Sebi refuses to stay audit of suspected shell firm Inter Globe Finance

IGFL is among the firms against whom Sebi initiated action in Aug 2017 by ordering trading restrictions after it received a list of 331 suspected shell companies

Markets regulator Sebi on Thursday refused to grant a stay on the forensic audit of Inter Globe Finance, which is suspected to be a shell company. 

In an interim order passed in March this year, Sebi had directed the stock exchanges to appoint a forensic auditor to verify any misrepresentation of financials and business of Inter Globe Finance Ltd (IGFL) and its subsidiaries as well as any misuse of the books of accounts.

Besides, the company's promoters and directors were permitted only to buy the securities of IGFL. However, the shares held by them were not allowed to be transferred for sale, as per the interim order.

Following the interim order, the company was given an opportunity to submit its explanations and it filed replies in that regard.

In respect of several transactions, IGFL has provided insufficient explanation/justification, which is not backed by independently verifiable documentary evidence, Sebi said in its fresh order dated December 27.

With regard to the wrong categorisations in the financials of IGFL that have been highlighted in the interim order, IGFL has admitted that the same were errors. It has offered no explanation as to why such errors (as claimed) had crept in its financials. It also failed to give any reason as to why the said errors did not come to its notice till the time Sebi highlighted the same, it added.

Accordingly, the Securities and Exchange Board of India (Sebi) has confirmed "the directions issued against IGFL to the extent that forensic audit directed vide interim order dated March 1, 2018 shall continue".

However, Sebi removed the restrictions placed on the promoters and directors of IGFL regarding the sale of securities of IGFL after finding "no prima facie evidence of misuse of funds".

IGFL is among the firms against whom Sebi initiated action on August 7, 2017, by ordering trading restrictions after it received a list of 331 suspected shell companies from the government. Pursuant to this, IGFL had moved the Securities Appellate Tribunal (SAT) that stayed trading restrictions imposed on the company. 

However, the regulator and stock exchanges were asked to continue their probe and initiate appropriate proceedings.