STATUTORY AUDITOR FINED RS 10,000 FOR NOT COMPLYING AS-15 AND TRANSPARENT AUDIT REPORTING.

 STATUTORY AUDITOR FINED RS 10,000 FOR NOT COMPLYING AS-15 AND TRANSPARENT AUDIT REPORTING.

ROC BENGALURU VS SDU HOLDINGS PRIVATE LIMITED

ROC Bengaluru penalized the statutory auditor of SDU Holdings Pvt. Ltd. ₹10,000 for failing to qualify the audit report on non-provisioning of terminal benefits, treating it as a violation of Accounting Standard (AS) 15 read with Section 129 of the Companies Act, 2013.

The auditor’s defense of “immateriality” was rejected, and the penalty was imposed under Section 450 following the Companies (Amendment) Act, 2020.

ROC Bangalore did not accept this contention and imposed a penalty of ₹10,000 on the Statutory Auditor.

Materiality judgment was not adequately documented; omission constituted a reporting lapse.

This case underscores that even “small” lapses in employee benefit provisioning can trigger penalties for auditors, highlighting the importance of rigorous compliance with AS-15 and transparent audit reporting.

# Your Compliance expert R V SECKAR, FCS, LLB 79047 19295,

SEBI FINES VEERKRUPA JEWELLERS AND MERCHANT BANKER ₹16 LAKH FOR MISUSE OF IPO ESCROW MECHANISM

 SEBI FINES VEERKRUPA JEWELLERS AND MERCHANT BANKER ₹16 LAKH FOR MISUSE OF IPO ESCROW MECHANISM

FACTS OF THE CASE

IPO FUNDS RELEASED DIRECTLY FROM THE ESCROW ACCOUNT TO VEERKRUPA JEWELLERS BYPASSING THE COMPANY’S BANK ACCOUNT

SEBI penalized Veerkrupa Jewellers Ltd (VJL), its Managing Director Chirag Shah, and lead merchant banker First Overseas Capital Ltd (FOCL) with a total fine of ₹16 lakh because nearly the entire IPO proceeds (₹7.95 crore of ₹8.10 crore raised in July 2022) were released directly from the escrow account to gold vendors, bypassing the company’s bank account — a clear violation of SEBI’s Issue of Capital and Disclosure Requirements (ICDR) Regulations.

SEBI’S FINDINGS

VIOLATION OF ESCROW MECHANISM:

·       Funds must first be credited to the issuer’s bank account before utilization.

·       Merchant Banker FOCL instructed Axis Bank (banker to the issue) to transfer funds directly to vendors using Annexure A2 of the Escrow Agreement, which is meant only for intermediary expenses, not vendor payments

REGULATORY BREACHES:

Merchant Banker FOCL and its officials violated Regulations 271 & 272 of ICDR, 2018 and Merchant Banker Regulations.

Managing Director Chirag Shah breached fiduciary duties under LODR Regulation 4(2)(f)(iii)(3).

KEY POINT:

 SEBI clarified that even if the funds were ultimately used for the disclosed purpose (gold purchases), compliance with the prescribed release mechanism cannot be bypassed.

KEY TAKEAWAYS

IPO proceeds must always flow through the issuer’s account before utilization.

Operational convenience or industry practice cannot override SEBI’s prescribed mechanisms.

Even without misappropriation, lapses in fund release procedures attract penalties to safeguard market integrity.

Veerkrupa Jewellers’ case shows that SEBI enforces strict adherence to fund release protocols, penalizing both issuers and merchant bankers when IPO proceeds bypass the mandated escrow-to-issuer route.

# Your Compliance expert R V SECKAR, FCS, LLB 79047 19295,

WHAT IF CHANDRA SEKARAN'S APPOINTMENT AS CHAIRMAN OF TATA GROUP BY TATA BOARD IS NOT APPROVED BY THE MEMBERS IN THE COMING AGM AS NOEL TATA IS OPPOSING HIS APPOINTMENT?

 WHAT IF CHANDRA SEKARAN'S APPOINTMENT AS CHAIRMAN OF TATA GROUP BY TATA BOARD IS NOT APPROVED BY THE MEMBERS IN THE COMING AGM AS NOEL TATA IS OPPOSING HIS APPOINTMENT?

LEGAL & GOVERNANCE CONSEQUENCES

VACANCY IN CHAIRMANSHIP:

Mr. Chandrasekaran’s current term runs until February 2027, but reappointment at the AGM is essential for continuity.

