Tag: forensic audit

Sebi orders forensic audit of Future Retail accounts and its transactions with three group firms

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Stock market regulator Sebi has ordered a forensic audit of the accounts of debt-ridden Future Retail Ltd (FRL) for the financial years 2019-20, 2020-21 and 2021-22.

The Securities and Exchange Board of India (Sebi) has also asked for an audit of FRL’s Related Party Transactions (RPT) with three other Future group firms — Future Enterprises Ltd, Future Consumer Ltd and Future Supply Chain Solutions Ltd.

RPT refers to a deal or arrangement made between two parties related to each other by having a pre-existing business relation or common interest.

In their respective regulatory filings, the three Future group firms informed the exchanges that they have received a letter from Sebi on August 3, 2022, addressed to the Interim Resolution Professional of FRL intimating about the appointment of Choksi & Choksi LLP as a forensic auditor.

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This is with respect to “consolidated financial statements of FRL and audit of the books of accounts of the company and some other entities for review period being financial years ended 31st March 2020, 31st March 2021 and 31st March, 2022”, Future Enterprises said in its regulatory filing.

The audit will be “with respect to the related party transactions with FRL during the above review period,” said the three Future group firms. They have also assured their cooperation with the forensic auditors during the audit process.

While mentioning the reason for initiating a forensic audit, Sebi in its letter said it has “reasonable grounds to believe that the disclosure of financial information and the business transactions in the matter of FRL have been dealt with in a manner which may be detrimental to the interest of the investors or the securities markets and/or an intermediary or a person associated with the securities market”.

Also read: Three Future Group cos report payment defaults

It may have violated provisions of the SEBI Act, Securities Contracts (Regulation) Act, 1956 (’SCRA Act’), SEBI (PFUTP) Regulations, 2003 and the provisions as specified in Section 24 of the Companies Act, 2013 or any other Rules or the Regulations made or directions issued by Sebi there under, the letter added.

Last month, the Mumbai bench of the National Company Law Tribunal (NCLT) had ordered to initiate an insolvency proceedings against FRL after admitting the plea of the Bank of India.

Suspending the board of FRL, NCLT appointed an IRP (Interim Resolution Professional) and put the company under moratorium.

All four Future group firms were part of the 19 group companies operating in retail, wholesale, logistics and warehousing segments, which were supposed to be transferred to Reliance Retail as part of a Rs 24,713-crore deal announced in August 2020.

The deal was called off by billionaire Mukesh Ambani-led Reliance Industries Ltd in April after it failed to get support from lenders’ of the respective companies. Following this, the Kishore Biyani-led retail empire is in deep financial trouble.

Also read: Centre warns ed-tech companies of strict action if unfair trade practices continue

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Sebi asks listed cos to disclose forensic audit info to exchanges

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In order to address the gaps in availability of information, markets regulator Sebi has asked listed companies to make disclosures about initiation of forensic audit to stock exchanges. The move comes after Sebi’s board last month approved a proposal in this regard. The listed entities will make disclosures about the fact of initiation of forensic audit along with the name of the entity initiating such audit and reasons for the same, if available, to stock exchanges, Sebi said in a notification issued on Thursday.

Further, the companies will be required to disclose about final forensic audit report, other than for forensic audit initiated by regulatory or enforcement agencies, on receipt by the listed entity, along with comments of the management, if any. In addition, Sebi has made certain changes in rules for listed entities, which list their non-convertible debt securities, with regard to maintenance of asset cover and intimation about documents to debenture trustees.

Under the norms, listed entities will have to maintain 100 percent asset cover, or asset cover as per the terms of offer document, sufficient to discharge the principal amount at all times for the non-convertible debt securities issued. The regulator has removed the framework that said maintenance of 100 percent asset cover will not be applicable in case of “unsecured debt securities issued by regulated financial sector entities eligible for meeting capital requirements as specified by respective regulators”.

