Sun Pharmaceutical Industries — along with seven of its executives including Dilip Shanghvi (managing director) and Sudhir Valia (director) — has settled a pending dispute with the Securities and Exchange Board of India (Sebi) by agreeing to pay a cumulative penalty of Rs 2.92 crore.
Sun Pharma has agreed to pay Rs 56 lakh, while Shanghvi will pay Rs 62.3 lakh, and Valia Rs 37.4 lakh. Other individuals have agreed to pay between Rs 18.5 lakh and Rs 37.4 lakh.
The matter pertains to violation of related party norms and allegations of fund diversion. Two whistle-blowers had alleged that Sun Pharma and its wholly owned subsidiary Sun Pharmaceutical Laboratories had been diverting funds through Aditya Medisales, its sole distributor in India. It was further alleged that the diversion continued for several years but Sun Pharma had declared Aditya Medisales as a related party only in 2017-18.
Based on the allegations, Sebi launched an investigation as well as a forensic audit.
It was observed that the pharma major had failed to comply with relevant regulations pertaining to related parties.
According to the Sebi order, Sun Pharma had failed to obtain prior approval of the audit committee for transactions with Aditya Medisales. Further, it had failed to obtain shareholders’ approval despite the transactions with Aditya Medisales qualifying as ‘material’ related-party transactions. The firm didn’t disclose these related-party transactions even in its annual reports.
In March 2020, Sebi initiated adjudicating proceedings in the matter. Later, in May, the regulator issued show cause notices to Sun Pharma and the seven individuals.
While the proceedings were on, Sun Pharma and the noticees filed an application for consent settlement — by way of which an alleged wrongdoer can settle proceedings with Sebi without admitting or denying the charges, by paying a settlement fee.
Sebi’s high-powered advisory committee accepted the settlement plea in December.