If members reject his appointment, the board must immediately elect a new chairperson from among its directors.

DOMINANT ROLE TATA TRUST

Tata Trusts (holding ~66% of Tata Sons) have decisive voting power.

Noel Tata, as a trustee and family representative, opposing Chandra Sekaran could sway the outcome if the Trusts vote as a bloc.

QUORUM & PROCEDURAL RISKS:

Quorum clauses in Tata Sons’ Articles of Association require the joint nominee of Sir Dorabji Tata Trust and Sir Ratan Tata Trust.

If quorum itself fails, the AGM may stall, leaving Chandrasekaran’s reappointment unresolved.

SHARE MARKET TURBULANCE

If Mr. Chandrasekaran’s reappointment is not approved in the coming AGM, Tata Group companies—especially TCS, Tata Motors, and Tata Steel—could see volatility similar to the turbulence during Cyrus Mistry’s ouster in 2016.

TATA GROUP’S STRATEGIC PROJECTS AT RISK:

Chandrasekaran has been central to initiatives like Tata Digital, Air India’s turnaround, and semiconductor ventures.

His exit could slow or derail these projects until a new chairman sets direction.

POSSIBLE SCENARIOS

NOEL TATA AS SUCCESSOR

If Noel Tata is positioning himself against Chandrasekaran, he could emerge as a consensus candidate backed by Tata Trusts.

This would mark a return to family-led leadership after a decade of professional chairmanship.

INTERIM CHAIRMAN:

The board may appoint an interim chairman (possibly from independent directors) until a permanent successor is chosen.

LEGAL CHALLENGE:

Chandrasekaran could contest the rejection if procedural irregularities (like quorum failure) are involved.

OPPRESSION & MISMANAGEMENT

If Tata Sons’ members reject N. Chandrasekaran’s reappointment, courts could intervene if procedural irregularities or oppression claims arise. Indian precedents show that shareholder rejection of directors is valid if due process is followed, but tribunals and courts have stepped in when removals were oppressive, lacked probity, or violated Articles of Association.

KEY TAKEAWAYS

If Noel Tata successfully blocks Chandrasekaran’s reappointment, Tata Sons faces a leadership crisis, potential legal battles, and market turbulence. The Trusts’ dominance means succession will likely be resolved internally, but the choice between professional management and family leadership will define the group’s next decade.

# Your Compliance expert R V SECKAR, FCS, LLB 79047 19295,

SEBI IMPOSED A PENALTY OF ₹18 lakh ON LYPSA GEMS & JEWELLERY LTD FOR NOT ATTACHING A CERTIFICATE FROM PCS THAT NONE OF DIRECTORS ARE DEBARRED OR DISQUALIFIED IN ITS ANNUAL REPORT

 SEBI IMPOSED A PENALTY OF  ₹18 lakh ON LYPSA GEMS & JEWELLERY LTD FOR NOT ATTACHING A CERTIFICATE FROM PCS THAT NONE OF DIRECTORS ARE DEBARRED OR DISQUALIFIED IN ITS ANNUAL REPORT

SEBI VS LYPSA GEMS & JEWELLERY LTD

FACTS OF THE CASE

 SEBI IMPOSED A PENALTY OF  ₹18 lakh ON LYPSA GEMS & JEWELLERY LTD FOR FAILURE TO  attach in the  Annual Report of a listed entity  certificate from a Practicing Company Secretary confirming that none of the directors have been debarred or disqualified from being appointed or continuing as directors attacks penalty.

WHAT IS THE VIOLATION?

Under Regulation 34(3) read with Schedule V, Part C, Clause 10(i) of the SEBI LODR Regulations, the Annual Report of a listed entity is required to contain a certificate from a Practicing Company Secretary confirming that none of the directors have been debarred or disqualified from being appointed or continuing as directors.

LEGAL BASIS

Regulation 34(3) read with Schedule V of SEBI (LODR) Regulations, 2015: Requires disclosure of PCS certificate in Annual Report.

Section 118(11) of Companies Act, 2013: Non-compliance with Secretarial Standards attracts penalties.

IMPLICATIONS FOR LISTED COMPANIES

MANDATORY PCS CERTIFICATE:

Every listed entity must attach the certificate in its Annual Report; omission attracts SEBI adjudication.

DUAL LIABILITY:

 Non-compliance can trigger penalties under both SEBI LODR and Companies Act, 2013.

GOVERNANCE RISK:

Even small lapses (like missing certificates) are treated as systemic weaknesses.

