Capital markets regulator Securities and Exchange Board of India (Sebi) has barred the promoters of Deccan Chronicle Holdings Ltd (DCHL) from the securities market for a period ranging from one year to two years as well as imposed penalties totalling ₹8.20 crore for various violations.

Manipulation of financial reports

The directions passed against them through an order on Tuesday are for fraudulent activities, understatement of loans by DCHL in its financial statements for the fiscal year 2008-09 to 2011-12 and violations of regulations.

The regulator imposed a fine of ₹4 crore on DCHL, ₹1.30 crore each on T.Venkattram Reddy, T. Vinayak Ravi Reddy, ₹20 lakh on N Krishnan and ₹10 lakh on V Shankar.

"... restrains T. Venkattram Reddy, T. Vinayak Ravi Reddy,PK Iyer, N Krishnan and V Shankar from accessing the securities market and further prohibit him from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in a manner for a period ranging from one year to two years," Sebi said.

The Sebi directions follow a probe conducted by the market regulator between October 2011 and December 2012 wherein various violations of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) and insider trading regulations were found.

Pursuant to the investigation, it was found that that DCHL has underreported the loan amounts, interest payments and financial charges in the books of accounts of the company during the financial year 2008-09 to 2010-11 and thereby misled the investors and shareholders by reporting to the public such manipulated financials of the company and transferred the outstanding loans in the books of Deccan Chronicle Marketers (DCM).

Liabilities understated

T. Venkattram Reddy and PK Iyer as the Chairman and Vice-Chairman of DCHL failed to present true and fair financial statements, understate the liabilities and overstating the profit into the accounts of the company and then by offering buyback of shares at a price that was higher than that of ruling market price of the scrip despite absence of reserves. They have knowingly deceived the investors and induced them into investing in the shares of the company.

Moreover, Reddy, Ravi Reddy and Iyer have also failed to make disclosures encumbrances of shares held by them, created pursuant to signing of those Non-Disposal Undertakings (NDU) or pledge agreements with various lending institutions and hence, failed to comply with various regulations.

DCHL and its promoters have kept the investors in the dark about the increase in their shareholding on account of buyback of shares of the firm.

The market watchdog noted that the misleading information with respect to its business activities and true nature of its income had potential to mislead the investors was unfair. PTI HG SP MR