The Securities and Exchange Board of India (Sebi) on Friday imposed a total penalty of ₹29 crore on Suzlon Energy Limited (SEL) group’s Chairman and Managing Director Vinod Tanti, Executive Vice-chairman Girish Tanti, and two others for alleged lapses in disclosures of SEL’s financial statements.
Sebi alleged that the financial statements and disclosures disseminated by SEL did not reflect the true substance of the transactions, resulting in a misleading presentation of its profitability, net worth, leverage, financial exposure, and risk profile.
The market regulator imposed a penalty of ₹15.95 crore on SEL, and ₹5.75 crore and ₹5.45 crore on Vinod Tanti and Girish Tanti, respectively.
The matter pertains to the transfer of Operation & Maintenance Business (OMS) by SEL to Suzlon Global Services (SGSL) for ₹2,000 crore in FY14 and the recognition of a profit of ₹1,923 crore, leading to a presentation that SEL’s net worth was ₹2,664 crore instead of ₹741 crore.
Another issue raised in the order concerns contingent liabilities related to a stand-by letter of credit (SBLC) issued by SBI which was used to secure a loan for AE Rotor Holding BV (AERH), a wholly owned subsidiary of the company.
“SBLC exposure of $569.40 million, equivalent to approximately ₹4,050 crore, was reclassified as an insurance contract under Ind AS 104 and omitted from the designated contingent liability note in 2017-18 (FY18), resulting in a materially diluted presentation of SEL’s financial exposure,” noted Sebi.
The probe in the matter was initiated after an anonymous complaint in December 2019 against the firm, alleging irregularities in dealings with subsidiaries and associate companies.
“The violations established in this order are serious in nature as they relate to financial statements and disclosures of a listed entity, which constitute the basis on which investors and market participants assess the financial position and prospects of such entity,” noted Sebi whole-time member Sandip Pradhan in the order.
As the Tantis were non-executive directors, it was submitted to Sebi that they cannot be held liable for the alleged acts of the company.
“Persons occupying executive, managerial or finance positions in a listed company cannot evade liability merely because the disclosures were made by the company. Also the directors are the custodians of the company and are responsible for monitoring the activities of the company,” the order noted.
The order added that the role of key officials is not limited to merely attending meetings; they cannot escape liability.