SAT refuses stay on market regulator Sebi's order against Brightcom

The Securities Appellate Tribunal (SAT) on Thursday refused to interfere in the market regulator’s order against the Brightcom Group.

“Though investigations are ongoing, examination of transactions pertaining to 22 allottees out of 82 allottees of preferential allotments have pointed to evidence of prima facie diversion of funds by Appellant No. 2. In the absence of any evidence to the contrary being filed by the appellants before me, I do not find any lacunae in passing of the impugned order,” noted Meera Swarup, technical member, SAT.

"I do not find any reason to interfere in the impugned order at this stage," she added.

In an order dated August 22, 2023, the Securities and Exchange Board of India (Sebi) had barred Brightcom’s then chairman S.K. Reddy from the markets and debarred from holding director post in listed companies.

Brightcom Group had appealed before the tribunal seeking stay on Sebi’s order barring Reddy and the company’s Chief Financial Officer Narayan Raju from holding key positions citing impact on revenue and operations.

Sebi had also barred 21 others, including ace investor Shankar Sharma, from diluting their stakes in the company.

Sebi whole-time member Ashwani Bhatia had noted in the order that the company submitted forged and fabricated bank account statements to Sebi with a deliberate intent to mislead.

Sebi had prima facie observed that Brightcom itself financed its preferential allotment by round-tripping of funds and the accounting of receipt of share application money in a fictitious manner led to an inflated book of accounts.

The shares of Brightcom have fallen nearly 20 per cent since the Sebi order in August 2023.