barred Girish Talwalkar, Prashant Talwalkar, Madhukar Talwalkar, Vinayak Gawande, Anant Gawande, and Harsha Bhatkal for varying periods.

The two companies are Talwalkars Better Value Fitness Ltd (TBVFL) and Talwalkars Healthclubs Ltd (THL), while Girish Talwalkar, Prashant Talwalkar, Madhukar Talwalkar, Vinayak Gawande, Anant Gawande, Harsha Bhatkal are the promoters. The penalties have been imposed for violations related to disclosure norms and PFUTP (Prohibition of Fraudulent and Unfair Trade Practices), according to two separate orders.

The regulator slapped a fine of Rs 36 lakh each on Girish, Prashant, Anant, Harsha; Rs 24 lakh each on TBVFL, Vinayak, Madhukar; Rs 18 lakh on Girish Nayak and Rs 12 lakh on THL. In the case of TBVFL, the regulator imposed a securities market ban on Girish Talwalkar, Prashant, Madhukar, Vinayak, Anant, Harsha and Girish Nayak for a period of 18 months, and further restrained them from being associated with any listed company or any Sebi-registered intermediary for the same period.

In addition, Sebi also barred Girish Talwalkar, Prashant, Anant, Harsha and Girish Nayak from the market for a period of 18 months in the matter of THL and the debarment will commence after the expiration of the period of restraints imposed on the entities in the case of TBVFL. The order came after Sebi was in receipt of several complaints against THL and TBVFL during the period of August-October 2019. The complaints indicated default in payment of interest on term loans despite a significant cash balance. As per the financial results ending March 2019, both the companies (TBVFL and THL) had a total cash balance of approximately Rs 77 crore and the total default by both the companies on interest payment as of July 2019 was only Rs 3.5 crore (Term Loan), which raised suspicion over the authenticity of their book of accounts.

The regulator after preliminary examination, took up the matter for detailed investigation, and KPMG was appointed as forensic auditor to assist the investigating authority in conducting forensic examination of books of accounts of both TBVFL and THL for 4 financial years (2016-17 to 2019-20). Thereafter, Sebi started a probe into the companies when there was suspicion that their financials were being misrepresented to provide a healthy picture to the investors.

As per the order, TBVFL and THL have misrepresented their financial statements by inflating the bank balance disclosed in financial statements, inflation of revenue by the revaluation of investments, advances given to connected companies without rationale, which are not in the interest of the company, inappropriate recognition of revenue and expenses and unjustified investments in entities with low net worth and non-provision of impairment losses. “I find that an act of concealment of information related to mis-utilisation of funds by a listed company, which if disclosed would have the potential to impact the share price of that listed company, is undoubtedly fraudulent and unfair trade practice relating to the securities market and covered under the PFUTP Regulations,” Sebi’s Executive Director V S Sundaresan said in the order.