Market regulator takes major action against Mishtann Foods in case of wrongful fund raising – SEBI asks Mishtann Foods to retrieve nearly Rs 100 crore misappropriated and diverted to group entities

Market regulator SEBI has asked Mishthan Foods Ltd (MFL) to return nearly Rs 100 crore, which it wrongly raised through group entities and diverted to the company’s promoters and directors. Sebi, in an interim order issued on December 5, has asked the company to return funds worth Rs 49.12 crore from the rights issue and Rs 47.10 crore that were diverted to MFL’s promoters/directors and their associates through fraudulent purchases/sales with group entities. Relatives were diverted.

SEBI has banned the company and 12 other entities from raising funds through the public, promoters and senior management till further orders. SEBI whole-time member Ashwini Bhatia, in her order, said that prima facie the case is one of large-scale manipulation of financial statements by MFL involving inflating of purchase and sale figures through fraudulent transactions. .

He said that more than 90 percent credit and debit entries in the bank accounts of these units indicate MFL’s fraud, under which MFL carried out the money transfer scheme through fake companies. These units had no business operations of their own and were acting as mediums of fund transfer. Ashwini Bhatia said that due to these actions the rights of investors were violated and the stock market suffered massive losses.

He also said how the ‘fate’ of the company and its more than 4.2 lakh shareholders is in the hands of one person i.e. Managing Director Hiteshkumar Gaurishankar Patel (HGP) and he is also the sole promoter of the company, whose shares in the company amount to almost Rs. Have 43% stake. Bhatia said, ‘He controls the fake buyers/sellers of MFL through his relatives.’