Regulator Sebi has barred Kavit Industries and its directors from capital markets for three years for misuse of company funds and misrepresentation of the books of accounts.
Besides, the regulator has directed that a copy of the ruling should be forwarded to "the Ministry of Corporate Affairs (MCA) along with a copy of the forensic audit report for their information."
The company features in the list of 331 suspected shell companies released by the ministry.
Sebi had initiated action against Kavit after the MCA had directed the regulator to initiate necessary action under its regulations.
Sebi in an order said Kavit Industries, directors -- Jayesh Raichand Bhai Thakkar, Amit Tarachand Shah, Jigar Motta, Chirag Thakkar,Bhavesh Desai,Nikhil Bhut, Kalyani Rajeshirke and Kiran Soni-- "are restrained from accessing the securities markets" for 3 years.
Moroever, the regulator prohibited directors "from holding any position as director or key managerial person of any other listed company for a period of 3 years."
In February this year, Sebi in an order had directed exchange to appoint independent auditor to conduct forensic audit of Kavit Industries for verification of financials of the firm for violating LODR (Listing Obligations and Disclosure Requirements) regulations including misuse of company funds.
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In a fresh order, market watchdog observed from the forensic audit that irregularities/misstatements from the annual reports books of accounts of firm were within the knowledge of the company and its directors and misused company funds including through grant of loans, which have in most cases not been recovered.
In addition to that the entities have not been able to substantiate the increase in revenue from Rs 33.96 crores in financial year 201516 to Rs 177.93 crore in 201617 with sufficient documentary evidence, Sebi said.
Therefore, the entities had employed fraudulent methods to misrepresent books of accounts, Securities and Exchange Board of India(Sebi) said in an order dated Sep 28.
By indulging in such activities, entities violated LODR and PFUTP (Prohibition of Fraudulent and Unfair Trade Practices), said Sebi.
"Actions of the company and its directors clearly resulted in fraud' as defined under the PFUTP Regulations" and by "failing to abide by the principles governing disclosures and obligations" in respect of its financial results, contravened LODR provisions, the regulator noted.
Accordingly, Sebi banned Kavit Industries and its directors for three years.
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