Securities and Exchange Board of India: The Bombay Dyeing and Manufacturing Company Ltd. (‘BDMCL’) and some of its promoters (Nusli Wadia, Ness Wadia and Jehangir Wadia) has been barred from the securities market for 2 years for violating the provisions of SEBI (Prevention of Fraudulent and Unfair Trade Practices) (‘PFUTP’) Regulations, 2003 by misrepresenting the financial statement of BDMCL originating from year 2011 until 2019.
BDMCL was established in 1879 and is a part of the Wadia Group and is engaged in the business of real estate, polyester and retail/ textile. BDMCL was involved in publishing untrue financial statements and constitute manipulative and fraudulent and unfair trade practices against the minority shareholders of BDMCL and the market at large. Hence, it was alleged that BDMCL has violated the provision of Regulations 3(b), (c) and (d) and 4(1), 4(2)(e), (f), (k) and (r) of the PFUTP Regulations, 2003 read with Sections 12-A(a), (b) and (c) of the SEBI Act, 1992.
On receiving certain complaints, SEBI conducted a detailed investigation into the affairs of BDMCL for the period 2011-2012 to 2018-2019. Following the investigation, it issued Show-Cause Notice (‘SCN’) to the 10 entities involved.
SEBI alleged that the BDMCL along with Scal Services executed a “well-thought-out and deliberate” fraudulent and manipulative scheme to record non genuine sales of flats made to Scal Services by fraudulently entering into MoUs with Scal Services. According to SEBI, the shareholding of Scal Services was structured in a manner to camouflage the actual shareholding of BDMCL in the company.
SEBI observed that the revenues and profits of BDMCL were inflated because of the misrepresentation of the financial statement. The BDMCL and the Wadia Group were allegedly involved in perpetrating a fraudulent scheme of misrepresentation of financials statements of BDMCL, that originated in FY 2011-2012 and continued till FY 2018-2019, with the merger of real estate business of Scal Services with BDMCL. They misrepresented by inflating sales of Rs. 2,492.94 crores and profit of Rs. 1,302.20 crores, arising from the sale of flats, by BDMCL to Scal, over the period from FY 2011-2012 to 2017-2018.
SEBI has restrained the Wadias from holding the position of director and from being key managerial personnel in any listed company for 1 year.
SEBI has also imposed a monetary penalty of 2.25 Crore on BDMCL, 4 Crore on Nusli Wadia, 5 crores on Jehangir Wadia and 2 crore on Ness Wadia.
[The Bombay Dyeing and Manufacturing Company Ltd., In re, WTM/ AB/ CFID/ CFID_1/20686/2022-23, decided on 1-10-2022]
*Kriti Kumar, Editorial Assistant has reported this brief.
