Supreme Court dismisses Amit Goenka’s plea against Bombay High Court order in Shirpur Gold case

The Supreme Court has dismissed Amit Goenka’s petition challenging a Bombay High Court order regarding an investigation into the alleged siphoning of funds at the bankrupt Shirpur Gold Refinery Ltd.

Goenka—currently president of digital business, international linear business, enterprise technology, broadcast operations, and engineering at Zee Entertainment Enterprises Ltd—was non-executive chairman of Shirpur Gold Refinery in 2021-22.

The Bombay High Court had on 14 August rejected Goenka’s petition contesting the appointment of KPMG as a forensic auditor to probe the alleged fund siphoning at Shirpur Gold Refinery.

A Supreme Court bench led by Justices Hrishikesh Roy and S.V.N. Bhatti on Tuesday held that having “considered the nature of the division bench of the High Court’s order, we see no infirmity with the order. Accordingly, the petition is dismissed.”

The Securities and Exchange Board of India appointed KPMG Assurance and Consulting Services as a forensic auditor in 2021 to review Shirpur Gold Refinery's financial statements for 2018-2019 through 2020-2021. 

KPMG submitted its report in March 2023. Following that, the markets regulator, in an interim order dated 25 April 2023, accused debt-ridden Shirpur Gold of fund diversion. 

Sebi’s interim order was prompted by a February 2021 complaint alleging that loans taken by Shirpur Gold Refinery were not used for company operations but siphoned off to companies under the control of Subhash Chandra, chairman emeritus of Essel Group, and his family. Essel Group owns Zee Entertainment.

The complaint also alleged that Shirpur Gold had failed to provide public shareholders with information regarding its operations.

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“We do not find any justifiable reason assigned by the petitioner (Amit Goenka) in the writ petition for the belated challenge being raised to the appointment of KPMG as forensic auditor on 13 September 2021,” a division bench of the Bombay High Court comprising justices Rajesh S. Patil and A.S. Chandurkar had said.

‘A well-designed scheme’

Sebi issued a show-cause notice and interim order against Amit Goenka, Shirpur Gold Refinery, and five others on 25 April 2023 for alleged fraudulent practices and manipulation of financial statements at Shirpur Gold.

In its order passed by whole-time member Ashwani Bhatia, Sebi barred entities from diluting or selling their holdings in Shirpur Gold. Sebi also observed that Shirpur had allegedly created a scheme to divert funds from debtors to entities of promoter groups.

“It appears that the main reason for Shirpur’s defaults to lenders is non- receipt of funds from its debtors amounting to ₹404 crore. The same appears to be part of a well-designed scheme devised by promoters to move the funds out of Shirpur and transfer to their accounts while misusing the IBC process,” Bhatia said in the order. 

Sebi had given 21 days to Goenka and the others to file responses or objections.

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‘Not a forensic report’

At the Bombay High Court, Pradeep Sancheti, a senior counsel representing Amit Goenka, submitted that KPMG was not eligible to be called upon to submit a forensic report as it did not satisfy the eligibility criteria prescribed under the tender issued by Sebi.

He added that KPMG’s report submitted on 21 March 2023 could not be categorised as a ‘forensic report’ and that it did not mention a Unique Document Identification Number. The counsel added that KPMG’s name was not mentioned in the list of firms registered with the Institute of Chartered Accountants of India.

Mustafa Doctor, senior counsel appearing for Sebi, argued that if any adverse order was passed against Goenka, he could appeal against it. 

Since Sebi’s interim order was passed pursuant to the report submitted by the forensic auditor, and it was not challenged, the petition challenging the appointment of KPMG was merely meant to delay the court proceedings, he added.

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