INVESTOR CONFIDENCE:

Repeated disclosure failures damage credibility and ESG scores.

IMPORTANT COMPLAINT CHECK LISTS FOR LISTED COMPANIES

·       Ensure PCS certification on directors’ eligibility is attached annually.

·       Disclose cash flow & consolidated financials without exception.

·       Include auditor’s reports and AOC-1 statements in every filing.

 

# Your Compliance expert R V SECKAR, FCS, LLB 79047 19295,

WHAT IS THE DOCTRINE OF IN PARI DELICTO?

 WHAT IS THE DOCTRINE OF IN PARI DELICTO?

COURTS CANNOT LEND THEIR ASSISTANCE TO AN ILLEGAL OR UNACCOUNTED TRANSACTION; THE LOSS MUST LIE WHERE IT FALLS.

You Cannot Recover Money through Court When the Payment Itself Was for an Illegal Purpose

Poosa Sri Krishna & Ors. v. Gattu Kishan Rao & Anr., 2026 INSC 974, decided on 31 August 2026, the Supreme Court held that where the plaint itself reveals that the money was paid for an illegal and fraudulent purpose, the suit cannot be permitted to proceed. The plaint was accordingly rejected

The underlying arrangement involved payments allegedly made for procuring bank loans, including amounts intended to satisfy bank officials in their personal capacity. The plaint also referred to the procurement and exchange of demonetized currency.

The Court held that law, opposed to public policy and fraudulent, rendering the agreement void under Section 23 of the Indian Contract Act, 1872, forbade the object of the arrangement.

Court then applied the doctrine of in pari delicto—where parties are equally at fault in an illegal transaction, the Court will not come to the rescue of either party

The Supreme Court also reaffirmed the principle laid down in G. Pankajakshi Amma v. Mathai Mathew, (2004) 12 SCC 83: courts cannot lend their assistance to an illegal or unaccounted transaction; the loss must lie where it falls.

# Your Compliance expert R V SECKAR, FCS, LLB 79047 19295,

TRANSPARENCY ISSUES IN BOARD EVALUATION PRACTICES IN COFORGE LIMITED

 TRANSPARENCY ISSUES IN BOARD EVALUATION PRACTICES IN COFORGE LIMITED

Coforge’s internal audit flagged serious governance lapses: former Chairman O.P. Bhatt received the lowest rating in the board evaluation, but this was withheld from the Nomination & Remuneration Committee (NRC) and the board.

The controversy led to Bhatt’s resignation on September 8, 2026, and has raised questions about transparency in board evaluation practices.

AUDIT FINDINGS (KPMG, Q2 FY26):

·       Detailed board evaluation reports were not circulated to all directors.

·       The lowest rating for the Chairman was omitted from discussions.

NO IMPACT ON FINANCIAL REPORTING

Coforge emphasized that the issue relates to governance evaluation, not financial reporting.

No impact on financial statements, revenue, or profitability.

GOVERNANCE TRANSPARENCY ISSUES 

The audit flagged non-disclosure of a low rating for the Chairman, leading to Bhatt’s resignation. While Coforge insists this has no financial impact, the episode highlights serious governance transparency issues that could draw regulatory and investor scrutiny.

# Your Compliance expert R V SECKAR, FCS, LLB 79047 19295,

₹890.52 CR TAX + EQUAL PENALTY UNDER SECTION 74 CGST ACT ON TATA STEELS LTD WAS STRUCK DOWN BY SUPREME COURT

 ₹890.52 CR TAX + EQUAL PENALTY UNDER

 SECTION 74 CGST ACT ON TATA STEELS

 LTD WAS STRUCK DOWN BY SUPREME

 COURT

                TATA STEEL LTD. V. UNION OF INDIA

Tata Steel faced ₹890.52 Cr tax + equal penalty under Section 74 CGST Act.

The Supreme Court in Tata Steel Ltd. v. Union of India (2026) held that a Show Cause Notice (SCN) under Section 74 of the CGST Act cannot merely use labels like “fraud” or “suppression” without laying out the foundational facts.

The ₹890.52 crore tax demand plus equal penalty was struck down because the SCN was based only on audit objections, not on the independent satisfaction of the assessing officer.

The Supreme Court has made it clear—Section 74 is not a routine extension tool. Authorities must prove fraud or suppression with facts in the SCN itself. For corporates, this ruling is a strong defense against vague, audit-driven GST demands.

# Your Compliance expert R V SECKAR, FCS, LLB 79047 19295,