Sebi on 3 June referred the Rajesh Exports Ltd case to NFRA for appropriate actions.
A common feature seen in all the companies where alleged irregularities occurred—including in Rajesh Exports--is that their balance sheets looked clean until deficiencies were identified, and it is because the chief financial officers of the companies did not present the accounts in a transparent manner, Gupta.
India’s story of corporate scams is as fascinating as the cases reported abroad, Gupta said. “From Haridas Mundhra in 1956 till today, the latest in the news is Rajesh Exports. I would like to talk about a few things--how the CFOs are important for financial governance,” Gupta said at ASSOCHAM’s event on Future of Financial Governance.
Gupta said the deeper problem is in creative accounting or lack of disclosures. “Preparers of accounts were aware which way things were moving but (those) were not presented in a transparent manner. “CFOs should have the courage and capacity to present accounts in a transparent manner,” Gupta said.
Rajesh Exports has emerged as the latest instance of corporate governance failure in the country. The Securities and Exchange Board of India (Sebi) has launched an investigation into the company, alleging that the gold jewellery maker overstated its consolidated revenue by INR 15.15 trillion between FY21 and FY25.
An interim order by Sebi following a forensic audit showed that nearly 99% of the company's reported revenue during the period stemmed from overseas subsidiary, whose audited standalone financial statements showed only a fraction of the revenue.
Gupta did not specify what action NFRA will take. Queries emailed to Rajesh Exports on Wednesday remained unanswered at the time of publishing.
Gupta also pointed to complex corporate structures that have facilitated questionable fund transfers. "There is a large web of companies where money has been siphoned off without any genuine business purpose," he said. "Funds have moved from one entity to another without proper evaluation of the rationale behind such transfers."
Urging finance professionals and auditors to remain vigilant, Gupta said corporate risks are evolving rapidly. Besides traditional governance challenges, companies must now contend with threats arising from artificial intelligence (AI) and cyber vulnerabilities.
At the same time, AI can also help companies identify anomalies and strengthen fraud detection, Anita Shah Akella, joint secretary at Ministry of Corporate Affairs, who was also present at the event, said. “In many ways, balance sheets start whispering long before they start screaming,” she said.
“AI can help institutions move to predictive oversight from reactive oversight,” Akella said. But she also cautioned against over-reliance on technology.
"For India, sovereign AI is not merely a technological aspiration. It is in fact a necessity. But even sovereign AI will not be able to substitute for sovereign judgment. And this brings us to the most defining governance challenge of our times- the AI hallucination,” Akella said.
Corporate governance frameworks cannot afford decisions distorted by AI hallucination-induced inaccuracies, she added. "Technology tells us what is possible, while values help us decide what is desirable. Governance lies at the intersection of the two."
Gupta stressed that effective governance requires collective effort. "Sound corporate governance is not a solitary pursuit. It is a shared responsibility that demands foresight, collaboration and, above all, trust," he said.
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NFRA chairperson urged chief financial officers to present accounts transparently
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He flagged complex corporate structures that facilitate questionable fund transfers
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He warned against governance risks from AI and cyber vulnerabilities
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A senior MCA official said sovereign AI was a necessity, but couldn’t replace human judgement
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She said AI hallucinations could distort corporate decision-making
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