SEBI Fines Madhav Copper ₹10 Lakh For Failing To Disclose GST Search And Registration Cancellation

On 28 July, the Securities and Exchange Board of India (SEBI) imposed a penalty of Rs. 10 lakh on Madhav Copper Limited for delaying disclosure of GST proceedings and failing to make continuing disclosures under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Adjudicating Officer Amit Kapoor held:

“I note that the search conducted by GST authorities was a material event under Regulation 30 of LODR Regulations and the Noticee was required to disclose the same within 24 hours”

SEBI initiated adjudication proceedings against Madhav Copper Limited after an examination revealed prima facie violations of the disclosure requirements under the LODR Regulations.

The Board alleged that Madhav Copper Limited delayed disclosure of the search conducted by GST authorities on 7 July 2021 and the provisional attachment of its assets by the GST Department. It also alleged that the company failed to explain the delay, disclose the GST proceedings and inform the stock exchanges about the cancellation of its GST registration.

Madhav Copper Limited admitted that it delayed the disclosures by 15 days but contended that the delay was unintentional. It argued that the GST proceedings were still under investigation and that it disclosed the matter after the National Stock Exchange sought clarification.

Rejecting the company's defence, the Adjudicating Officer observed that Regulation 30 of the LODR Regulations requires listed entities to disclose material events and information that may affect investors' decisions to stock exchanges within 24 hours of their occurrence.

The Officer observed that the GST Department had alleged tax evasion of around Rs. 137 crore, which exceeded the materiality thresholds prescribed under the company's disclosure policy. The Officer also noted that the company's share price witnessed a significant decline after the disclosure. He held that the GST search and provisional attachment were material events, and found that Madhav Copper Limited violated the LODR Regulations by delaying their disclosure by 15 days. He held:

“if the material event is not disclosed within the timeline provided than the entity has to provide explanation for delay in disclosure. However, in the instant matter no explanation was provided by the Noticee.”

Further, the Officer held that Madhav Copper Limited violated the LODR Regulations by failing to disclose the cancellation of its GST registration. He noted that the subsequent disclosure of restoration of the registration did not absolve the company of its earlier disclosure obligation.

Accordingly, SEBI imposed a penalty of Rs. 10 lakh on Madhav Copper Limited for violating the disclosure requirements under the LODR Regulations.