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    Sun Pharma-AML whistleblower case: Here's how it unfolded

    Sun Pharma-AML whistleblower case: Here's how it unfolded

    Sun Pharma-AML whistleblower case: Here's how it unfolded
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    By CNBCTV18.com  IST (Published)

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    Sebi's internal committee held the board of directors and directors responsible for the acts of omission and commission by the company.

    Sun Pharmaceutical Industries Ltd, India's largest drugmaker which had been battling accusations of fund diversion, has finally settled the whistleblower complaints with the Securities and Exchange Board of India (Sebi).
    Sun Pharma's senior management paid a total settlement amount of Rs 2.36 crore on February 11 (Thursday), of which Rs 62.35 lakh was borne by its managing director Dilip Shanghvi as approved by an internal panel of Sebi. This information on the order was uploaded on the market regulator’s website.
    Sebi was conducting a probe following two whistleblower complaints against the pharma major and its wholly-owned subsidiary — Sun Pharmaceutical Laboratories — pertaining to alleged diversion of funds through its Aditya Medisales Ltd (AML), its sole distributor in the country and a related party under Sebi regulations.
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    It was alleged that such transactions had been happening for many years and Shanghvi was getting some extra financial benefits from the company's operations through related-party transactions. AML was disclosed to be a related party of Sun Pharma only around 2017-18.
    Following a forensic audit report and subsequently an investigation, Sebi noted that the drugmaker had not abided by compliances prescribed under the listing regulations. It also found fault with Sun Pharma in failing to get prior approval of its audit committee for transactions with AML while shareholder approval for related-party transactions was not obtained.
    The market regulator also found that while such transactions were disclosed in the annual reports for FY 2015-16 and 2016-17 and relevant compliance pertaining to related parties, as mandated under Sebi LODR (Listing Obligation and Disclosure Requirements), had not been made with regard to AML.
    Sebi's internal committee held the board of directors and directors responsible for the acts of omission and commission by the company.
    It, however, mentioned that under Regulation 28 of the Settlement Regulations, it had the right to take enforcement action regarding the settlement order if any representation made by the applicants were later found to be untrue or breached any clause or condition filed during the proceedings.
    Key executives of the company who also paid settlement charges included chief financial officer Uday Baldota (Rs 24.65 lakh), whole time directors Kalyanasundaram Subramanian (Rs 36.9 lakh), Sailesh T. Desai (Rs 37.41 lakh) and Sudhir V. Valia (Rs 37.41 lakh), but without admission or denial of guilt.
    In October 2018, a whistleblower sent a 172-page letter to Sebi, alleging corporate governance lapses at the drugmaker. The complaint stated transactions worth over 58 billion rupees ($815 million) with Suraksha Realty, controlled by Sun's co-promoter Sudhir Valia, had taken place.
    Two months later, a media report had claimed that Sebi, with the help of a whistleblower tip-off, was reopening an insider trading case against Sun Pharma to probe alleged lapses by some of its promoters in raising funds overseas.
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