SEBI imposes ₹2.46 crore fine on two companies, seven individuals

Capital markets regulator Sebi on Friday imposed penalties totalling ₹2.46 crore on two companies and seven individuals, including promoters, for flouting regulatory norms.

The regulator also barred Girish Talwalkar, Prashant Talwalkar, Madhukar Talwalkar, Vinayak Gawande, Anant Gawande, Harsha Bhatkal and Girish Nayak for varying periods.

The two companies are Talwalkars Better Value Fitness Ltd (TBVFL) and Talwalkars Healthclubs Ltd (THL). Girish Talwalkar, Prashant Talwalkar, Madhukar Talwalkar, Vinayak Gawande, Anant Gawande, Harsha Bhatkal are the promoters.

The penalties have been imposed for violations related to disclosure norms and PFUTP (Prohibition of Fraudulent and Unfair Trade Practices), according to two separate orders.

The regulator slapped a fine of ₹36 lakh each on Girish Talwalkar, Prashant Talwalkar, Anant Gawande and Harsha Bhatkal; ₹24 lakh each on TBVFL, Vinayak Gawande and Madhukar Talwalkar; ₹18 lakh on Girish Nayak and ₹12 lakh on THL.

In the case of TBVFL, the regulator imposed a securities market ban on Girish Talwalkar, Prashant Talwalkar, Madhukar Talwalkar, Vinayak Gawande, Anant Gawande, Harsha Bhatkal and Girish Nayak for 18 months and further restrained them from being associated with any listed company or any Sebi-registered intermediary for the same period.

In addition, Sebi has also barred Girish Talwalkar, Prashant Talwalkar, Anant Gawande, Harsha Bhatkal and Girish Nayak from the market for a period of 18 months in the matter of THL and the debarment will commence after the expiration of the period of restraints imposed on the entities in the case of TBVFL.

The order came after Sebi received several complaints against THL and TBVFL during August-October 2019. The complaints indicated default in payment of interest on term loans despite a significant cash balance.

As per the financial results ending March 2019, both the companies (TBVFL and THL) had a total cash balance of approximately ₹77 crore and the total default on interest payment as of July 2019 was only ₹3.5 crore (term loan), which raised suspicion over the authenticity of their book of accounts.

The regulator, after preliminary examination, took up the matter for detailed investigation and KPMG was appointed as forensic auditor to assist the investigating authority in conducting forensic examination of the books of accounts of both TBVFL and THL for four financial years (2016-17 to 2019-20).

Thereafter, Sebi started a probe into the companies when there was suspicion that their financials were being misrepresented to provide a healthy picture to the investors.

As per the order, TBVFL and THL misrepresented their financial statements by inflating the bank balance disclosed in financial statements, inflation of revenue by the revaluation of investments, advances given to connected companies without rationale, which are not in the interest of the company, inappropriate recognition of revenue and expenses and unjustified investments in entities with low net worth and non-provision of impairment losses.

"I find that an act of concealment of information related to mis-utilisation of funds by a listed company, which if disclosed would have the potential to impact the share price of that listed company, is undoubtedly fraudulent and unfair trade practice relating to the securities market and covered under the PFUTP Regulations.

"I am of the view that by disseminating financial statements through the platform of stock exchanges(s) or otherwise, THL and TBVFL has attempted to demonstrate a rosy picture of its affairs, which was clearly misleading and was designed to influence the decisions of the investors dealing in its securities and thereby likely to induce sale and/or purchase in its securities, and thus, in effect has violated the PFUTP Regulations," Sebi's Executive Director VS Sundaresan said in two separate orders.