SAT overturns ban on Nusli Wadia, sons, others

The Securities Appellate Tribunal (SAT) Friday set aside market regulator Securities and Exchange Board of India's (Sebi) order barring Bombay Dyeing & Manufacturing Co, its promoters Nusli Wadia and his sons Ness and Jehangir, from the securities market for two years for indulging in an allegedly fraudulent scheme of misrepresenting the company's financial statements.The tribunal also quashed Sebi's direction restraining the Wadias from holding director positions and from being key managerial personnel in a listed company for one year. It has also directed Sebi to refund the penalties paid by them within four weeks of the order. The regulator had imposed a monetary penalty of ₹2.25 crore on Bombay Dyeing, ₹4 crore on Nusli Wadia, ₹5 crore on Jehangir Wadia and ₹2 crore on Ness Wadia. The market regulator had barred a total of 10 entities, including Scal Services, part of the Wadia group, its directors DS Gagrat, NH Datanwala, Shailesh Karnik, R Chandrasekharan, and Durgesh Mehta, a former managing director of Bombay Dyeing.The tribunal also pulled up Sebi for the inordinate delay in taking action after nine years of the alleged violations taking place.Sebi issued show cause notices in June 2021 and passed an order against the company and its promoters on October 21,2022, while the alleged violations took place in FY2011-12."There is no valid explanation for the delay in taking action after nine years. We are at pains to note that Sebi, which is expected to play an important role in maintaining the integrity of the securities market, wakes up and acts only on receipt of certain complaints," the tribunal said.The ruling came by a 2-1 majority, with the two technical members ruling in favour of Bombay Dyeing, while Presiding Officer Justice PS Dinesh Kumar upheld Sebi's order.Sebi's penal action came in the wake of certain complaints, based on which it conducted a detailed investigation into the affairs of Bombay Dyeing for the period 2011-12 to 2018-19. Following the investigation, it issued show-cause notices to all 10 entities involved.The market regulator had mainly alleged that Bombay Dyeing, along with Scal Services, executed a "well-thought-out and deliberate" fraudulent and manipulative scheme to record non-genuine sales made to Scal Services to the tune of ₹2,492.94 crore and profits of ₹1,302.20 crore between 2011-12 and 2017-18 by fraudulently entering into memorandums of understanding (MoUs) with Scal Services.Scal Services was primarily engaged in real estate and trading during Sebi's investigation period.