Capital markets regulator, Securities and Exchange Board of India (SEBI) on Monday barred SME company Kalahridhaan Trendz (KTL) and its promoters from the securities markets for flouting disclosure rules.
KTL is listed on the NSE's Small and Medium Enterprises (SME) platform Emerge.
Apart from KTL, the promoters - Niranjan D Agarwal, Aditya N Agarwal, and Sunita Niranjan Agarwal - were also restrained from markets till further orders, Sebi said in an interim order-cum-showcause notice.
The SEBI also directed KTL and its promoters to show cause as to why suitable directions of debarment should not be issued against them.
The order came after SEBI received certain complaints from HDFC Bank against KTL regarding default in payment of credit card dues. Thereafter, the markets watchdog initiated an examination in the matter to ascertain the violation of various SEBI rules.
The examination was conducted from February 23, 2024 to December 15, 2024.
SEBI found that KTL is prima facie found to have failed to make material disclosures regarding its default in repayment of its dues to HDFC Bank.
Further, the company (KTL) is prima facie found to have made false and misleading corporate announcements regarding its expansion/profitability and receipt of a large buy order from a fictitious entity from Bangladesh, the regulator said.
In response to regulatory enquiries regarding the same, it has tried to cover its track by fabricating e-mail communications. The false and misleading corporate announcements positively affected the price and trading volume in the scrip, it added.
SEBI noted that it appears that the KTL had made the corporate announcements to paint a rosy picture of the prospects of the company and to induce investors to trade in the shares of the company.
By acting in such manner, Kalahridhaan Trendz Ltd has indulged in fraudulent and unfair trade practices in the securities market, the order said.
Further, SEBI found that Niranjan, Aditya N Agarwal, and Sunitadevi Agarwal being the MD, the whole-time director, and a non-executive director, respectively, of KTL are also responsible for the violations/non-compliances.
The regulator also observed that Gujarat-based Kalahridhaan Trendz has failed to appoint a compliance officer under Listing Obligations and Disclosure Requirements (LODR) rules.
Additionally, SEBI alleged that the company has made misleading corporate announcements regarding appointment of independent director and has contravened the disclosure norms.
These corporate announcements by KTL have raised concerns that they were aimed at influencing investors to trade in its shares.
There is a real possibility that the promoters, who are involved in this case, may start selling their shares and exit the company, leaving gullible investors in the lurch, Sebi said.
Also, Kalahridhaan Trendz has approved another fund-raising plan through a rights issue. Given the misleading statements, there is a risk that public shareholders may be tempted to invest further in KTL and suffer losses in the long run, it added.