Further, the listed entities will have to promptly forward to debenture trustees a half-yearly certificate regarding maintenance of 100 percent asset cover, or asset cover as per the terms of offer document, in respect of listed non-convertible debt securities, by the statutory auditor along with the half-yearly financial results. The submission of half-yearly certificate is not applicable where bonds are secured by a government guarantee, Sebi said. Sebi has amended the Listing Obligations and Disclosure Requirements (LODR) regulation to make the above changes.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Sebi tightens forensic audit disclosure norms, introduces Code of Conduct for Fund Managers

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Capital market regulator Securities & Exchange Board of India (SEBI) on Tuesday mandated all listed entities to make disclosures on any forensic audit initiated along with the final audit report and management commentary.

In order to address the gaps in the availability of information on the forensic audit of listed entities, the Board has decided that in case of initiation of such audits, listed entities shall disclose to the stock exchanges the fact of initiation of forensic audit along-with name of entity initiating the forensic audit and reasons for the same.

The final forensic audit report shall also be disclosed on receipt by the listed entity, along with comments of the management.

However, forensic audit initiated by regulatory or enforcement agencies need not be disclosed, Sebi said.

Further, among a slew of decisions taken, the board also approved the amendment of Mutual Fund Regulations to introduce a Code of Conduct for Fund Managers including Chief Investment Officers and Dealers of AMCs. The Chief Executive Officer will be responsible to ensure that the Code of Conduct is followed by all such officers.

At present, this code of conduct is only applicable to trustees and the AMC.

The Board approved an amendment to MF Regulations to enable Asset Management Companies to become a self-clearing member of the recognised Clearing Corporations to clear and settle trades in the debt segment of recognised stock exchanges, on behalf of its mutual fund schemes.

The regulator also approved the proposal of strengthening the role of Debenture Trustees (DT) so as to protect the interest of debenture holders. The debenture shall exercise independent due diligence of the assets on which charge is being created. The DT shall take required action by convening the meeting of debenture holders for enforcement of security, joining the inter-creditor agreement (under the framework specified by RBI), etc.

Sebi also approved setting up of a limited purpose repo-clearing corporation.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Forensic audit bares ‘modus operandi’ of Rs 13,500 crore PNB scam

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In fresh and startling revelations, a Forensic Audit into the Punjab National Bank (PNB) Rs 13,500-crore scam involving absconder diamantaires Mehul Choksi and his nephew Nirav Modi, has zeroed in on the possible ‘modus operandi deployed to siphon off their illegal funds.

For starters, in the Forensic Audit – conducted by the Belgium-headquartered BDO’s India branch – it was found how Choksi’s company Gitanjali Gems Ltd’s multiple exporters of rough diamonds used a common account in the same bank, according to sources.

The exporters were: 4Cs Diamond, EMA Diamond LP with an account in Israel Discount Bank, Tel Aviv; Crown AIM Ltd, Taipingyang Trading Ltd. account with UCO Bank in Hong Kong; and Munic Gems LLC, Saumil Diam LLC holding an account in J.P. Morgan Chase, New York.

The Forensic Audit team found that Choksi’s diamond companies made “high value sales and purchases” through ‘potentially non-existent partners’ (bogus companies), using the same invoice for making multiple imports.

Some of these ‘non-existent partners’ include Premier Intertrade, Asian Corporation and Iris Mercantile, as per the forensic probe conducted for the Mumbai-based Bank of India (BoI).

The PNB also informed the BoI how fraudulent Letters of Undertaking (LoUs) of Rs 3,032.12 crore and FLCs worth Rs 1799.36 crore were issued in favour of Choksi’s group companies – Gitanjali Gems Ltd., Gili India Ltd. and Nakshatra Brands Ltd.

The Forensic Audit delved deeper to detect that a lion’s share – 87 per cent – of the Letters of Undertaking (LoU) pertained to only two companies – 4Cs Diamond and Shanyao Gong Si Ltd, both in Hong Kong.

BDO is investigating the entire methodology of the frauds perpetrated by the ‘Mama-Bhanja’ duo of Choksi-Nirav Modi and their companies, how the funds were used/misused/diverted/siphoned/etc, reportedly for a long-term period starting from 2010, informed the sources.

With this, the BoI becomes the latest in the string of Indian banks which have been defrauded directly or indirectly by the absconding duo since the PNB in January 2018 first admitted to the infamous Rs 13,500-crore scam, one of the biggest to clobber the country’s banking system so far.

