Sebi imposes a penalty of Rs 7,00,000 on NHAI for disclosure lapses

Capital markets regulator Sebi on Tuesday imposed a penalty of Rs 7 lakh on the National Highways Authority of India (NHAI) for delay in making timely disclosure about financial results.

Sebi had conducted an examination in the matter of NHAI from financial year 2015-16 to 2018-19.

During its investigation, Sebi found that NHAI delayed filing of its half-yearly financial results by 4 days to 78 days between 2015-16 to 2018-19.

The regulator had advised NHAI for strict compliance with the LODR (Listing Obligations andDisclosure Requirement )Regulations in future.

However, despite the advisory by Sebi, NHAI did not submit the financial results on time with respect to the half year ending on September 30, 2018 and March 31, 2019.

The results were submitted with a delay of 19 days and 78 days, respectively.

"There was repeated failure (seven instances during FY 2015-16 to FY 2018-19) on the part of the noticee (NHAI) regarding compliance with the provisions ...LODR Regulations," Sebi said in an order.

Accordingly, the regulator imposed a penalty of Rs 7 lakh on NHAI.

In its reply to a show cause notice (SCN) issued by Sebi, NHAI said it seeks approval of the majority of its board members in relation to all matters including approval of unaudited half yearly results.

Due to lack of quorum of board, that is due to absence of required part time board members, despite all efforts by the company, it failed to meet the stipulated timelines.

NHAI further contended that it is an entity which has been established by the Government of India under specific Statute and has been classified as 'State' within the meaning of Article 12 of Constitution of India.

Its board includes public servants, and therefore issuance of SCN warranted prior consent from central government as provided under the 'Code of Criminal Procedure', and therefore the instant SCN infringes with the said statutory immunity and is thus liable to be withdrawn.

Under the LODR norms, listed entities are required to submit unaudited or audited financial results on a half-yearly basis in a prescribed format within 45 days from the end of the half year to the recognized stock exchanges.

Sebi, in its order, said that timely disclosure of relevant information by listed companies is essential for maintaining transparency about the affairs of the company which helps in eliminating information asymmetry.

Moreover, correct and timely disclosures play an essential role in proper functioning of the securities market, and failure to do so results in depriving the investors from taking well informed investment decisions.