SEBI has given Mishtan Foods about Rs. 100 crore ordered to bring back misappropriated funds, banned the company, the promoter from the markets

Capital markets regulator SEBI has sanctioned Mishtan Foods for about Rs. 100 crores, which the company allegedly misappropriated through dubious transactions with related parties.

SEBI has barred Mishtan Foods and five companies, including its promoter and CMD Hitesh Kumar Gaurisankar Patel, from the securities market till further orders for alleged financial mismanagement, fraudulent transactions and corporate governance lapses.

The regulator barred Mishtan Foods Limited (MFL) from raising money from the public and from associating itself with 12 entities including Hitesh Kumar, Navin Chandra Patel (CFO), Ravikumar Patel (former CFO) and Jatinbhai Patel (former whole-time director). With any SEBI-registered entity or, any listed company or any firm seeking to raise money from the public, until further orders.

The regulator, in its extensive investigation, found that the company transferred funds between promoters, directors and their relatives under the guise of legitimate business activities. The deadline for refund will be within 45 days of the order.

In addition, SEBI has banned key individuals and entities associated with the company from trading in the stock market for two years.

The interim order comes after an investigation into allegations of fraudulent activities spanning several years. The regulator said Mishtan Foods engaged in circular trading with fictitious buyers and suppliers, many of whom were shell entities controlled by the company’s directors and their associates.

“These transactions inflated the company’s financial performance on paper, misleading investors and regulators,” Sebi said in its order.

The investigation also revealed that the company was routing funds through a web of interconnected entities. For instance, suppliers such as Arihant Corporation and Mishtan Shopee appeared to be non-existent but accounted for significant transactions in Mishtan’s financial statements.

The company allegedly used these entities to create the illusion of business activity, while funds were being diverted to the personal accounts of the directors and their relatives.

Sebi’s probe also revealed that another red flag was the company’s transport costs for goods, where it claimed not to incur any transport costs, a statement contradicted by the statements of the parties concerned.

The regulator’s probe also found discrepancies in the company’s inventory records, with significant discrepancies between declared stock and actual holdings.

Mishtan Foods has been asked to provide a detailed plan to return the diverted funds. Company promoters, directors and auditors face constant scrutiny with possible criminal prosecution under SEBI regulations.

(with inputs from agencies)