The Securities and Exchange Board of India (SEBI) has banned Kavi Arora, former CEO of Religare Finvest Ltd, from the securities market for two years and imposed a fine of ₹5 crore in connection with a case of fund diversion.
The case relates to the diversion of funds amounting to ₹2,473.66 crore of Religare Finvest Ltd (RFL), a subsidiary of Religare Enterprises Ltd (REL), from the financial year 2014-15 until 2017-18, in the garb of loans through layers of entities for the ultimate benefits of entities controlled by the erstwhile promoters – Malvinder Mohan Singh and Shivinder Mohan Singh.
In the final order, Ananta Barua, SEBI Whole Time Member, said that Arora was "involved knee-deep in the perpetration of a scheme of diversion of funds." Arora served as CEO and MD of RFL from November 14, 2011, until he resigned in 2017. The alleged diversion of funds happened during the period from the financial year 2014-15 to 2017-18.
Barua noted that there is ample material on record to hold that Arora gave his consent to the approval of fresh loans under Corporate Loan Book (CLB) and even evergreening of certain loans under CLB, despite repeated and specific adverse comments by RBI, ICRA and some lending banks.
The financial statements of RFL were consolidated with the financial statements of REL on a quarterly basis. The diversion of funds was never disclosed to the shareholders of REL, which misled them to remain invested in the shares of Religare or deal in the securities of REL, Barua said.
Therefore, the diversion of funds from RFL, in the garb of loans, led to indirect manipulation of the price of shares of REL, and thus, such an act was fraudulent and an unfair trade practice relating to the securities market, according to the order.
By indulging in the scheme of diversion of funds along with the erstwhile promoters, Arora has also violated the provisions of Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) rules. Arora is restrained from accessing the securities market and from buying, selling, or otherwise dealing in securities, directly or indirectly, for two years.
He is also barred from getting associated with the securities market, including as a director or Key Managerial Personnel in a listed company or a SEBI-registered intermediary.
A fine of ₹5 crore has also been imposed on Arora. SEBI had passed an interim order on March 14, 2019, and a confirmatory order in September 2019 with respect to alleged diversion of around ₹2,315.09 crore from Religare Enterprises Ltd (REL)/ RFL for the benefit of promoter/promoter connected entities.
In July 2022, SEBI passed a final order in the matter where it imposed a penalty totalling ₹60 crore on 10 entities, including Malvinder Mohan Singh and Shivinder Mohan Singh (Singh brothers), in a case involving the diversion of funds of RFL.
The Singh brothers were barred from the securities market for three years or until the recovery of the diverted money along with interest, while other entities were prohibited for two years.
This article taken by livemint.com
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