Description

SEBI order against Golden Tobacco Limited regarding improper transfer of Rs.17,517.57 lakhs to subsidiary and misrepresentation to investors during FY 2009-10 to 2020-21.

Summary

SEBI issued an order against Golden Tobacco Limited (GTL) and its promoters - Mr. Sanjay Dalmia, Mr. Anurag Dalmia, and Mr. Ashok Kumar Joshi - for investigation into violations during FY 2009-10 to 2020-21. GTL transferred Rs.17,517.57 lakhs to its wholly owned subsidiary Golden Realty & Infrastructure Limited (GRIL) as advances, claiming they were for acquiring development rights. However, SEBI found that only Rs.3,599.14 lakhs were returned, and Rs.11,415.52 lakhs were diverted to entities connected with promoters, constituting misrepresentation to investors.

Key Points

  • GTL transferred Rs.17,517.57 lakhs to subsidiary GRIL during FY 2009-10 to FY 2014-15
  • Only Rs.3,599.14 lakhs were returned to GTL from the advances
  • Rs.11,415.52 lakhs were allegedly diverted to promoter-connected entities
  • GTL claimed advances were for acquiring development rights under Joint Development Agreement with WGF Financial Services Limited
  • Company underwent Corporate Insolvency Resolution Process (CIRP) in June 2022
  • Investigation covers potential violations of SEBI Act 1992, PFUTP Regulations 2003, and LODR Regulations 2015

Regulatory Changes

No new regulatory changes introduced. Order relates to enforcement of existing regulations regarding disclosure requirements and prohibition of fraudulent practices.

Compliance Requirements

  • Proper disclosure of fund transfers to subsidiaries and their actual utilization
  • Accurate representation of recoverability of advances in financial statements
  • Compliance with related party transaction disclosure norms
  • Adherence to prohibition of fraudulent and unfair trade practices

Important Dates

  • Investigation Period: FY 2009-10 to FY 2020-21
  • Joint Development Agreement: August 13, 2010
  • NCLT CIRP Order: June 8, 2022
  • Fund Transfer Period: FY 2009-10 to FY 2014-15

Impact Assessment

High impact case involving significant fund diversion and investor misrepresentation spanning over a decade. The case highlights risks of subsidiary transactions being misused for fund diversion. GTL’s insolvency proceedings indicate severe financial distress, potentially affecting investor recoveries. The order reinforces SEBI’s focus on proper disclosure of related party transactions and prevention of fund siphoning through subsidiaries.

Impact Justification

Involves substantial fund diversion of Rs.17,517.57 lakhs and misrepresentation to investors over 12 years