Capital markets regulator Sebi has imposed a penalty of over Rs 4 crore on five former officials of Fedders Electric and Engineering Ltd (FEEL) and barred them from the securities market for two years in a case of malpractices and manipulations in the company's accounts.
Also, they have been restrained from holding position of a director or key managerial personnel in any listed company or any registered intermediary for two years.
Individually, the six individuals penalised by Sebi are -- Akhter Aziz Siddiqi, who was CFO-cum-whole time director, member of the audit committee (AC) and in-charge of finance and accounts at FEEL; Sham Sunder Dhawan, who was whole time director and signed financials of FEEL for FY 2007-08 to FY 2016-17, Bindu Dogra and Ritushri Sharma -- who were independent directors of FEEL and were part of the AC for FY 2013-14 to FY 2017-18 -- and Bharat Raj Punj, who was part of promoters of company.
The Sebi conducted an investigation into affairs of FEEL for the period April 2012 to August 2020 to ascertain whether books of accounts of the company were manipulated or there was any wrongful diversion of funds of the company by the promoters/directors/key managerial persons in contravention of the regulatory provisions.
In its order, Sebi found that FEEL showed inflated turnover by showing sales and purchases to related entities including LEEL Electricals Ltd.
However, corresponding figures of purchase and sales shown by LEEL were less than what was shown by FEEL. Such arrangement of diversion of funds by showing fictitious transactions with related entities became possible because both FEEL and LEEL were managed by a common group of persons, Sebi said in its order passed on Friday.
The regulator said that FEEL and its KMPs, who were instrumental in the affairs of the company, failed to comply with the governance requirements and accordingly restrictions were imposed on them.
Individually, the regulator levied a fine of Rs 1.25 crore on Akhter Aziz Siddiqi, Rs 1.2 crore on Sham Sunder Dhawan, Rs 1 crore on Bharat Raj Punj and Rs 35 lakh each on Bindu Dogra and Ritushri Sharma. They have been directed to pay the penalty amount within 45 days, the order noted.
In July 2021, the CBI registered an FIR against Fedders Electric and Engineering Limited and its promoters for allegedly cheating an SBI-led consortium of banks to the tune of Rs 1,028.94 crore.
The agency alleged that the company produced fabricated account books, misrepresented figures to borrow funds and siphoned off various loan proceeds. The allegations were based on forensic audit report.
The Allahabad bench of the National Company Law Tribunal (NCLT) through its order in August 2019 admitted FEEL for corporate insolvency resolution proceedings (CIRP). In its order in October 2021, NCLT approved the resolution plan and the control of FEEL shifted to the new management.