2025 (6) TMI 1673 - Board - SEBI

Violations of Listing agreement/ LODR Regulations and PFUTP Regulations - Sebi Interim Order against Company and its promoters/ directors - misstatements and accounting irregularities in Company s financial statements for Financial Years (FYs) from 2014-15 to 2019-20 and accounting irregularities and other disclosure violations were part of a scheme to defraud investors which enabled promoters to offload their shares at elevated prices - Whether BGL failed to comply with Accounting Standards which led to violation of Listing agreement/ LODR Regulations? - HELD THAT - Ind AS 36 requires an entity to consider the carrying amount of investment in its separate financial statements and consolidated financial statement as one of the criteria for impairment assessment. Obviously therefore in the facts of this case when the carrying amount of the investment (YMA) in BGL s separate financial statement exceeded the carrying amounts of the investee s (YMA s) net assets in BGL s consolidated financial statements BGL should have impaired its investment in its standalone financial statements in FYs 2018-19 and FY 2019-20. In fact while not specifically alleged in the SCN given that YMA had declared bankruptcy in 2016 impairment should have been suitably recognised in 2016 itself. Be that as it may as discussed earlier Ind AS 36 requires impairment loss to be given effect immediately in profit or loss if the asset is not revalued. Since no revaluation had been done the contentions of the Noticee with respect to ongoing settlement and bringing back of the asset to Brightcom group are simply not tenable or substantiated. In any case hopes and prayers for a favourable resolution tomorrow cannot be the basis to avoid adherence to basic accounting standards today. Therefore find that BGL violated Regulation 48 of the LODR Regulations read with para 12 of Ind AS 36. BGL s incorrect accounting treatment of impaired assets in the consolidated financial statement under OCI instead of profit or loss in accordance with Ind AS 36 led to overstatement of its profit in FY 2018-19. By capitalizing its R D costs (basis aggregation of subsidiaries standalone financial statements in Interim Order) BGL improperly moved these expenditures from P L statement to its balance sheet thereby reducing its current period expenses and artificially inflating its profit. Accordingly find that the accounting policy followed by BGL that led to wrong capitalization of R D costs as assets is in violation of AS 26 (for FYs 2014-15 and 2015-16) and Ind AS 38 (for FYs 2016-17 to 2019-20). Therefore find that BGL has violated Clause 50/ Regulation 48 read with AS 26 and Ind AS 38. Asset recognition criteria as stated in AS 26 and Ind AS 38 was not being met for BGL to transfer the additions to Intangibles under Development and Capital Work-in-Progress each year to Intangible Assets in the subsequent year. As per section 10(1)(3) of the Depositories Act 1996 a beneficial owner is entitled to all the rights and benefits and be subjected to all the liabilities in respect of his securities held by a depository. The above indicates that promoters of BGL had done off-market transfer of shares which is being referred to as pledge of shares. Thus from the above note that there was no valid pledge created in respect of promoter shares of BGL. Hence BGL s submission is without merit. Thus we note that BGL filed incorrect shareholding pattern claiming that the shares of promoters were pledged when it was actually transferred. In view of the above I find that BGL violated clause 35 of the erstwhile Listing Agreement (up to November 30 2015) and Regulation 4(1) (c) (h) 31(1)(b) of LODR Regulations read with SEBI circular no. CIR/CFD/CMD/13/2015 dated November 30 2015 (w.e.f December 01 2015). Issuing false and misleading press release with respect to appoitment of internal auditor - Making incorrect disclosure about appointing EY as internal auditor BGL had misrepresented to stock exchanges and investors and violated regulation 4(1)(c) and (h) of LODR Regulations. Did not carry our review or audit of quaterly results for FY 2019-20 - Financial information of 14 subsidiaries of BGL were not subjected to limited review by the auditor in the unaudited quarterly results for September 2019 as the same were reviewed by BGL and then submitted to the auditor. The total consolidated revenue of BGL as per September 2019 unaudited quarterly financial results was INR 629.57 crores out of which revenue of subsidiaries not reviewed/ audited amounted to INR 513.02 crores i.e nearly 81% of revenue of BGL was not reviewed/ audited for September 2019. Financial information of 14 subsidiaries of BGL was not subject to audit. The total consolidated assets of BGL as on March 2020 was INR 3, 270 crores out of which assets of subsidiaries not reviewed/audited amounted to INR3, 058.99 crores i.e nearly 93.55% of assets of BGL was not reviewed / audited for