Eros Fund Diversion Case: SAT Refuses To Interfere With SEBI's Order, Rejects Eros International's Appeals

The SAT denied the appeals of Eros, it’s managing director Sunil Arjan Lulla and it’s CEO Pradeep Kumar Dwivedi which posed a challenge to the order of the market regulator in the fund diversion case.

In it’s order dated June 22, Sebi barred Eros International Media, Lulla, and Dwivedi from the capital market with regard to a possible fund diversion case.

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In a recent development in the Eros fund diversion case, the Securities Appellate Tribunal (SAT) rejected Eros International Media Ltd.’s appeal challenging Sebi’s order restraining the company from the capital market. 

The SAT on Tuesday denied the appeals of Eros, it’s managing director Sunil Arjan Lulla and it’s CEO Pradeep Kumar Dwivedi which posed a challenge to the order of the market regulator in the fund diversion case, reported PTI. 

The tribunal’s bench consisting of Presiding Officer Justice Tarun Agarwala and Technical Member Meera Swarup said, “We do not find any reason to interfere with the impugned order at this stage and we dispose of the appeal directing the appellants to file reply/objection along with a stay vacation application to the ad-interim ex-parte order dated June 22, 2023, within three weeks.”

The media company and it’s executives had appealed to the tribunal against an interim order passed by the Securities and Exchange Board of India (SEBI) earlier on June 22. The tribunal in it’s order stated that the investigation prima facie disclosed funds being siphoned to multiple organisations of the appellant company ‘which cannot be lost sight of and in the absence of any cogent reply being given, we also find that some of the content advance entities being not existent also leads to a presumption of diversion of funds in the form of content advance and trade receivable.’

In it’s order dated June 22, Sebi barred Eros International Media, Lulla, and Dwivedi from the capital market with regard to a possible fund diversion case. Additionally, both Lulla and Dwivedi were forbidden from assuming the position of a director or top managerial personnel in any listed company, including Eros or it’s subsidiaries, till further notice. 

In addition to Eros International and it’s executive personnel, the two promoter organisations, Eros Worldwide FZ LLC and Eros Digital Private Ltd were also barred by the market watchdog. 

Sebi stated in it’s order that it found the accounts books of the company overstated and not representing an honest and fair depiction of the financial health of the company, the report noted. The regulator further stated that the transactions between the content advance entities and the trade receivable entities give room to the possibility that Eros was ‘circulating funds whereby amounts transferred as content advances were subsequently recognised as revenue by routing it through trade receivables entities’.

Sebi commented in it’s ruling that the company was still engaged in advancing funds to entities that potentially have been involved in the siphoning off funds to entities related to the promoters.