Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of ₹5 lakh on Amit Kumar Singh, former chief financial officer (CFO) of Blue Coast Hotels Ltd, for violations relating to financial disclosures, related-party transactions and certification of financial statements.
In an adjudication order, SEBI found that Mr Singh had furnished certifications to the board of directors confirming that the company’s financial statements were accurate and compliant with applicable laws. However, the regulator observed that these certifications were provided without adequate verification and failed to highlight significant disclosure lapses in the company’s accounts.
The matter came to light following an examination report submitted by the National Stock Exchange of India (NSE) on the financial statements of Blue Coast Hotels for the period FY18-19 to FY21-22.
During the review, SEBI observed that the company had failed to disclose a significant contingent liability amounting to ₹318.95 crore relating to refunds payable to buyers of commercial space in the Delhi Aerocity project.
The liability arose after the project did not materialise and buyers sought refunds following directions issued by the Delhi High Court. According to SEBI, the potential obligation should have been disclosed as a contingent liability in accordance with applicable accounting standards. However, the company failed to reflect this in its financial statements during the relevant financial years.
The regulator also noted discrepancies in the way certain payments were recorded in the company’s accounts. An amount of ₹8.82 crore paid towards refunds to space buyers was classified as miscellaneous expenses rather than shown as an exceptional item, despite the payment being significant and linked to a specific legal obligation. In another instance, a payment of ₹2.49 crore related to the same matter was recorded as an advance to a supplier instead of being treated as a loan.
SEBI further found violations relating to related-party transactions. The company had sold investments worth ₹10.48 crore in Joy Hotel & Resorts Pvt Ltd and provided financial assistance of ₹2.88 crore to Zios Medical, both of which qualified as related-party transactions. However, the company did not obtain the required approvals from the audit committee and shareholders before undertaking these transactions, as mandated under regulatory norms.
During the relevant period, as the CFO of the company, Mr Singh certified that the financial statements presented a true and fair view of the company’s financial position. SEBI concluded that the certification was incorrect and issued without proper due diligence, thereby failing to ensure compliance with disclosure requirements and governance standards.
Taking these violations into account, SEBI imposed a monetary penalty of ₹5 lakh under Section 15HB of the SEBI Act.
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