Sebi Asks Ex­changes to Ex­am­ine Tax Re­turns and Fi­nan­cials of ‘Shell Cos’

The Economic Times - - Money -

Mum­bai: Se­bionWed­nes­dayasked stock ex­changes to ex­am­ine the tax re­turns and fi­nan­cials for the past three years of the 331 listed en­ti­ties sus­pected to be shell com­pa­nies. The reg­u­la­tor has listed out eight points for ex­changes to look at, such as bank state­ments and com­pli­ance with the listing re­quire­ments.

“Ex­changes have sent let­ters to th­ese com­pa­nies ask­ing for the rel­e­vant doc­u­ments as per Sebi’s direction. Ex­changes have been asked to do an au­dit, if re­quired even a foren­sic au­dit,” said a per­son in­volved in this process. “Ex­changes will have to fol­low the due process and hear th­ese com­pa­nies and sub­mit its re­port to Sebi,” the per­son said. “NSE has al­ready com­menced the process of col­lect­ing in­for­ma­tion, asad­vised­bySe­biand­will­bere­port­ing­toSe­bi­after­com­plet­ingth­e­ex­er­cise,” NSE said in a press state­ment. Ear­lier on Wed­nes­day, The Se­cu­ri­ties and Ap­pel­late Tri­bunal (SAT)toldthe­cap­i­tal­mar­ke­treg­u­la­tor Sebi that it should not have passed a blan­ket or­der declar­ing more than 300 firms as shell com­pa­nies and should have given them a hear­ing be­fore tak­ing such a de­ci­sion.

SAT was re­spond­ing to pe­ti­tions from J Ku ma r I n f r a p r o j e c t s a n d Pr a k a s h In­dus­triesagain­st­theSe­cu­ri­tiesand Ex­change Board of In­dia’s de­ci­sion to clas­sify them as shell com­pa­nies. The Sebi or­der also restricted tradinginthesec­om­pa­nies,hurt­ingth­eir share prices. The tri­bunal, which hears ag­grieved par­ties against whom Sebi had passed orders, has di­rected the reg­u­la­tor to hear th­ese com­pa­nies and pass an or­der. Both J Ku­mar In­fra and Prakash In­dus­tries had sought the tri­bunal’s in­ter­ven­tion to set aside the Sebi or­der. SAT re­marked that the reg­u­la­tor shouldn’t have passed a blan­ket or­der and should have ap­plied its mind. Sebi should have found out from pub­lic records about th­ese com­pa­nies and should have given the ap­pel­lants a hear­ing be­fore pass­ing the or­der, the Tri­bunal said.

JKu­marIn­frapro­jects­made a rep­re­sen­ta­tion to Sebi on Tues­day. SAT has asked Sebi to pro­vide them an op­por­tu­nity to hear lat­est by Thurs­day morn­ing and de­cide the mat­ter. The Tri­bunal said if the reg­u­la­tor fails to do that it will hear the ap­peal at 2:15 on Thurs­day.

SAT raised few queries with the Sebi coun­sel and in­structed him to ap­praise them on Thurs­day on the same. Some of the ques­tions raised by SAT are: Why there has been a de­lay in im­ple­ment­ing the MCA di­rec­tions?MCAhad­sen­tits­di­rec­tion­sto Sebi on June 9,2017, but Sebi im­ple­mented the di­rec­tions on Au­gust 7. SAT also asked Sebi when was the de­ci­sion taken to im­ple­ment the di­rec­tions of MCA? When was the com­mu­ni­ca­tion from MCA brought to the no­tice of the Sebi chair­man or be­fore the Board? What steps the of­fi­cer took once he re­ceived the in­for­ma­tion­fromMCA?

On­thisSe­bi­coun­selShyamMe­hta said he will come back to the court Thurs­day with the re­sponse.

Sebi asked stock ex­changes to re­strict trad­ing in shares of 331 com­pa­nies. Trad­ing was sus­pended in th­ese com­pa­nies’ shares and they were placed in Grade VI of Graded Sur­veil­lance Mech­a­nism Frame­work.

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