Knowingly hiding facts from courts: SEBI slams Rajesh Exports in order confirming ban from markets

The Securities and Exchange Board of India (SEBI) has confirmed its interim directions restraining Rajesh Mehta, chairman of Rajesh Exports Limited (REL), from buying, selling or dealing in the securities of the company until further orders [SEBI v. Rajesh Exports & Anr.]

In a confirmatory order passed on Wednesday, SEBI Whole Time Member (WTM) Kamlesh C Varshney upheld directions mandating the listed gold refiner and its promoter to cooperate with an ongoing forensic audit and submit true and complete disclosures.

The market regulator had intervened after allegations of extensive financial misstatement, unverified transactions and corporate governance failures cropped up.

SEBI noted that while REL reported consolidated revenues exceeding ₹15 lakh crore between FY21 and FY25, its Swiss operating subsidiary, Valcambi SA, recorded standalone revenues of just ₹3,027.38 crore. The unexplained disparity was nearly 99%.

SEBI also flagged an unverifiable ₹1,035.27 crore investment in gold mines in Africa and the improper netting-off of ₹2,914 crore in overdue trade receivables.

A central focus of the order was the routine diversion and routing of company funds through the personal bank accounts of Rajesh Mehta and his son Siddharth Mehta. SEBI rejected the defence that Mehta was acting purely as an authorised commercial conduit.

“The physical transit of corporate funds into a director’s private account alters the legal character of those public funds into an unauthorized financial accommodation. A structural violation of disclosure norms and unapproved resource transfers cannot be retrospectively cured or justified by the ultimate destination of the funds,” Varshney said. 

The regulator also took severe exception to REL’s admission that it routed ₹77 crore through Mehta’s personal account for a court deposit to avoid disclosing its identity to the Karnataka High Court.

“This in itself raises questions on the way REL is governed as it is knowingly hiding facts from the Hon’ble courts. During the personal hearing, Mr. Rajesh Mehta argued that by doing so they wished to maintain plausible deniability about liability of the actual judgement debtor. Such blatant admission of wrongdoing, that too in the context of directions issued by the Hon’ble High Court of Karnataka, does not repose confidence in the adherence to legitimate corporate governance practices by the Noticees,” the October 14 order stated.

SEBI similarly dismissed the company's refusal to supply customer and vendor data under the cloak of Swiss confidentiality laws and private non-disclosure agreements.

“Contractual arrangements cannot determine the scope of the regulatory requirements that may be required by SEBI in discharge of its statutory functions and thus cannot be relied upon by the Noticees to bypass the regulatory obligations. If such a defense were to be accepted, all listed companies could circumvent regulatory disclosures in the garb of private confidentiality arrangements and investors' interest could be seriously undermined,” SEBI ruled. 

It directed the forensic auditor and investigating authority to expedite their probe and ruled that preserving the trading freeze on Mehta remains vital to protect public investors and maintain market integrity.

[Read order]