Sebi slaps Rs 2.5 cr fine on TIL, former officials over 'fake' transactions

Markets regulator Sebi has imposed a penalty of Rs 2.5 crore on TIL Ltd and three former officials for indulging in fictitious purchase and sales leading to over-statement of sales and revenue for 2019-20 and 2020-21.

The fine needs to be paid within 45 days, the Securities and Exchange Board of India (Sebi) said in its order.

Individually, the regulator has levied a fine of Rs 1 crore each on TIL and Sumit Mazumder, who was the chairman and managing director at the time of the violation. He is also one of the promoters of the company.

Besides, a penalty of Rs 25 lakh each has been imposed on then CEO Ramesh Aggarwal and former CFO Shibaditya Ghosh.

In its order, Sebi noted that the modus operandi followed by TIL was that it had issued fictitious invoices in the past financial years, which were subsequently cancelled in the next financial years by the issuance of credit notes and re-invoiced on the same day without proper documents to increase the sales turnover or trade receivables so as to maintain the credit facilities availed from the banks.
 

This had resulted in the overstatement of sales or trade receivables in the financial years 2019-20 and 2020-21, it added.

"The notice no1 (TIL) had allegedly carried out fictitious purchase and sales transactions with Ganesh International, Upgrade Tracom, BPS Foundations, Maa Tara Electricals, Dutta & Associates, Roshni Enterprises and Chennai Radha Engineering Works Pvt. Ltd. (CREWPL) which resulted in overstatement of sales, revenue, purchases and inventory for the FYs 2019-20 and 2020-21," Sebi said in its 75-page order.

Through such acts, the entities violated the provisions of Sebi's LODR (Listing Obligations and Disclosure Requirements) and PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules.

The order came after Sebi had conducted an investigation into the matter of TIL Limited after receiving complaints alleging that the audited balance sheet for FY 2020-21 was fudged and fictitious trading in steel was recorded for padding up the top lines for the banks.

Similarly, it was alleged that sales were billed to one customer, Chennai Radha Engineering Works and GST was paid, while the order was never received.