Supreme court allows SEBI to investigate Binny Ltd 

The Supreme Court has given the go ahead to SEBI to investigate the alleged diversion of Rs. 850 crore by textile company Binny Ltd. The Supreme Court dismissed the company’s plea seeking a stay on the show-cause notice by the markets regulator on Friday.

The Sebi probe is based on accusations that Binny’s promoters misappropriated Rs. 851 crore through a series of related party transactions in the real estate sector between 2014 to 2021.

Prior to this, Binny Ltd had moved the Bombay High Court, seeking a stay on the investigation and urging it to direct Sebi to reconsider its settlement application. However, the Bombay high court dismissed the petition and ordered the company to bear the cost of Rs. 2.5 lakh for filing an appeal.

“We understand quite clearly now that the only purpose of the settlement application, and indeed these writ petitions were to prolong and delay the adjudication of the show cause notice,” the Bombay high court order dated 4 July had said.

Following investor complaints, Sebi initiated a forensic audit of Binny’s books in 2021. Based on the findings, it issued a show-cause notice to the company on 24 November 2022.

According to filings, Sebi’s show cause red-flagged at least five suspicious transactions done by the company promoters. According to the Sebi notice, Binny has been under scrutiny for offering questionable advances amounting to  ₹329 crore to certain related parties between December 2014 and April 2016. These advances were purportedly intended for land purchases.

However, according to the charges, the company failed to adhere to proper procedures for such transactions. Furthermore, Sebi has accused Binny of extending loans totalling Rs383 crore to related parties for the acquisition of windmills and land parcels. These advances remained outstanding in the company’s books from 2014 until 2021.

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