March 2020. As established above at least 80% of each of the consolidated revenue assets and profits of quarterly financial results of FY 2019-2020 was not subjected to limited review. Thus find that BGL has violated regulation 33(3)(h) of LODR Regulations. Failure to ensure the constitution of the audit committee with effect from October 01 2014 i.e. Delay in obtaining shareholders approval for appointment of Mr. R Allamsetty and Compliance with conditions of independence with respect to appointment of Mr. R. Allamsetty as independent director - Noticee company have contended that the standalone financial statements of its subsidiaries are available and they have been regularly published in the annual report which is available on the website of the Company. I note that the requirement is to publish the standalone financial statements under a separate section post 01.04.2019 on its website and not in its annual report. Noticee 2 has submitted that not seeking exemption from SEBI from publishing the subsidiary financial results on the applicability of regulation 46 of the LODR Regulations was purely unintentional and without malafide intent. In this regard these being civil quasi- judicial proceedings establishing the said violation guilty intent or mens rea is not required to be established. Failure to comply with statutory requirement mentioned herein per se attracts the violation. In view of the above find that BGL has violated regulation 4(1)(d), (g), (h), (i), (j) and 46(2)(s) of LODR Regulations. Did not maintain structured digital database - BGL eventually disclosed impairment of assets due to GDPR in FY 2019-2020 of INR 868.30 crores under OCI in Profit Loss Statement without explaining the reasons for delay as required in regulation 30(6) of the LODR Regulations. Mr. Vijay Kancharla (Noticee 3) in his reply has submitted that till May 2018 BGL was mapping its features/ components to requirements of GDPR and testing whether those features/ components were to be offered to customers or not. Therefore he has argued that the statement There are no Material Changes and Commitments affecting the financial position of the Company which occurred between the end of the financial year to which the financial statements relate and the date of this Report in the director s report for the FYs ended on March 31 2016 and March 31 2018 dated November 21 2016 and October 16 2018 is correct. Since GDPR was enacted in April 2016 I find that BGL was obligated to disclose impact of GDPR on its business in FYs 2016-17 to 2018-19. Therefore the submission that BGL was evaluating effect of GDPR until FY 2019-2020 is not tenable. Regulation 30 r/w clause 7 of para B of Part A of Schedule III of LODR Regulations has been violated in FYs 2016-2017 2017-2018 and 2018-2019. Further BGL has also violated regulation 34(2) of the LODR Regulation by not disclosing introduction of GDPR as Threats Outlook Risks or Concerns in the MDAR in the Annual Reports for the FYs ending March 31 2017 to March 31 2020. Whether there was a violation of PFUTP Regulations? - Explanation to Regulation 4(1) of the PFUTP Regulations which was inserted on October 19 2020 as clarification (i.e. something which was earlier implicit has now been made explicit by adding the aforesaid Explanation) also effectively reiterates the prohibitions stated in the Section 12A of the SEBI Act and regulation 3 of the PFUTP Regulations. The Explanation which was inserted for the removal of doubts clarifies that any device scheme or artifice to manipulate financial statements that would directly or indirectly manipulate price of the company s securities would be deemed to have always been considered as manipulative fraudulent or unfair trade practice in the securities market. Accordingly I find that BGL has violated Regulation 3(c) 3(d) and 4(1) of PFUTP Regulations for the impugned period. Post amendment with effect from February 2019 Regulation 4(2) of PFUTP Regulations lists thereunder those actions or omissions which are deemed to be fraud. The Interim Order cum SCN inter alia alleges that the accounting irregularities and other disclosure violations resulted in violation of regulations 4(2)(f) (k) and (r) of PFUTP Regulations. In the foregoing paragraphs of this Order have concluded that the financial statements were in fact egregiously misstated due to accounting irregularities. As stated above once the actions/ omissions listed in these clauses are factually established the law does not require separate finding of fraud . Accordingly I find that in addition to Regulation 3(c) 3(d) and 4(1) of PFUTP Regulations during FY 2019-20 BGL violated Regulation 4(2)(f) (k) (r) of PFUTP Regulations. Fraudulent schemes of this nature in securities markets cannot be perpetrated by one or two persons alone. There are likely to be several persons who may be involved in various aspects of fraud the activities of whom when individually seen in isolation may appear genuine or