After PNB, it was the State Bank Of India (Rs 405 crore), Oriental Bank Of Commerce (Rs 289 crore), Punjab & Sind Bank (Rs 44.10 crore), and now the newest in the Choksi-Nirav Modi ‘hit-list’ is the BoI (Rs 175 crore).

The BoI has named the prime defaulters as: Gitanjali Gems Ltd. and its group companies, Managing Director Choksi, Dhanesh V. Sheth, Nazura Y. Ajaney, Chandrakant K. Karkare (all Directors) and Pankhuri A. Warange – who is the Company Secretary.

Besides, there are corporate guarantors like Decent Securities & Finance Pvt. Ltd., Eureka Finstock Pvt. Ltd., Hyderabad Gems SEZ Ltd., Nashik Multiservices SEZ Ltd., and Decent Investment & Finance Pvt. Ltd.

The BoI said that although the aforementioned individuals/companies had the capacity to repay all their dues, they deliberately failed to fulfil their obligations towards the lenders and so have been declared as ‘Willful Defaulters’.

It has also labelled as ‘Wilfull Defaulters’ Fire Star International Ltd’s Managing Director Nirav Modi, Executive Director Haresh V. Shah, Non-Executive Director Angelina Nguyen, directors Suresh C. Senapaty, Ravi Shanker Gupta, besides independent directors Gautham Mukkavilli and Sanjay Rishi.

Hoping to recover its dues, the BoI has initiated further suitable proceedings against the companies and individuals.

“It is high time that the government directs all the banks defrauded by Choksi-Nirav Modi to come clean on their exposures in public interest and make a united effort to recover their dues,” banking expert and Maharashtra Convenor of Trade Unions Joint Action Committee V. Utagi told IANS.

In a recent booster to the Indian investigators, on December 4, 2019, the Bombay High Court rejected Choksi’s plea against the proceedings to declare him a ‘fugitive economic offender’.

A day later, a Special PMLA Court has proclaimed Nirav Modi to be a ‘fugitive economic offender’ – only the second so far in India, paving the way to attach and dispose off all his known assets/properties to recover the outstanding dues.

While ‘Mama’ Choksi has settled down in Antigua & Barbados, ‘Bhanja’ Nirav Modi is currently under judicial custody in a London jail with India making efforts to get them both extradited.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Jet Airways says forensic audit of specific transactions progressing after SBI directions

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Troubled carrier Jet Airways said on Monday that a forensic audit of specific transactions is being carried out following directions from State Bank of India (SBI).

The full service airline is grappling with financial woes and is looking to raise funds.

“As per the directions of State Bank of India, a forensic audit of specific transactions of the company for the period April 1, 2014 to March 31, 2018 is in progress.

“The company is fully cooperating with the auditors and providing them all the information, as is being sought in this connection,” Jet Airways said in a regulatory filing.

SBI, the lead banker to the airlines’ over Rs 8,000 crore loans, has mandated EY to conduct the forensic audit of its books, sources said last week.

The airline has been in the red for three consecutive quarters.

Sources had said the audit was ordered following a complaint of alleged financial irregularities in Jet Airways accounts by a whistleblower.

In August, the government had ordered an inspection of books and papers of the airline.

Last month, chief executive officer Vinay Dube said the airline was in active discussions with various investors to secure sustainable financing.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

SC orders forensic audit of real estate firm Unitech Ltd

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Supreme Court on Friday ordered forensic audit of embattled real estate firm Unitech Ltd which has failed to deliver flats to thousands of home buyers on time.

A bench headed by Justice D Y Chandrachud asked accounting firm Grant Thornton to carry out the forensic audit of Unitech Ltd and all its subsidiary companies since January 2006.

Advocate Brajesh Kumar, appearing for some of the home buyers, said the court has asked Grant Thornton to give its preliminary report by December 14.

The apex court has also asked the auditor to place before it the draft terms of audit and timeframe within which it would be completed.

On July 5, the top court had asked a panel headed by former Delhi High Court judge S N Dhingra to proceed with auction of Unitech Ltd’s unencumbered properties at Agra and Varanasi in Uttar Pradesh and Sriperumbudur in Tamil Nadu to refund money to the home buyers.

The court had set up a three-member panel for expeditious auction of over 600 acres of land of the real estate firm for refunding money to home buyers who do not want possession of their homes or flats.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow