Finding Prabhat Dairy and its promoters to be non-cooperative in a forensic audit, SEBI has asked Prabhat Dairy to deposit within seven working days the amount of Rs 1,292.46 crore to an interest-bearing Special Escrow Account.
The subsequent operations in the Special Escrow Account shall be monitored by JM Financial as its manager till the completion of the forensic audit.
The promoters, Sarangdhar Ramchandra Nirmal and Vivek Sarangdhar Nirmal, shall be restrained from disposing, selling or alienating, in any other manner, their assets or divert funds.
The company and its officials have been directed to cooperate with the forensic auditor appointed as per the SEBI letter dated July 17, 2020 and shall furnish all information/documents to the forensic auditor/SEBI within seven working days. The Audit Committee of PDL is directed to ensure that all data /information may be provided to the forensic auditor/SEBI within seven working days.
A SEBI order on Tuesday found, “It is necessary to adopt some urgent measures to safeguard the interests of minority investors/shareholders of PDL and protect the integrity of the securities market by ensuring that the proceeds of the Transaction are secured for the benefit of its investors.”
“However, having regard to the material available on record, the directions in these proceedings are limited to only PDL and its Promoters/Directors, viz. Sarangdhar Ramchandra Nirmal and Vivek Sarangdhar Nirmal as they have prima facie failed to cooperate with the forensic auditor appointed by SEBI and have not furnished the requisite information and documents which leaves an apprehension of fund diversion,” it said.
Further, the conduct of the Company and its Promoters/Directors does not inspire confidence in investors and exhibits blatant unwillingness to be transparent about the financial dealings. The stark opaqueness on the side of the Company and its Promoters/Directors as regards the availability of the Transaction proceeds for distribution to the shareholders of the Company (as had been publicly announced earlier) has aroused suspicion and anxiety in the minds of investors and other stakeholders, SEBI said.
The SEBI order said that the Company and its Managing Director have repeatedly failed to cooperate with the forensic auditor despite multiple efforts from Grant Thornton to obtain the information/documents needed for ensuring the commencement of the forensic audit directed by SEBI.
In addition, the Company and its Managing Director have also failed to adhere to the directions of SEBI for cooperating with the forensic auditor, which were communicated vide the aforementioned e–mails/letters.
“I note that unless the forensic audit is conducted, SEBI will not be in a position to determine whether or not the Company has indulged in misstatement of accounts, diversion of funds to its subsidiaries/associates, etc. which money belongs to its shareholders. While some information has emerged on the basis of a preliminary examination, only a detailed forensic audit could bring out the complete picture and the extent of the misstatement/misappropriation, if any. The Company appears to wilfully deny substantial information/documents to the forensic auditor appointed by SEBI. Further, some of the recent complaints received by SEBI against PDL (as brought out in the preceding paragraphs) point towards the Promoters/Directors trying to defraud the investors of their promised dues, related to the Transaction,” the order signed by SEBI Wholetime Member G Mahalingam said.
SEBI had received a complaint on September 16, 2020, from the minority institutional investors of the Company, viz. TVS Shriram Growth Fund 1B (7.6 per cent shareholding in the Company), India Agri Business Fund Limited (14.4 per cent shareholding in the Company) and Societe De Promotion Et De Participation Pour La Cooperation Economique (8.7 per cent shareholding in the Company) stating: “…It has (now) been more than 17 months since the closing of the Transaction and yet, so far, the Transaction’s net proceeds have not been distributed to the Company’s shareholders and we do not have the confirmation as to whether the monies are still locked in this Escrow Account. Despite repeated follow ups, no further conclusive explanations have been provided by the management or Company’s advisors in this regard.”