mundane. Fraudulent schemes of this nature in securities markets usually involve co-ordinated activity by several connected persons individually playing separate parts. By preponderance of probability Noticees 2 to 5 participated in the fraudulent scheme involving misrepresentation of financial statements and disclosure violations which enabled the promoter group to offload their shareholding in BGL. The role played by these Noticees in the company have already been explained in the foregoing paragraphs. Further Noticees 2 3 are the promoters of BGL who directly benefited from this fraudulent scheme. Therefore Noticees 2 3 4 and 5 are vicariously liable for the accounting irregularities and disclosure violations of BGL. Thus find that Noticees 2 3 4 5 have violated Section 12A(b) (c) of the SEBI Act Regulations 3(c) 3(d) 4(1) 4(2)(f) 4(2)(k) and 4(2)(r) of PFUTP Regulations. Whether issuance of directions and/ or penalty under sections 11(1) 11(4) 11(4A) 11B(1) and 11B(2) of the SEBI Act are warranted? - Considering the long period during which the misstatements continued and the persistent non-cooperation with SEBI s investigation and the multifarious violations of law perpetrated by the Noticees stringent remedial and penal directions are warranted in this case. Since the fraudulent scheme was evidently designed to benefit the promoter directors who offloaded a large portion of their shares and taking into account their roles as CMD and Whole Time Directors in the listed company I am of the view that Noticees 2 and 3 deserve a more stringent penalty and directions of restraint in comparison to the other noticees. Next Noticee No. 5 functioned as an employee and CFO of the company for the entire impugned period of six years and was responsible for preparing the financials during this period. Next in the case of Noticee 4 facts bear out that he was an ED and Audit Committee member for only 3 years during the impugned period and the violations arising from incorrect impairment of assets post the GDPR notification all took place after his tenure as ED/ Audit committee member. Nonetheless he bears responsibility for other accounting standard irregularities/ LODR violations elaborated in this Order. Finally Noticee No 1 (BGL) deserves comparatively lesser penalty and period of restraint for the reason that it is now largely owned by public shareholders who have borne the brunt of the fraud perpetrated by the promoter directors. Compliance with directions of interim order cum SCN - Vide the Interim Order cum SCN certain directions were issued to all the Noticees. In this regard we note that BGL has not complied with any of the directions except for directions at para 177(c) (d) and (g). Also while BGL has claimed that it had complied with the following direction find that BGL has failed to do so. As regards the directions issued at paragraph 177(i) of the Interim Order cum SCN issued to the Noticees note that except for Noticee 5 other Noticees have failed to comply with the said direction. Directions - In exercise of the powers conferred upon under Sections 11(1) 11(4) 11(4A) 11B(1) and 11B(2) read with Section 15A(b) 15A(c) 15HA and 15HB of the SEBI Act and proceedings under Section 12A(2) of SCRA read with Section 23H of SCRA direct as under (a) Noticees 1 to 5 are restrained from accessing the securities market and prohibited from buying selling or otherwise dealing in securities directly or indirectly or being associated with the securities market in any manner whatsoever for the periods defined. (b) Noticees 2 to 5 are restrained from being associated with the securities market in any manner whatsoever including as a director or Key Managerial Personnel in a listed company or an intermediary registered with SEBI or a public company which intends to raise money from public in the securities market for the periods defined. (c) Noticee 1 (i.e. BGL) shall file a statement of impact of all the non-compliances detailed in this Order within three months from the date of the Order with the stock exchanges. BGL shall ensure that the said statement of impact of non-compliances is in the format specified in SEBI Circular no. CIR/CFD/CMD/56/2016 dated May 27 2016 (BGL may use the term non-compliances instead of the term audit qualification for this purpose). BGL shall further ensure that the said statement of impact of non-compliances is certified by a peer-reviewed Chartered Accountant who has audited at least one company forming part of NIFTY 100 or BSE 100 indices during the past three years. (d) Noticee 1 (i.e. BGL) shall disseminate the standalone financial statements of each of its subsidiaries on its website for the period between FY 2014-15 and FY 2021- 22 as required under Regulation 46 of SEBI (LODR) Regulations 2015 within fifteen days from the date of this Order. (e) Noticees 1 to 5 are hereby imposed with the penalties as specified.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in the judgment are:

(a) Whether the company failed to comply with applicable Accounting Standards, resulting in violations of the Listing Agreement and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations)?

(b) Whether the company violated other provisions of the Listing Agreement and LODR Regulations, including disclosure obligations and corporate governance requirements?

(c) If violations are established, whether the directors and Chief Financial Officer (CFO) are personally responsible for the acts of the company?

(d) Whether there was a violation of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations)?

(e) Whether issuance of directions and/or penalties under relevant sections of the SEBI Act and Securities Contracts (Regulation) Act, 1956 (SCRA) are warranted?

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1): Compliance with Accounting Standards

Relevant Legal Framework and Precedents: Regulation 48 of LODR Regulations and Clause 50 of the Listing Agreement mandate compliance with notified Accounting Standards. The applicable standards included AS 26 for FY 2014-15 and 2015-16 and Ind AS 36 and 38 for FY 2016-17 onwards. Ind AS 36 specifically governs impairment of assets, requiring annual impairment testing and immediate recognition of impairment losses in profit or loss, except for revalued assets where impairment may be recognized in Other Comprehensive Income (OCI) to the extent of revaluation surplus. Ind AS 38 governs recognition of intangible assets, distinguishing between research and development phases, with research expenditures expensed immediately and development expenditures capitalized only if certain criteria are met.

Court's Interpretation and Reasoning: The company recorded impairment losses related to the impact of the General Data Protection Regulation (GDPR) amounting to INR 868.30 crores in FY 2019-20 and INR 411.76 crores in FY 2018-19. The Court found that the company failed to carry out annual impairment testing for FYs 2016-17 to 2018-19, despite the GDPR being announced in 2016 and effective from May 2018, which should have triggered impairment assessments. The failure to recognize impairment losses timely violated Ind AS 36.

Further, the company recognized impairment losses in OCI instead of profit or loss, without evidence of prior asset revaluation, violating Ind AS 36 paras 60 and 61. The Court rejected the company's contention that impairment losses of subsidiaries could be recognized in OCI if not directly impacting the parent's profit and loss, noting that Ind AS 36 does not differentiate based on direct or indirect impact.

The company also failed to disclose the events and circumstances leading to the impairment losses as required under para 130 of Ind AS 36, thereby violating disclosure requirements.

Regarding R&D expenditure, the company capitalized costs incurred during research and development phases without adequately distinguishing between them, contrary to AS 26 and Ind AS 38. The standards require research phase costs to be expensed immediately, and development phase costs to be capitalized only if specific criteria are met. The Court found the company's practice of capitalizing combined R&D costs unsupported by evidence and inconsistent with accounting standards.

Additionally, the company's practice of transferring entire opening balances of "Intangible Assets under Development" and "Capital Work-in-Progress" to "Intangible Assets" annually was found to be inconsistent with the requirement that assets be recognized only when recognition criteria are met. The Court found the company's explanation of a fixed 12-month product cycle implausible and unsupported by evidence.

Key Evidence and Findings: The forensic audit report, company's annual reports, auditor's reports, and internal documents revealed delayed impairment testing, incorrect accounting treatment of impairment losses, inadequate disclosures, and improper capitalization of R&D costs. The company's explanations were found lacking in substantiation.

Application of Law to Facts: The company's failure to comply with Ind AS 36 and Ind AS 38 led to artificial inflation of profits by approximately INR 1,280 crores over FYs 2018-19 and 2019-20. These accounting irregularities contravened Regulation 48 of LODR and Clause 50 of the Listing Agreement, which require adherence to accounting standards and accurate disclosures.

Treatment of Competing Arguments: The company argued that impairment losses were recognized only after confirming permanence, that capitalization of R&D was consistent with industry practice and local laws of subsidiaries, and that impairment losses of subsidiaries could be recognized in OCI. The Court rejected these arguments, emphasizing the clear mandates of accounting standards and the need for timely and transparent disclosures.

Conclusions: The company violated accounting standards and related disclosure obligations, resulting in overstated profits and misleading financial statements.

Issue (2): Violations of Other Provisions of Listing Agreement/LODR Regulations

Relevant Legal Framework: Various provisions of LODR Regulations and Listing Agreement govern disclosure of material events, shareholding patterns, internal audit, audit committee constitution, appointment of independent directors on subsidiary boards, maintenance of structured digital database (SDD), and disclosure of regulatory impacts such as GDPR.

Court's Interpretation and Reasoning:

(a) The company failed to disclose the initiation of forensic audit to stock exchanges within 24 hours of SEBI's letter dated September 16, 2021, disclosing it only after 165 days, violating Regulation 30 of LODR.

