SEBI slaps ₹63 crore fine on Rana Sugars

The firm is owned and managed by Kapurthala MLA Rana Gurjit Singh and his son and Sultanpur Lodhi MLA Inder Pratap Singh Rana, who is managing director and promotor of RSL, and other family members as chairman and promotors.

The Securities and Exchange Board of India (SEBI) has imposed a penalty of ₹63 crore on Rana Sugar Limited (RSL) on the alleged charges of diversion of funds to its conduit and individual entities.

The firm is owned and managed by Kapurthala MLA Rana Gurjit Singh and his son and Sultanpur Lodhi MLA Inder Pratap Singh Rana, who is managing director and promotor of RSL, and other family members as chairman and promotors.

In its orders dated August 27, the copy of which is in possession of Hindustan Times, the SEBI has restrained RSL directors and promotors from accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of two years from the date of coming into force of this order.

The orders issued by G Ramar, SEBI’s chief general manager, also prohibited Rana Gurjit, his son and other family members from holding any position as director or key managerial person of any other listed company for a period of two years.

In detailed orders, which included the operations details of the investigation into the transactions made by the RSL to its alleged conduit entities, SEBI investigation into the matter inter alia alleged that the company along with its promoter directors, including its managing director, chairman and other family members had devised a scheme to divert/siphon off the funds of the company by using certain private limited companies indirectly controlled by the managing director of the RSL and his family members and consequently the transactions with these private companies were also not shown as related party transactions.

On the basis of its investigation, the SEBI issued show-cause notices to 15 entities, including promotors and directors of RSL and its associated entities.

In its investigation, the SEBI found that “an amount of approximately ₹52.98 crore was diverted from RSL to the directors and promoters of RSL and their relatives by using some private limited companies as vehicle for such diversion. The aforesaid conduit entities have aided and abetted RSL in the diversion of funds of RSL for the benefits of promoter and directors of RSL and their relatives.”

SEBI observed that “Four companies, to which notices were also issued, had no business except borrowing and lending from and to companies and entities directly or indirectly related to RSL. They were operating as vehicles to create multiple layers to eliminate or blur the trail of funds diverted or transferred amongst various entities, including individuals belonging to the promoter group of RSL, directly or indirectly connected and associated or related to RSL.”

SEBI has also directed Rana Sugars to take all necessary steps to recover dues from these conduit entities and appoint a law firm in consultation with the National Stock Exchange (NSE) to help in the recovery process.

RSL MD Rana Inder Partap Singh appeared before the investigating authority on September 21, 2022, during which he submitted that the money received by him and his family members and relatives were on account of business advances for supply of sugarcane seeds. The SEBI mentioned that no information or any documents were submitted in respect of the same.

Meanwhile, the Rana Sugars and Inder Pratap Singh, the promoter and MD, are asked to pay a penalty of Rs7 crore each. A fine of ₹5 crore each was imposed on Ranjit Singh, promoter and chairman of Rana Sugars and Veer Pratap Singh, promoter-director of the company. The market regulator imposed a penalty of ₹4 crore each on Manoj Gupta, the chief financial officer (CFO) of RSL, Gurjit Singh and others. Seven other entities are slapped with a fine penalty of Rs3 crore each.

However, Rana Gurjit said that “though his son Rana Inder Pratap could brief better on this issue, such issues happen when one is in such businesses. The issue has been unnecessarily exaggerated.”

Rana Sugars Limited’s managing director Rana Inder Pratap Singh said, “The SEBI orders are completely one sided as the payments were made only for business advances.”

“We are surely going to challenge the SEBI orders soon before the competent authority. The business advances made to the companies were already recovered even before the SEBI initiated the investigation into the entire thing,” he said.