Capital market regulator SEBI has ordered the textile company Binny Ltd to bring back the diverted fund of ₹706 crore into its bank account with an interest of 12 per cent to be computed from the date of each debit transactions leading to misappropriation from its accounts.

This apart, SEBI has levied a penalty of ₹6 crore each on M Nandagopal, Chairman, Arvind Nandagopal, Managing Director and T Krishnamurthy, Chief Financial Officer. It also imposed a penalty of ₹3.50 crore on Nate Nandha, Director of the company.

The regulator barred the company, Nandagopal, Arvind Nandagopal and Krishnamurthy from accessing capital market and holding position as director or key managerial positions for three years. Nandha was barred from capital market and holding key positions in listed entities for two years.

The penalty has to be paid in 45 days, said the SEBI order.

SEBI starting investigating into Binny in 2021 by appointing Chokshi and Chokshi to conduct forensic audit on the company’s financials.

Fund diversions

SEBI order said the fund diversions in the company had taken place from 2013-14 to 2020-21, which essentially means that over ₹700 core were never utilised for the purposes of the listed entity Binny. This has resulted in huge opportunity loss to the company’s shareholders and it is difficult to quantify the loss to investors, it said.

The promoter and promoter group shareholding in the company has gone down from 75 per cent in June, 2013 to 56 per cent as of June, 2024.

By misrepresenting the financial statements and by failing to make true and adequate disclosures, the company and its directors have not presented the true and fair view of the affairs in the company.

They have not only defrauded and misled the investors through their actions, omissions and contraventions but also impaired the integrity of the securities market, said SEBI.

Independent directors settlement

Incidentally, in February the four independent directors of Binny reached a settlement with SEBI without admitting or denying the findings in show cause notices issued to each one of them.

They have collectively paid over ₹42 lakh as settlement fees. Three of the directors including Justice (Retd.) S Jagadeesan, T Manisriram and Dr DVR Prakash Rao paid ₹11.05 lakh each and T Radhakrishnan paid ₹9.42 lakh.

In August 2023, the Supreme Court had dismissed the company’s plea to stay the show-cause notice issued by SEBI. This was after the Bombay High Court dismissed the company’s plea to stop the regulator’s investigation and accept their settlement application.

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