(b) The company submitted inconsistent and incorrect shareholding patterns to stock exchanges for 31 out of 34 quarters, misrepresenting pledged shares which were in fact transferred, violating Clause 35 of the Listing Agreement and Regulation 31 of LODR Regulations.

(c) The company issued a misleading press release on April 10, 2018 announcing appointment of Ernst & Young as internal auditor, which was not true, violating Regulation 4 of LODR.

(d) The company did not ensure limited review or audit of quarterly consolidated results for FY 2019-20, with 80% or more of consolidated revenue, profits, and assets of subsidiaries not subjected to audit or review, violating Regulation 33(3)(h) of LODR.

(e) The company failed to ensure constitution of audit committee in compliance with regulatory requirements, particularly regarding appointment and tenure of an independent director, violating Regulations 17(1) and 18(1)(b) of LODR.

(f) The company did not appoint at least one independent director on the boards of its unlisted material subsidiaries, violating Regulation 24(1) of LODR.

(g) The company failed to disclose standalone financial statements of subsidiaries on its website as required under Regulation 46(2)(s) of LODR.

(h) The company failed to maintain a structured digital database of persons with whom Unpublished Price Sensitive Information (UPSI) was shared, as required under Regulation 3(5) of SEBI (Prohibition of Insider Trading) Regulations, 2015.

(i) The company failed to disclose the impact of GDPR on its business and financials in a timely and adequate manner, violating Regulation 30 read with Schedule III and Regulation 34 read with Schedule V of LODR.

Key Evidence and Findings: The company's delayed forensic audit disclosure, inconsistent shareholding pattern filings, false press release, lack of audit/review of quarterly results, irregularities in audit committee constitution, absence of independent directors on subsidiary boards, non-publication of subsidiary financials on website, non-maintenance of SDD, and inadequate disclosures on GDPR impact were substantiated by SEBI's investigation, forensic audit, and company records.

Application of Law to Facts: The company's actions violated multiple provisions of the Listing Agreement and LODR Regulations designed to ensure transparency, accountability, and investor protection.

Treatment of Competing Arguments: The company contended that certain delays were unintentional or due to operational complexities, that disclosures were made through press releases or media articles, and that some requirements were not applicable or were complied with. The Court found these contentions insufficient to excuse non-compliance with mandatory regulatory provisions.

Conclusions: The company violated several disclosure and corporate governance provisions under the Listing Agreement and LODR Regulations.

Issue (3): Liability of Directors and CFO

Relevant Legal Framework: Regulations under LODR assign responsibilities to directors and senior management to ensure compliance with disclosure and accounting requirements. Section 12A(b) and (c) of SEBI Act and relevant regulations impose liability on persons in charge and responsible for company affairs. Case law establishes that directors cannot feign ignorance if they have knowledge or control over company affairs.

Court's Interpretation and Reasoning: The Court examined attendance at board and audit committee meetings, signing of financial statements and CEO/CFO certifications, and involvement in subsidiary boards. It found:

- Noticee 2 (Chairman and Managing Director & Promoter) attended all relevant board meetings, signed financial statements and CEO/CFO certifications, and was responsible for company affairs. He was directly and vicariously liable for violations.

- Noticee 3 (Whole Time Director & Promoter) attended significant board and audit committee meetings, signed financial statements, and was a director on subsidiaries' boards. He was directly and vicariously liable.

- Noticee 4 (Independent Director, Audit Committee member, Executive Director, Group CFO) attended board and audit committee meetings, signed financial statements for FY 2015-16, and was a KMP. Although he resigned as Executive Director in 2017, he was responsible for violations during his tenure.

- Noticee 5 (CFO) was responsible for supervision of accounting and financial reporting, signed financial statements and CEO/CFO certifications, and was liable for violations during his tenure.

Key Evidence and Findings: Board and audit committee attendance records, financial statements, CEO/CFO certifications, and company disclosures demonstrated the involvement and responsibility of the directors and CFO.

Application of Law to Facts: The directors and CFO failed to discharge their duties with due diligence and care, resulting in violations of securities laws and regulations.

Treatment of Competing Arguments: The directors contended they were not responsible for day-to-day operations or accounting irregularities and relied on case law distinguishing liability of additional or independent directors. The Court distinguished these cases, emphasizing the active roles played by the directors in this case.

Conclusions: Noticees 2 to 5 are directly and vicariously liable for the violations committed by the company.

