SEBI finds ₹17,195.3 lakh outstanding in Golden Tobacco's subsidiary

This order details SEBI's investigation into whether Golden Tobacco Limited (GTL) manipulated its accounts between FY 2009-10 and FY 2020-21 by diverting funds to a subsidiary, Golden Realty & Infrastructure Ltd (GRIL), and misrepresenting the purpose of these funds in its annual reports.

Who it concerns: Pawan Kumar Malsaria (Noticee), Golden Tobacco Limited (GTL), Golden Realty & Infrastructure Ltd (GRIL), WGF Financial Services Ltd (WGF), Western Express Industries Ltd (WEIL), Golden Investment (Sikkim) P. Ltd. (GISL), GTC INC B.V., Cross Investment Pvt. Ltd., Dalmia Finance Ltd, General Exports Ltd, India Bull Financial Services Ltd, Sudhir Gensets Ltd, Bansal Estate Pvt. Ltd., Bharatpur Nutritional Products Ltd., Aniruddha Builders & Developers, Blueberry Tradelinks, Kamdhenu Realities, Simplex Land & Housing, Soarsee Properties Pvt. Ltd., Mazda Agencies, Lodha & Co., Bhandari & Associates, Market Analysts & Product Promoters, Pka Advocates, Ramesh Gupta, Reena Jain, Ilac Investment.

What SEBI found or ordered

• SEBI initiated adjudication proceedings against Pawan Kumar Malsaria for alleged violations of Regulation 17(8) and 33(2)(a) of the SEBI (LODR) Regulations, 2015.
• SEBI observed that GTL advanced a total of Rs. 21,172.11 lakhs to GRIL between FY 2009-10 and FY 2014-15.
• SEBI found that GRIL had no commercial substance, never commenced business, and had zero revenue in the analyzed years.
• SEBI noted that funds from GTL to GRIL were transferred to WGF Financial Services Ltd and other entities, including General Exports Ltd.
• SEBI concluded that GTL diverted funds under the guise of investments to GRIL, resulting in misrepresentation in GRIL's and GTL's consolidated books.
• SEBI noted that GTL's annual reports disclosed these advances as being for acquiring development rights in Delhi, but the project was not approved by the Delhi Development Authority (DDA).
• The order is an Adjudication Order under Section 15-I of the SEBI Act, 1992, and does not yet state a final penalty amount or bar order in the provided text.

Also in the document

• The investigation period spans over a decade (FY 2009-10 to FY 2020-21).
• The total outstanding investments/advances with subsidiaries for FY 2020-21 were Rs. 17,195.3 lakhs, with 94.5% outstanding in GRIL.
• SEBI identified a flow of funds through multiple conduit entities, including WGF Financial Services Ltd, which was a loss-making company with significant bad debts written off in FY 2015-16.
• The order mentions a development agreement between GRIL and WGF for 19.26 acres of land with a total consideration of Rs. 350 crores, of which Rs. 97.5 crore was paid by GRIL.