SEBI Imposes Fine Worth Rs 2.46 Crore On Two Companies, Seven Individuals For Flouting Regulatory Norms

The markets regulator barred Girish Talwalkar, Prashant Talwalkar, Madhukar Talwalkar, Vinayak Gawande, Anant Gawande, Harsha Bhatkal, and Girish Nayak for varying periods.

The regulator levied penalties for flouting disclosure norms and PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) on Talwalkars Better Value Fitness Ltd. and Talwalkars Healthclubs Ltd.

The Securities and Exchange Board of India (SEBI) has levied penalties worth Rs 2.46 crore on two companies and seven individuals for violating regulatory norms. The markets regulator barred Girish Talwalkar, Prashant Talwalkar, Madhukar Talwalkar, Vinayak Gawande, Anant Gawande, Harsha Bhatkal, and Girish Nayak for varying periods.

The companies include Talwalkars Better Value Fitness Ltd. (TBVFL) and Talwalkars Healthclubs Ltd. (THL), reported PTI. The regulator levied penalties for flouting disclosure norms and PFUTP (Prohibition of Fraudulent and Unfair Trade Practices), it revealed in two separate orders. While Girish Talwalkar, Prashant Talwalkar, Anant Gawande, and Harsha Bhatkal have received a fine of Rs 36 lakh each from the regulator, Rs 24 lakh fine has been imposed on Vinayak Gawande and Madhukar Talwalkar, and a fine of Rs 12 lakh has been levied on THL. TBVFL has been slapped with a fine of Rs 24 lakh and Girish Nayak has been asked to pay a fine of Rs 18 lakh. 

With regards to TBVFL, Sebi also imposed a securities market ban on Girish Talwalkar, Prashant Talwalkar, Madhukar Talwalkar, Vinayak Gawande, Anant Gawande, Harsha Bhatkal, and Girish Nayak for 18 months and restricted them from being associated with any listed company or any intermediary registered with Sebi for the same time period. 

The regulator also banned Girish Talwalkar, Prashant Talwalkar, Anant Gawande, Harsha Bhatkal and, Girish Nayak from the market for 18 months with regards to THL and the debarment will start after the expiration of the period of restraints levied on the individuals and company in case of TBVFL. 

Sebi received various complaints against the two companies in 2019 from August to October period. The complaints alleged a default in interest payment on term loans in spite of a significant cash balance. 

According to the results of the companies for the financial year ending March 2019, both TBVFL and THL reported a total cash balance of around Rs 77 crore and the total default on interest payment stood at Rs 3.5 crore (term loan), as of July 2019. This created a doubt about the validity of their account books. 

After it’s preliminary examination, the regulator initiated a detailed investigation and KPMG was named the forensic auditor to assist the investigating authority in conducting an examination of the account books for both companies for a period of four fiscal years from 2016-17 to 2019-20. 

Post this, Sebi began an inquiry into the companies on the suspicion that their financials were being misrepresented to paint a healthy picture in front of the investors. In it’s order, the regulator found that both companies misreported their financial statements by inflating their bank balance, revenue, advances given to connected companies without rationale, and much more. 

Sebi's Executive Director, V S Sundaresan, noted in two separate orders, “I find that an act of concealment of information related to mis-utilisation of funds by a listed company, which if disclosed would have the potential to impact the share price of that listed company, is undoubtedly fraudulent and unfair trade practice relating to the securities market and covered under the PFUTP Regulations. I am of the view that by disseminating financial statements through the platform of stock exchanges(s) or otherwise, THL and TBVFL has attempted to demonstrate a rosy picture of its affairs, which was clearly misleading and was designed to influence the decisions of the investors dealing in its securities and thereby likely to induce sale and/or purchase in its securities, and thus, in effect has violated the PFUTP Regulations.”