Market regulator Securities and Exchange Board of India (SEBI) has imposed a total penalty of ₹18 lakh on Lypsa Gems & Jewellery Ltd (LGJL) and the company promoters for multiple instances of financial misreporting and disclosure failures over several years. The regulator held the company’s top management responsible for misleading investors and violating listing norms.
Of the total penalty, ₹12 lakh has been imposed on the company. Dipan Babulal Patwa (promoter, chairman and joint managing director) and Manish Jaysukhlal Janani (promoter and managing director) have been directed to jointly and severally pay ₹5 lakh. Jeeyan Dipan Patwa (executive director and chief financial officer) and Sonal Dipan Patwa (executive director) have been asked to jointly and severally pay ₹1 lakh.
SEBI’s investigation, covering FY17-18 to FY22-23, found persistent deficiencies in financial reporting, corporate governance and regulatory compliance. At the heart of the case was the company’s repeated failure to provide complete and accurate disclosures, depriving investors of a clear picture of its financial position.
One of the key violations was the non-disclosure of cash-flow statements for multiple years, including FY20-21, FY21-22 and FY23-24. SEBI noted that these omissions denied investors crucial insights into the company’s liquidity. It rejected LGJL’s defence that the lapses were due to COVID-19-related disruptions, observing that the failures continued even after the pandemic and that preparing statements without disclosing them publicly undermines transparency.
The regulator also found that the company failed to present consolidated financial statements for several years, thereby obscuring the group's and its subsidiaries' financial positions. Even when disclosures were eventually made, SEBI observed inconsistencies and misleading notes. The company’s claim that its subsidiary was dormant was dismissed, with SEBI emphasising that compliance obligations cannot be based on subjective assessments of materiality.
Further lapses included the absence of the auditor’s report in the FY19-20 annual report, as well as the failure to disclose key documents, such as AOC-1 statements and directors’ eligibility certificates, over multiple years. These pointed to systemic weaknesses in internal controls and governance.
SEBI also flagged transactions that raised concerns about possible manipulation of financial performance. In one instance, the company carried out purchase and sale transactions of diamonds with related entities controlled by the same family, buying goods worth ₹3.42 crore and selling them for ₹3.44 crore. The regulator noted that such circular transactions inflated revenue and purchase figures, creating a misleading impression of business activity.
In addition, LGJL failed to recognise expected credit losses on long-outstanding receivables, leading to an overstatement of its financial position by more than ₹52 crore in recent years, as well as misstatements in earlier periods. These omissions were found to violate applicable accounting standards and materially distorted the company’s true financial health.
SEBI concluded that these were not isolated or technical lapses. The board, comprising promoters and closely related individuals, was found to be aware of the irregularities and failed to exercise due diligence. The regulator noted that the concentration of control within a closely held group worsened governance concerns and enabled the approval of misleading financial statements.
Holding the company and its directors accountable, SEBI ruled that the conduct amounted to a deliberate attempt to misrepresent financial performance and mislead investors. The violations were found to be in breach of listing regulations and the rules prohibiting fraudulent and unfair trade practices.
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