Sebi Imposes ₹54 Lakh Penalty on Jaiprakash Power Ventures and Top Executives for Financial Misrepresentation

The Securities and Exchange Board of India (Sebi) has levied penalties amounting to ₹54 lakh on Jaiprakash Power Ventures Ltd (JPVL), a subsidiary of the Jaypee Group, along with its senior executives, for misrepresenting the company’s financial statements. This action underscores Sebi’s commitment to ensuring transparency and integrity in corporate financial practices.

Key Officials Penalized

The individuals penalized include:

• Suren Jain, Managing Director and CEO.
• Manoj Gaur, Chairperson.
• Executive Directors Sunil Kumar Sharma and Praveen Kumar Singh.
• Chief Financial Officer R.K. Porwal.
• Former Whole-Time Member M.K.V. Rama Rao.

Each individual, alongside the company, has been directed to pay the fines within 45 days, as per Sebi’s detailed 89-page order.

Investigation into Financial Misrepresentation

Sebi’s investigation into JPVL focused on possible violations of:

• PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations.
• LODR (Listing Obligations and Disclosure Requirements) norms.

The probe revealed significant discrepancies in JPVL’s financial statements for the period spanning FY 2012-13 to FY 2021-22, where the company:

1. Overstated its books by not valuing investments in its subsidiaries—Sangam Power Generation Company Ltd (SPGCL), Jaypee Arunachal Power Ltd (JAPL), and Jaypee Meghalaya Power Ltd (JMPL)—at fair value.
2. Omitted the provision for interest on current investments, Foreign Currency Convertible Bonds (FCCBs), and other unsecured loans during FY 2018-19.

These practices resulted in profit and loss accounts and balance sheets that did not provide a true and fair view of the company’s financial health.

Sebi’s Findings

The regulator concluded that JPVL’s financial misrepresentation constituted a breach of PFUTP and LODR regulations. Adjudicating Officer Asha Shetty stated:

“The financial statements of the company have not reflected a true and fair view.”

This misrepresentation was deemed deliberate and was aimed at overstating the company’s financial position.

Penalties Levied

The total penalty of ₹54 lakh was distributed as follows:

• Jaiprakash Power Ventures Ltd: ₹14 lakh.
• Suren Jain, Manoj Gaur, Sunil Kumar Sharma, Praveen Kumar Singh: ₹7 lakh each.
• R.K. Porwal, M.K.V. Rama Rao: ₹6 lakh each.

These fines are intended to serve as a deterrent to other corporate entities, emphasizing the importance of adhering to accounting standards and regulatory norms.

Impact on Corporate Governance

This action by Sebi reinforces the regulatory emphasis on corporate governance, fair disclosure, and compliance with accounting norms. It also highlights the risks companies face when attempting to misrepresent financial statements, which can lead to legal and reputational repercussions.