SEBI Issues Notices To Essel Group's Amit Goenka, 7 Others In Fund Diversion Case

Capital markets regulator SEBI on Tuesday issued interim order-cum-show-cause notices against Shirpur Gold Refinery, its erstwhile chairman Amit Goenka, promoter Jayneer Infrapower and Multiventures, and five others for allegedly siphoning off funds from the company and violating other rules.

Shirpur is a part of the Subhash Chandra Goenka led-Essel Group and has been taken to NCLT under IBC by its lenders. Amit Goenka was non-executive chairman and director of Shirpur till 2021-22.

The interim order has been passed against Shirpur Gold Refinery Ltd., its promoter Jayneer Infrapower and Multiventures, and six individuals—Amit Goenka (chairman), its directors Mukund Galgali, Vipin Choudhary, Dineshkumar Kanodia, and its CFOs Shravan Kumar Shah and Ashok Sanghvi.

The family members of Subhash Chandra, including his son Amit Goenka, are the shareholders in Jayneer, as per SEBI.

In its order, SEBI directed Goenka, Galgali, Choudhary, Kanodia, Shah, Sanghvi and Jayneer not to sell or dispose of their shareholding till further orders.

The regulator also directed SGRL, Goenka, Galgali, Choudhary, Kanodia, Shah, Sanghvi and Jayneer to disclose the updated status of all the undisclosed material events to the stock exchanges within 15 days.

In its 44-page interim order, SEBI observed that the financial statements of Shirpur Gold Refinery were misrepresented to facilitate diversion of its assets to Jayneer via promoter-connected entities. This in turn led to the sale of assets to the connected entities without receipt of consideration from them.

"The diversion of Rs 404 crore from Shirpur to the three debtors—Altrarex, Balmukh and Magicstone—which are also promoter-connected entities and then through a web of other connected entities, ended up with Jayneer."

"It is thus clear that out of approximately Rs 872 crore received by Jayneer that originated from the said debtors, at least Rs 404 crore was diverted from Shirpur through the debtors and ultimately reached Jayneer," SEBI's whole-time member Ashwani Bhatia said in the order.

The diversion of funds from these debtors to the promoter of Shirpur were part of an elaborate scheme orchestrated by Jayneer to divert assets of the company to itself and its connected entities, it said.

It also noted that SGRL and its directors tried to mislead the investigation and also the forensic audit by failing to cooperate in providing the information sought by SEBI and the forensic auditor.

Therefore, the conduct of the noticees during the investigation has not been satisfactory.

It was observed that Amit Goenka was a direct beneficiary of the asset diversion from SGRL as he and his family members held 100 per cent shares in Jayneer. Hence, the scheme could not have been executed without the involvement of him, SEBI said.

It was also observed that Galgali, Choudhary, Kanodia failed in their fiduciary responsiblities as directors.

Shah and Sanghvi, who were CFOs for different tenures during FY 2018-19 and 2019-20, had given certification with respect to untrue financial statements for the company.

Since the company's financials contained misrepresentations, it was clear that the certificates provided by the CFOs were false.

Through such acts, they allegedly flouted the market norms, the regulator said.

Accordingly, the noticees were asked to explain as to why suitable directions restraining them from accessing as well as dealing in the securities market in any manner, for a specified period and further restraining them from associating with any listed company or any intermediary, should not be issued against them for the violations allegedly committed by them, Bhatia said.

Further, they were called upon to show cause as to why an inquiry should not be held against them for the alleged violations of the provisions of disclosure norms and Prohibition of Fraudulent and Unfair Trade Practices.

The order came after SEBI received a complaint in February 2021 against SGRL alleging that the loans taken by Shirpur from banks and financial institutions had not been used for the operations of the firm but were siphoned off to companies controlled by Subhash Chandra and his family.

Thereafter, the regulator initiated an investigation and appointed a forensic auditor into the affairs of Shirpur.

The focus of the probe was to ascertain if there were any misrepresentations in the published financial statements for the FY19, FY20 and FY21, and to identify diversion of assets from the company through debtors along with any other violations resulting in contravention of the market norms.