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