Brightcom Group Ltd, M. Suresh Kumar Reddy (BGL’s promoter-cum CMD), and Narayan Raju (CFO) were involved in round-tripping of BGL’s own funds in a circular fashion to falsely portray receipt of consideration from allottees of preferential allotments and siphoning off of proceeds of preferential allotments, SEBI has said in an order.

In the order, SEBI’s Wholetime Member Ashwani Bhatia said Brightcom’s CMD and CFO shall cease to hold the position of a director or a key managerial person in any listed company or its subsidiaries until further orders.

BGL shall place the order before its Board of Directors within seven days from the date of its receipt.

M. Suresh Kumar Reddy is hereby restrained from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever until further orders, the SEBI order said.

“Noticees 3 to 25 in the order are hereby prohibited from disposing of shares of BGL held by them, directly or indirectly, in any manner whatsoever, until further order,” it said.

BGL is hereby directed to ensure that P. Murali & Co. and PCN & Associates, including their past and present partners, are not engaged with BGL or its subsidiaries in any capacity or manner whatsoever, until further order, it said.

The preferential allottees are hereby directed to co-operate in the ongoing investigation by SEBI with respect to preferential allotments, the order read.

SEBI received complaints dated October 6, 2022 and May 12, 2023 in respect of the preferential allotments made by Brightcom Group Limited in the financial years 2019-20 and 2020-21, alleging inter alia that BGL had raised money through preferential issue of shares to entities that were directly or indirectly connected to it, and that the money raised in the preferential issues was given as loans and advances to its subsidiaries.

It was further alleged that proper disclosures were not made in the annual report of the company in respect of utilisation of the proceeds of the preferential issues.

SEBI in its order said that Suresh Kumar Reddy and Narayan Raju were responsible for submission of forged and fabricated bank account statements to SEBI with an intent to mislead the investigation and cover-up the irregularities.

In view of the above, the noticees are alleged to have violated the provision of Section 12A(a), (b) and (c) of the SEBI Act, 1992 and Regulations 3(a), (b), (c) (d), 4(1), 4(2)(c) & (f) of the PFUTP Regulations, 2003.

The prima facie observations and findings clearly show the manipulations carried out by BGL and other noticees, in respect of BGL’s preferential allotments, which inter alia involve fictitious receipts of share application money from allottees and siphoning of funds from BGL.

However, BGL has brazenly attempted to cover-up its misdeeds by submitting forged and fabricated bank statements to SEBI. The blatant acts of the company and other noticees raise serious concerns about the affairs of the company and also raise doubts as to whether the financial statements prepared by the company and various disclosures made on the stock exchange platform or in annual reports in the past are correct.

Recently, an investigation by SEBI found inter alia several instances of accounting irregularities and mis-statements in the financial statements of the company.

As per the findings of investigation, BGL attempted to camouflage accounting entries in excess of Rs 1280 crore during FYs 2018-19 and 2019-20 to give a distorted picture of the company’s financial position.

SEBI has already issued an interim order-cum-show cause notice dated April 13, 2023 to BGL and other persons, including M. Suresh Kumar Reddy, who is a noticee in this order as well.