The regulator restrained KTL and its promoter and Managing Director Niranjan D Agarwal from the securities markets for two years

New Delhi

Capitalmarkets regulator Sebi has levied fines totalling Rs 1 crore on Kalahridhaan Trendz and its promoters after finding that the SME company concealed a loan default and misled investors through false corporate announcements.

Kalahridhaan Trendz Ltd (KTL) is in the business of manufacturing and trading of various types of fabrics and was listed on the NSE's SME platform Emerge. Sebi restrained KTL and its promoter and Managing Director Niranjan D Agarwal from the securities markets for two years. Directors Aditya N Agarwal and Sunitadevi Niranjan Agarwal have been prohibited for one year.

In a 57-page final order on Thursday Sebi found that KTL failed to disclose its default in repayment of HDFC Bank credit card dues within the timeline mandated under the Listing Obligations and Disclosure Requirements (LODR) Regulations. The company admitted during the proceedings that the disclosure should have been made but attributed the lapse to an inadvertent omission.

However, Sebi rejected the explanation, observing that timely disclosure of defaults is a mandatory obligation as it enables investors to assess a listed entity's financial health. The regulator also found that the company's August 12, 2024 disclosure claiming receipt of an export order worth Rs 115.5 crore from Bangladesh-based Beximcorp Textiles was made without adequate due diligence.

Sebi, however, said it could not verify the existence of the entity or its claimed association with another Bangladesh-based entity, Akij Textile Mills Ltd, and held that the announcement was misleading. "The company first concealed the bad news of its default, and then compounded the harm by making misleading and fraudulent claims about its business and financial prospects.

"This artificially inflated the price and volume of its scrip, luring unsuspecting investors into a false sense of confidence," Sebi's Whole Time Member Amarjeet Singh said in the order. Holding that disclosure is the bedrock of a fair and transparent securities market, the regulator said KTL's conduct flouted the disclosure rules and other Sebi norms. Accordingly, Sebi imposed fines in the range of Rs 10-30 lakh on KTL and Agarwals. Sebi also directed the NSE to ensure that appropriate action is taken in terms of the regulatory framework for non-compliance with the provisions of the LODR rules and the standard operating procedure for suspension and revocation of trading of specified securities, including initiating the process of compulsory delisting if warranted.