Sun Pharmaceutical Industries and senior executives Dilip Shanghvi and Sudhir Valia have settled a dispute with the Securities and Exchange Board of India (Sebi) by paying a cumulative penalty of Rs 2.92 crore. The matter pertains to violation of related party norms and allegations of fund diversion.
Two whistle blowers had alleged that India's lagest pharma company and its subsidiary Sun Pharmaceutical Laboratories diverted funds through its sole distributor in India Aditya Medisales. They said the diversion continued for several years but Sun Pharma declared Aditya Medisales as a related party only in 2017-18.
Based on the allegations, Sebi launched an investigation and also a forensic audit. It was observed that Sun Pharma had failed to comply with relevant compliances pertaining to related parties.
As per the Sebi order, Sun Pharma failed to obtain prior approval of the audit committee for transactions with Aditya Medisales.
Further, it failed to obtain the shareholders’ approval even as the transactions with Aditya Medisales qualified as ‘material’ related party transactions. It also didn’t disclose the related party transactions in the annual reports.
In March 2020, Sebi initiated adjudicating proceedings in the matter. Later in May, Sebi issued show cause notices to Sun Pharma and the seven individuals seeking an explanation on the affairs of the company.
While the proceedings were on, Sun Pharma and noticees filed an application for consent settlement—whereby an alleged wrongdoer can settle the proceedings with Sebi without admitting or denying the charges by paying a settlement fee.
Sebi’s high powered advisory committee accepted the settlement pleas in December. Sun Pharma agreed to pay settlement fee of Rs 56 lakh, Shanghvi, managing director in the company, paid Rs 62.3 lakh and Valia, a director, Rs 37.4 lakh. Five other individuals paid between Rs 18.5 lakh and Rs 37.4 lakh.
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