The Securities Appellate Tribunal (SAT) has quashed market regulator SEBI's order against Prabhat Dairy directing it to deposit ₹1,292 crore in an escrow account. The SAT directed the company to deposit ₹500 crore within 10 days.

The SAT has asked the company to not utilise this money till a decision is made on distribution of the sum to minority shareholders. Prabhat Dairy is facing a forensic audit. SAT said the SEBI order lacked any specific findings of fund diversion.

Prabhat Dairy told SAT that the amount left to be distributed after meeting the tax liability, indemnity, transaction cost, debt outstanding and promoter’s share was about ₹427crore and SEBI’s direction to deposit ₹1,202 crore was arbitrary. It said the suspicions raised by stock exchanges and SEBI over low floor price fixed for delisting were erroneous.

In an ex-parte, emergency order last month, SEBI had directed Prabhat Dairy to deposit ₹1,292 crore in an escrow bank account and came down heavily on the company for its non co-operation with forensic auditor Grant Thornton. Shareholders have accused the company of misuse and wrongful diversion of funds raised through sale of its core dairy business for ₹1,700 crore to French multinational Groupe Lactalis in April 2019.

SAT has directed the company to provide documents to the forensic auditor. In April 2019, Prabhat Dairy sold its flagship fresh milk business to Lactalis. In September 2019, it announced its delisting plans and applied for the same in December 2019. All this at a time when investors were expecting a huge dividend.

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