Kerala High Court issues notice to SEBI on plea seeking probe into Kitex Group

A petition has been filed before the Kerala High Cour alleging serious irregularities in the financial transactions of Kitex Garments Limited (KGL), Kitex Childrenswear Limited (KCL), and their foreign joint venture incorporated in the USA, Kitex USA LLC (KUL).

Justice Bechu Kurian Thomas today issued notice to the Securities and Exchange Board of India (SEBI) as well as KGL and KCL.

The petition was moved by one Muhammed Firdouz who had previously lodged a complaint with SEBI raising concerns regarding transactions and disclosures of KGL.

In his petition before the High Court, Firdouz submitted that he was alarmed by major structural irregularities, potential fraudulent financial manipulation, unbusinesslike foreign transactions, and non-compliances in KGL's public disclosures, annual reports, and financial statements.

The petition stated that KGL and KCL hold equal equity participation in KUL.

He claimed that when he examined financial disclosures for successive financial years, he was able to identify substantial export transactions between KGL and KUL, prolonged outstanding receivables, substantial commission payments by KCL to KUL, changes in the manner of reporting related party transactions, and subsequent substantial realisations from KUL.

"These included export transactions between KGL and KUL aggregating to approximately Rs.1,838.03 Crores, substantial outstanding receivables from KUL, commission payments of approximately Rs.46.98 Crores by KCL to KUL, changes in related-party disclosures, and subsequent realisation of approximately Rs.94.86 Crores from KUL," the petition explained.

Firdouz also submitted that statutory auditors of KGL had themselves recorded reservations concerning the recoverability of the receivables from KUL.

He pointed out that even though the financial position of KUL seemed weak on paper, in the second quarter of 2025-26, KUL made payments of approximately ₹94.86 Crores towards the outstanding receivables.

Firdouz in his petition pointed out several such financial transactions between these three entities which he claimed raises questions regarding the source of the funds, the financial capacity of KUL to make such payments, the underlying transactions giving rise to the payments and the genuineness of the payments.

He submitted that he filed the complaint before SEBI believing that these concerning transactions required further examination.

However, he did not receive any information from SEBI regarding action taken on his complaint.

Firdouz, therefore, moved the present petition before the High Court seeking directions to SEBI to consider the complaint and pass appropriate orders in accordance with law within a set timeframe.

The High Court today issued notice to SEBI, KGL and KCL. However, it did not formally admit the matter. A decision on that will be taken at the next hearing which is likely to happen after four weeks.

Firdouz was represented by advocates Bijoy P Pulipra, Kesiya Biju, Nithya Sumam Das, Varsha Vijay Menon, RS Anandan, Karthik KS, Sreejith V, Nimiya Feroz, Abhijith U and Kishor Kumar K.