Role of Statutory Auditors Highlighted in SEBI Interim Order Related to Structured Rotation of Funds

The interim order by SEBI dated 22.08.2023 has shed light on the forged bank statements submitted by the management of the company to the investigative authorities and the role of auditors in certifying the misrepresented financial statements.

The case involves raising of money by the company through preferential issue of shares to entities that were directly or indirectly connected to it and disbursing the proceeds as loans and advances to its subsidiaries. SEBI in its preliminary investigation found irregularities in the preferential allotments by the company which included:

a) Circulation of funds to create a false impression of receipt of warrant/share application money

b) Violation of lock-in norms

c) Partial return of warrant/share application money

d) Allotment of warrants/shares without a receipt or partial receipt of warrant/share application money

e) Diversion of proceeds of preferential allotments of warrants/shares

f) Submission of false/fabricated documents (bank account statements) to SEBI

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