Sebi refuses to grant stay on forensic audit of Parsvnath Developers

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Markets regulator Sebi Friday refused to grant a stay on the forensic audit of Parsvnath Developers Ltd (PDL), which figured in the list of 331 "suspected shell companies".

In an interim order passed in August 2018, Sebi directed a stock exchange to appoint an independent forensic auditor to verify any misrepresentation including of financials or business by PDL in the context of the transactions during financial years 2009-10, 2010-11 and 2011-12, including the role of key managerial personnel, directors and promoters in them.

Also, the auditor was required to verify any misuse of the books of accounts and funds including facilitation of accommodation entries or compromise of minority shareholder interest in the context of the transactions during the three financial years, according to the interim order.

Following the interim order, the company was given an opportunity in November last year to submit its explanation.

After hearing the company's version, Sebi said Parsvnath Developers failed to give a "plausible reason/explanation along with documentary evidences for the charges /allegations / prima facie findings as described in the interim order".

The regulator believes that the entire extent of violations can be unearthed only by means of forensic audit.

Accordingly, Sebi has confirmed "the directions issued vide interim order dated August 8, 2018".

PDL is among the firms against which Sebi initiated action on August 7, 2017, by ordering trading restrictions, following receipt of a list of 331 "suspected shell companies" from the government.

The trade restrictions -- allowing trade only once a month and that too for only buy transactions with a 200 per cent security deposit -- were revoked in some cases, including that of PDL, a few days later following appeals filed by them with the Securities Appellate Tribunal, but Sebi was asked to continue with its probe and pass its orders expeditiously.