Britannia Industries has paid over Rs 46 lakh towards settlement charge to markets regulator Sebi to settle a case of alleged failure to carry out due diligence before giving effect to transmission of shares and issuance of demand draft. Britannia Industries Ltd allegedly violated Listing Obligations and Disclosure Requirements Regulations (LODR).
Sebi agreed to settle proposed adjudication proceedings in the case pertaining to violation of LODR norms after it was approached by Britannia Industries with a plea under the settlement regulations "without admitting or denying the findings of fact and conclusion of law". In a settlement order passed on Thursday, Sebi said it has disposed of the adjudication proceedings initiated against the applicant (Britannia Industries).
The case pertains to Sujit Kumar Gupta who held certain shares of Britannia Industries and died in 1985. Britannia Industries had forwarded a letter received from the legal heir of Gupta to its registrar and transfer agent, Sharepro Services (I) Pvt Ltd, wherein information about the shares held in the name of Gupta was requested.
Subsequently, Sharepro received a letter from Balram Mukheijee, enclosing a document, purportedly a court order passed in 1985, which said he was entitled to certain shares held by Gupta. Thereafter, 33,750 shares were transferred to Balram in terms of the court order. Britannia was also a party to the purported suit filed by Balram, the order noted.
The investigation conducted by Sebi revealed that the court order as submitted by Balram was a forged document. Therefore, it was alleged that Britannia Industries did not carry out the required due diligence before giving effect to transmission of shares. The transfers were allegedly approved without proper documents, the settlement order noted.
In addition, Britannia Industries allegedly exhibited negligence in issuance of demand draft. It was alleged that in spite of being aware of the demise of Gupta, demand draft in favour of 'Sujit Kumar Gupta' was issued upon Britannia's instruction by HDFC Bank, which was subsequently encashed by some other Sujit Kumar Gupta.
However, Britannia Industries, through an application filed in January 2020, proposed to settle the proceedings. Thereafter, high powered advisory committee of the regulator considered the settlement terms proposed by Britannia and recommended the case for settlement upon payment of Rs 46,21,875.
After approval of the recommendation by the panel of whole time members of Sebi, Britannia Industries remitted the settlement amount in August. "In view of the acceptance of the settlement terms and receipt of settlement amount as above by Sebi, the instant adjudication proceedings initiated against the Noticee (Britannia Industries).... are disposed of," Sebi said.
However, the regulator can restore the proceedings under certain circumstances, which include failure of the firm to comply with the settlement order or if the firm is found to have made untrue disclosures.