Issue (4): Violation of PFUTP Regulations

Relevant Legal Framework: Sections 12A(b) and (c) of SEBI Act and Regulations 3(c), 3(d), 4(1), and 4(2)(f), (k), (r) of PFUTP Regulations prohibit fraudulent and manipulative practices, including misrepresentation in financial statements and misleading disclosures.

Court's Interpretation and Reasoning: The Court found that the company's misrepresentation of financial statements, delayed impairment recognition, incorrect accounting treatment, and disclosure violations constituted a scheme to defraud investors. These acts misled investors about the company's financial health, artificially inflated share prices, and facilitated promoters' offloading of shares at inflated prices.

The Court rejected arguments that no inducement or loss was shown, noting that loss quantification is not necessary to establish fraud under PFUTP Regulations. The Court also rejected contentions that multiple accounting treatments are permissible, emphasizing mandatory compliance with accounting standards under LODR Regulations.

Key Evidence and Findings: The forensic audit report, shareholding patterns, price-volume data, and company disclosures supported findings of fraudulent practices.

Application of Law to Facts: The company and its directors violated PFUTP Regulations by employing devices and schemes to defraud investors through false financial disclosures.

Treatment of Competing Arguments: The Court distinguished cited precedents and emphasized the civil nature of SEBI proceedings with a preponderance of probability standard.

Conclusions: The company and Noticees 2 to 5 violated PFUTP Regulations.

Issue (5): Appropriateness of Directions and Penalties

Relevant Legal Framework: Sections 11(1), 11(4), 11(4A), 11B(1), 11B(2), 15A(b), 15A(c), 15HA, 15HB of SEBI Act and Section 12A(2) read with Section 23H of SCRA empower SEBI to impose penalties and issue directions to protect investors and securities market integrity.

Court's Interpretation and Reasoning: Considering the prolonged period of violations, magnitude of misstatements (profit inflation of INR 1,280.06 crores), non-cooperation by the company, and the involvement of promoters who offloaded shares during the period, the Court found stringent remedial and penal measures warranted.

The Court noted that actual illegal gains could not be quantified due to non-submission of information by the company, but emphasized the need for disgorgement of ill-gotten gains once quantified.

Key Evidence and Findings: The company's failure to comply with directions of the interim order, attendance records, and financial misstatements supported imposition of penalties and market access restrictions.

Application of Law to Facts: The Court imposed market access restrictions ranging from one to five years on the company and directors, monetary penalties ranging from INR 1 crore to INR 15 crore, and directed the company to file impact statements and publish subsidiary financials on its website.

Treatment of Competing Arguments: The Court found no merit in contentions challenging the urgency of interim directions or the absence of quantified losses.

Conclusions: Directions and penalties under relevant provisions of SEBI Act and SCRA are warranted and imposed.

3. SIGNIFICANT HOLDINGS

"The failure to immediately recognize the impairment loss in profit and loss statement directly resulted in publication of inflated profits."

"Ind AS 36 does not make a distinction between 'direct' and 'indirect' impact on the parent company's financial performance which would justify recognizing the impairment losses in OCI."

"If the company was hoping that the announced GDPR would be modified prior to the implementation date, the correct approach would have been to recognize and disclose the impairment at the end of the relevant reporting period, and then reverse the impairment loss in accordance with paras 110/111 of Ind AS 36."

"The members of the audit committee are expected to exercise due oversight of the company's financial reporting process and to ensure that the financial statement is correct, sufficient and credible."

"The misrepresented financial statements and other inadequate/ false/ misleading disclosures, by its very nature, is bound to induce investors ... to continue to deal in the company's securities."

"Directors of the companies, especially of the listed companies, have access to inside knowledge ... Directors are expected to exercise the powers for the purposes for which they are conferred."

Core principles established include the mandatory and timely recognition of impairment losses in profit or loss, strict adherence to accounting standards for capitalization of R&D and recognition of intangible assets, full disclosure of material events and circumstances affecting financials, and the accountability of directors and CFO for ensuring compliance and transparency.

Final determinations:

- The company violated accounting standards and disclosure provisions, leading to overstated profits and misleading financial statements.

- The company violated multiple provisions of Listing Agreement and LODR Regulations related to disclosures, audit processes, and corporate governance.

- Directors and CFO were held directly and vicariously liable for the violations.

- The company and directors violated PFUTP Regulations by engaging in fraudulent and manipulative practices.

- Appropriate penalties and market access restrictions were imposed on the company and directors.