SEBI has slapped penalties totalling Rs 12 lakh on Prabhu Steel Industries Ltd (PSIL), its promoters including Harish Gangaram Agarwal, Dinesh Gangaram Agarwal and Akshita Harish Agarwal for flouting regulatory norms.
The regulator has imposed a fine of Rs 3 lakh each on these entities. They have to pay the penalty within 45 days, SEBI said in its order on Wednesday.
SEBI received a Financial Reporting Quality Review Report (FRQRR) from National Financial Reporting Authority in the matter of PSIL on February 14, 2022, wherein it noted serious lapses with respect to accounting and auditing standards of the company.
Thereafter, SEBI conducted a probe to ascertain if there was misrepresentation in financial statements of PSIL, under the provisions of the Securities Contracts (Regulation) Act, and disclosure rules.
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The regulator found PSIL's actions like omission, incorrect disclosures and presentation of the financial statements for FY 2019-20.
PSIL also failed to assess impairment loss provisions in respect of current loans, advances and bank balances, recognition of sale of shares as revenue from operations, non-provision for depreciation on property, as per SEBI order.
This has resulted into misrepresentation of financial statements and giving untrue picture to the investors.
As per SEBI, a company should refrain from misrepresentation and ensure that the annual reports presented do not present a misleading picture. However, PSIL had failed to adhere to the rules and violated SCRA regulation and disclosure rules.
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The regulator observed that Harish Gangaram Agarwal was the whole time director and Dinesh Gangaram Agarwal was the Chairman and MD and Key Managerial Personnel of PSIL and attended all the board meetings of the company during FY 2019-20.
Further, they have signed form MGT-9 (extract of annual return), management discussion and analysis report, corporate governance report, balance sheet, profit and loss statement, cash flow statement of the company.
The regulator observed lapses on part of Harish and Dinesh which failed to present true and fair view of the financial statements of the company, thereby violating the norms.
"I note that Akshita Harish Agarwal was the CFO and KMP of PSIL during the investigation period, and provided the CEO/ CFO certification for the FY 19-20, under disclosure rules and states that financial results do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading," SEBI's Adjudicating Officer Asha Shetty said in the order.
Further, it is noted that the financial statements contained errors and were not in compliance of accounting/auditing standards and there was misleading misrepresentation.
By indulging in these activities, PSIL, Harish Gangaram Agarwal, Dinesh Gangaram Agarwal and Akshita Harish Agarwal flouted the SCRA rules and disclosure norms.
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