Suspected shell firms: Sebi seeks forensic audit of 2 firms

Sebi has ordered forensic audit of two companies -- ARSS Infrastructure Projects and Jai Mata Glass -- which were among the 331 suspected shell companies, even as it lifted the trading restrictions imposed on them.
After receiving the list of 331 suspected shell companies from the corporate affairs ministry, Sebi imposed trading curbs on these firms, including ARSS Infrastructure Project Ltd (AIPL) and Jai Mata Glass Ltd (JMGL), on August 7.
The watchdog has directed stock exchange to appoint an independent forensic auditor to verify various factors, including whether there has been misrepresentation of financials and misuse of funds of AIPL.

Earlier this month, the watchdog had removed curbs imposed on some entities that featured in the list of 331 suspected shell companies.
In a 15-page interim order, the regulator has said trading in securities of AIPL would be reverted to the status as it stood prior to August 7.
"The promoters and directors in AIPL are permitted only to buy the securities of AIPL. The shares held by the promoters and directors in AIPL shall not be allowed to be transferred for sale, by depositories," the order issued on Monday said.

While ordering a forensic audit, the regulator said various aspects need to be verified including whether AIPL has actually executed the contracts claimed to have been undertaken by it from "PACL, PGFL, Rajesh Projects (India) Pvt Ltd, Aerens Goldsouk International Ltd and Mahaveer Infra Engineering (P) Ltd".

In case these contracts were not executed, the extent of value of artificially inflated revenue of AIPL and the illegal gain if any, earned by it should be verified, it added.
"In view of the prima facie evidence on misrepresentation by the company and strong suspicion of misuse of funds/ books of account... the persons who are in control of the company and the directors of the company are prima facie liable for action by Sebi and should not be permitted to exit the company at the cost of innocent shareholders," the order noted.
In a separate order, Sebi has ordered appointing an independent auditor to carry out forensic audit of JMGL. At the same time, the regulator has lifted the trading curbs on the company.

The audit would be for "verification, including the credentials/ financials of JMGL and to trace the end-use of proceeds of sale of land by JMGL".
Besides, the limitation on the transfer of shares held by the promoters and directors of JMGL has been removed since there is no prima facie evidence of misrepresentation or misuse of books of accounts or funds by the company.