The Vadodara-based company has been in the centre of controversy since 2019 when it was embroiled in a goods and services tax (GST) fraud and had not paid its employees for several months after reporting fake turnover numbers.

SEBI's order against Manpasand Beverages

Apart from MBL, those who restrained by SEBI are -- the promoter, chairman, managing director (CMD) Dhirendra Singh, promoter and executive director Abhishek Singh and chief financial officer (CFO) Paresh Thakkar. Also, these four entities have been fined ₹17 lakh each, which needs to be paid within a period of 45 days, SEBI said in its recently released 55-page order.

Dhirendra Singh, Abhishek Singh and Paresh Thakkar have also been prohibited from holding position of director or key managerial personnel in any listed public company or any intermediary registered with the regulator in any capacity for five years. They have also been restrained from accessing the securities market for three years.

The company's former independent directors -- Milind Babar and Chirag Doshi -- were fined ₹2 lakh each and current independent directors --Nishish Mobar and Bharti Naik were fined ₹1 lakh each. Naik was non-executive director at the relevant time. SEBI, in its order, had also found that MBL had deficiencies in internal controls and had published misleading financial statements for 2016-17 and 2017-18.

According to PMS fund manager Amit Mantri, essentially everything in the company was fake. ''The company existed only on the stock market and not in the real world. Unfortunately, this is also true of a large number of smidcap stocks and majority SME stocks in this market,'' said Mantri on 'X'.

Here's how SEBI unfolded the Manpasand Beverages corporate scam

Trouble for the company began when Deloitte resigned as its auditor in May 2018. Things went worse when the MBL's top officials were arrested in 2019. MD Abhishek Singh and two others were arrested on charges of GST fraud worth ₹40 crore by investigating officials of Central Goods and Services Tax (CGST) Commissionerate Vadodara-II. They were sent to judicial custody after they were produced before a court.

Also Read: SEBI penalises Manpasand Beverages, its directors for flouting regulatory norms

Multi-locational searches were conducted on various premises of MBL on May 23, 2019, following which a racket of creating fake units for availing fraudulent credit and committing tax evasion of ₹40 crore involving a turnover of ₹300 crore had surfaced, according to the CGST Commissionerate. Harshvardhan Singh, brother of Abhishek Singh, and company's Chief Financial Officer Paresh Thakkar were among the two others arrested after the detailed investigation.

After receiving complaints in September 2019 from Bipin Rathod, who was the chairman of the audit committee of MBL, SEBI stepped in and conducted an investigation into the matter to ascertain any possible manipulation or misrepresentation in the books of accounts of MBL.

Also, SEBI appointed Chokshi & Chokshi LLP to conduct a forensic audit of the company's financial statements for 2018-19 and 2019-20. In the report to SEBI, the auditor pointed out irregularities in the financial statements, which include purchases from unregistered dealers without payments, over-statement of sales, transactions with parties who had not filed GST returns, sales to suspicious entities, overstatement of impairments, receivables and fixed asset.

Also Read: Manpasand Beverages' MD, CFO arrested in GST fraud case

"The financial statements of MBL for 2018-19 and 2019-20 were manipulated and the figures contained therein were significantly mis-stated. This led to publication of manipulated, untrue and misleading financial results of the company during 2018-19 and 2019-20, which presented a false picture of the financial health of the company to investors," said SEBI Whole Time Member Ashwani Bhatia.

SEBI also noted that the manipulations in MBL had started prior to the investigation period, as the company was found to have mis-utilized proceeds of a Qualified Institutional Placement (QIP) done by it in September 2016. This was established by a SEBI's order passed on March 2, 2023.

MBL had also invested the proceeds in non-convertible redeemable debentures. The document was subject to the review of audit committee, in accordance with the decision of board of directors as required under the LODR (Listing Obligations Disclosure Requirements) norms. However, the audit committee has failed to monitor the utilisation of the issue proceeds. MBL, Dhirendra, Babar and Doshi -- as part of the audit committee members have violated the LODR rules.

"As the company itself has accepted that there was timing mismatch in recording the entries for QIP utilisation in the statements. I do not find merit in the contention of Dhirendra and Abhishek Singh in this regard. Therefore, I note that the company has violated LODR rules and Securities Contracts (Regulations) act (SCRA)," said Sakkeena P V, SEBI's  Adjudicating Officer in the order.

Here's a timeline of the Manpasand Beverages scam:

--The complaints were received in September 2019 from Bipin Rathod, then chairman of MBL's audit committee.

--Further, SEBI investigated to ascertain possible manipulation or misrepresentation in the accounting records.

--SEBI appointed Choksi & Choksi LLP to conduct a forensic audit of the financial statements of FY19 and FY20.

--SEBI in its order found that MBL had deficiencies in internal controls and had published misleading financial statements for 2016-17 and 2017-18.