‘Misleading financial statements’: Suzlon to challenge Sebi’s penalty order before SAT

Suzlon Energy plans to challenge SEBI’s recent order imposing a fine of nearly Rs. A fine of 29 crores was imposed. In an exchange filing, Suzlon said it intends to file an appeal before the Securities Appellate Tribunal (SAT) against the regulator’s order on May 29.

“Sebi’s findings in the said order pertain to the company’s financial statements for FY14 to FY18. The company will file an appeal before the Securities Appellate Tribunal in respect of SEBI’s order,” the company said.

The development comes a day after SEBI imposed penalties on Suzlon and a number of former senior executives following a long-running probe into the company’s historical financial reporting practices.

The market regulator imposed on Suzlon Rs. 15.95 crore was levied, while former executive Vinod R Tanti was fined Rs. 5.75 crore and Girish R. Tanti Rs. A fine of 5.45 crores was imposed. Former Group CFO Kirti J. Wagdia was paid Rs. 1.5 crore was fined, while former CFO Amit Agarwal was fined Rs. 30 lakhs was directed to be paid.

SEBI conducted a forensic audit and investigation covering several financial years after the regulator received a complaint alleging irregularities in transactions involving subsidiaries and associated entities.

The regulator concluded that certain transactions between Suzlon and its subsidiaries had the effect of overstating profits and strengthening the financial position of the company.

Among the issues examined were transfers of businesses and investments between group entities, accounting treatment of contingent liabilities, reversal of impairment and disclosures in financial statements.

According to SEBI, some transactions involving subsidiaries resulted in substantial accounting benefits being recorded without reflecting the underlying economic reality of the arrangement. The regulator also questioned the treatment of certain liabilities and fund flows between group entities, concluding that the company’s disclosures did not present a true and fair picture of its financial position during the period under review.

Sebi said accurate financial statements are important as investors rely on them while assessing the health and prospects of listed companies. The regulator said financial penalties are required under the norms of disclosure of violations, listing rules and provisions related to fraudulent and unfair trade practices.

However, Suzlon has now moved to challenge the findings before the Appellate Tribunal.

The company has made a significant turnaround in the past few years after emerging from a prolonged debt crisis and has emerged as one of the biggest beneficiaries of India’s renewable energy push. It has recently reported strong operational performance and is one of the largest wind power equipment manufacturers in the country.

An appeal to the SAT will determine whether the regulator’s findings and penalties are upheld, modified or set aside. Until then, SEBI’s order will remain in force.

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