LEEL case: Sebi slaps over Rs14 cr fine on 7 individuals for accounts manipulation

New Delhi: Markets regulator Sebi on Thursday slapped fines amounting to Rs14.2 crore on LEEL Electricals' promoter Bharat Raj Punj and its six former officials and barred them from the securities markets for up to five years in a case of malpractices and manipulations in the company's accounts. Also, they have been barred from being associated with any listed company or any registered intermediary, in any capacity, including as a director for three years.

The seven individuals penalised by Sebi are Anita Kakar Sharma, who was compliance officer and Vice President (Finance) between April 2006 and December 2018 at LEEL. Achin Kumar Roy, Nipun Singhal, and Mukat Behari Sharma were whole-time members and CFO of LEEL from September 2007 to April 2019. Achin and Mukat were members of the auditing committee between 2007 and 2014. In addition, Surjit Krishan Sharma, Geeta Tekchand were the independent directors of LEEL from January 2005 to July 2019, and Bharat Raj Punj, a promoter of the company.

LEEL Electricals announced in May 2017 that its consumer durable business was acquired by Havells India for a consideration of Rs 1,550 crore. Subsequent to the transaction, Sebi received a complaint dated November 13, 2018, from a shareholder of the company, alleging that the promoters and the senior management of the LEEL Electricals (LEEL) have diverted funds, including the funds received from the sale of the consumer durable business. Sebi also received a letter from the Office of the Commissioner for Central GST which stated that LEEL had availed of GST input tax credit of Rs 40.53 crore against reported purchase of material amounting to Rs 225.19 crore without actually receiving any goods and without any underlying financial transactions.

Further, the regulator initiated an probe into the affairs of LEEL for FY18 and FY19. Thereafter, Sebi noted that various violations of the provisions of the securities laws and, based on the same, a show cause notice was issued on July 5, 2022 to LEEL, its whole-time directors, independent directors and certain key managerial personnel. In its final order, Sebi said that "the case has witnessed a complete breakdown of the governance structures within the company resulting in the siphoning off of significant amounts of money, over the course of many years, which resulted in the erosion of shareholders wealth and ultimately ending up in liquidation".

Further, instead of being used to settle the financial liabilities of the company or being distributed to shareholders as dividends, the proceeds from the sale of the consumer durable business were taken out of the company. These individuals who were invested with fiduciary duties to safeguard the interest of the shareholder, did not act to prevent the diversion of funds. They were complicit in the misappropriation and misstatements, the regulator said in the order. "I hold that Noticees 2 to 5 (Punj, Roy, Nipun Singhal and Mukat Behari Sharma) have violated regulations pertaining to the obligation of listed companies to make accurate and timely disclosures," Sebi whole-time member Ashwani Bhatia said in the order. "Noticee 9 (Anita Kakar Sharma), I hold, has not acted in compliance with the provisions of Regulations Listing Obligations and Disclosure Requirements (LODR) Regulations," he said.

Individually, the regulator levied a penalty of Rs 5 crore on Bharat Raj Punj, Rs 3 crore on Anita Kakar Sharma, Rs 2 crore each on Achin Kumar Roy, Nipun Singhal and Mukat Behari Sharma, and Rs 10 lakh each on Surjit Kishan Sharma and Geeta Tekchand. They have to pay the fine within 45 days, failing which a 12 per cent per annum interest will be applicable from the expiry of 45 days till the date of actual payment.