Tag: Ness Wadia

Bombay Dyeing & Manufacturing Company Ltd has said that it will contest the Sebi’s order that banned the company, its promoters for up to two years and move to the Securities Appellate Tribunal (SAT) for relief.  

In a statement issued on Saturday, a company spokesperson said that the company will be exercising its statutory right to appeal this order and believes it would get justice and stand vindicated. 

On Friday, Sebi issued an order that barred 10 entities, including Bombay Dyeing and its promoters — Nusli N Wadia, Ness Wadia and Jehangir Wadia– from the securities markets for up to two years. Besides, it also levied a fine of around Rs 15.75 crore on them for involving in a fraudulent scheme of misrepresenting the company’s financial statements. 

Also read: Sebi bars Bombay Dyeing, Wadia family from security market, slaps Rs 15.75-cr fine

Others banned and penalised by Sebi are — Scal Services Ltd, a Wadia Group company, its then directors — D S Gagrat, N H Datanwala Shailesh Karnik, R Chandrasekharan — and Durgesh Mehta, who was Joint Managing Director and Chief Financial Officer of Bombay Dyeing. 

The matter dates back to June 2011 when the capital market issued a showcause notice to the company, its promoter entities and few other individuals after a probe was done into the company’s financial numbers for the period between FY12 and FY19. As per the details, the company’s dealings with Scal Services, an unlisted entity engaged in the real estate business and owned, were under scanner, as it involved various entities belonging to the Wadia Group.  

The probe stated that the bulk sales made to Scal Services were diverted to the real estate business of Bombay Dyeing. Sebi noted that the shareholding of Scal Services was done in a manner so that it cannot be tagged as an ‘Associate Company’. This was done so that Bombay Dyeing is not forced to consolidate the financial statements of Scal Services with itself, and avoid taxes. 

The company in its note on Saturday highlighted that the market regulator has made remarks on accounts dating back to a decade ago. It added that it is in receipt of Sebi’s order. The regulator has sought to interpret accounting standards and the depiction of validly prepared, approved and properly presented unqualified accounts between FY 2011-12 and FY 2018-19. “The accounts in question had been presented by the management, reviewed by the audit committee and opined on by the statutory auditors,” the spokesperson added. 

The company has added that it is quite certain that all transactions were entirely legitimate and in compliance with law. They did not, and could not have, by any reasonable interpretation or extrapolation violated Sebi rules, the spokesperson added.  

It is to be noted here that Sebi has highlighted in its note that “no benefits were made by the promoters and there is no diversion of funds”. But it issued a far-reaching set of directions. 

In its order, Sebi said Wadias have played an active as well as a deliberate passive role, in the perpetration of the scheme of deliberate misrepresentation of financial statements of Bombay Dyeing. 

Breaking up the total fine amount, Sebu has levied a fine of Rs 2.25 crore on Bombay Dyeing, Rs 4 crore on Nusli Wadia, Rs 5 crore on Jehangir Wadia, Rs 2 crore on Ness Wadia, Rs 50 lakh on Mehta, Rs 1 crore on Scal, and Rs 25 lakh each on the then directors of Scal. 

 (With PTI inputs)

The Securities and Exchange Board of India has barred Bombay Dyeing Company along with its promoter entities – Nusli Wadia, Ness Wadia and Jehangir Wadia – from the securities market for a period of two years for alleged misrepresentation of financial statements for as many as six years starting FY12. 

The capital markets watchdog has also imposed a total monetary penalty of ₹15.75 crore on the company, the three members of the Wadia family along with few other individuals. 

“… Noticees were allegedly involved in perpetrating a fraudulent scheme of misrepresentation of financials statements of BDMCL (Bombay Dyeing), that originated in FY 2011-12 and continued till FY 2018-19, with the merger of real estate business of Scal with BDMCL,” stated the 100-page long Sebi order issued late on Friday. 

The roots of the matter go back to June 2011 when the capital market issued a show cause notice to the company, its promoter entities and few other individuals based on an investigation of the company’s financial numbers for the period between FY12 and FY19. 

The crux of the matter was the company’s dealings with Scal Services, an unlisted entity engaged in the real estate business and owned – during the period of investigation – by various entities belonging to the Wadia Group. 

The Sebi probe found that a major portion of the revenue from the real estate business of Bombay Dyeing came from bulk sales made to Scal Services.   

For instance, dealings with Scal Services accounted for 83 per cent of the total real estate revenue of Bombay Dyeing in FY14, while the share was pegged at 60 per cent in FY12 and 68 per cent in FY15.  

The share dropped to 38 per cent in FY18 before the real estate business of Scal Services was merged with the company in FY19, as per the Sebi findings. 

More importantly, the Sebi order stated that the shareholding of Scal Services was maintained in a certain way only to avoid it coming under the ‘Associate Company’ definition, which, in turn, would have forced Bombay Dyeing to consolidate the financial statements of Scal Services with itself. 

“The entire shareholding of Scal was structured in a manner to camouflage the actual shareholding of BDMCL in Scal. This structured manner of devising the shareholding pattern reflects a deliberate attempt on the part of BDMCL/ its Promoters to mislead the non-promoter investors of the listed entity. By holding its entire shareholding in Scal through various other investment companies of Wadia Group, BDMCL ensured non-consolidation of transactions carried out with Scal although exercising absolute control over Scal. Based on the same, the consolidated financial statements of BDMCL are alleged to be untrue and misleading for the shareholders of the listed company during the IP (investigation period),” noted the Sebi order. 

“… it has been alleged that BDMCL, along with Scal, executed a ‘well thought out and deliberate’ fraudulent and manipulative scheme to record non-genuine sales made to Scal to the tune of Rs. 2,492.94 crores and profits to the tune of Rs. 1,302.20 crores during FY 2011-12 to FY 2017-18 by fraudulently entering into MoUs with Scal, a Group Company,” stated the order passed by Sebi whole time member Ananta Barua. 

The Wadia family members – Nusli, Ness and Jehangir – have also been barred from being associated with any listed company or a Sebi-regulated entity as a Key Managerial Personnel (KMP) for a period of one year.