SEBI Drops ₹6 Lakh Penalty On Rajendra Pathak In KLIL Case, Finds No Proof Of CFO Role

The Securities and Exchange Board of India (SEBI) on Wednesday, 27 May, set aside the penalty of Rs. 6 lakh imposed on Rajendra Pathak in the matter of K-Lifestyle & Industries Ltd. and dropped all proceedings against him, holding that there was no sufficient evidence to prove that Pathak worked as the company's Chief Financial Officer (CFO) during the relevant period or that he certified any misstated financial statements.

Quasi-Judicial Authority Biju S. passed the order in compliance with a July 2025 direction of the Securities Appellate Tribunal (SAT) which had set aside SEBI's 2021 order and sent the matter back for fresh consideration after giving Pathak a hearing. The Authority noted:

“The fact that Noticee, despite being named the CFO (i.e., officer primarily in charge of the financials of the company), did not attend a single audit committee meeting does cast a doubt on whether the Noticee was the CFO of the company and was in charge of its financials.”

SEBI started proceedings after it ordered a forensic audit in 2017 against K-Lifestyle & Industries Ltd. (KLIL) over suspected financial irregularities. Based on audit findings for April 2015 to December 2017, SEBI issued a show-cause notice in 2020 to the company, its directors, and Pathak. It alleged non-genuine transactions, misstatement of accounts, and misuse of funds.

In its 2021 order, SEBI held that KLIL misrepresented its financial statements. It also held that Pathak, as CFO, approved and certified the financial results in violation of Regulation 33(2)(a) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and imposed a penalty of Rs. 6 lakh on him.

Pathak denied these allegations. He said the company never appointed him as CFO and that he only worked as a Commercial Manager/plant-in-charge. He said no appointment letter, board resolution, or ROC filing supported his CFO role. He also alleged that the company forged his signatures on annual reports without his knowledge. Further, he pointed out that annual reports did not show any proof of his CFO responsibilities or his participation in financial certification.

SEBI rejected the argument that the show-cause notice violated the SEBI (Inquiry) Rules. It held that authorities issued the notice properly and followed due process. It also held that fraud charges under the PFUTP Regulations could not continue against Pathak because it dropped similar allegations against the company in the 2021 order. Moreover, it held that no evidence showed that he failed to cooperate with forensic auditors.

On review of the records, SEBI found that the forensic audit and investigation reports relied mainly on MCA records to label him as CFO, without supporting documents to confirm his appointment. It also noted inconsistencies in the company's annual reports, which continued to name him as CFO even after he allegedly left the company.

Further, it noted that Pathak did not attend any audit committee meetings. It also observed that key financial statements did not bear his signature and that only the Managing Director signed the compliance certificates under the LODR Regulations. It said:

“Therefore, there is no documentary evidence available on record to establish that the Noticee in fact certified that there was no financial misstatement. In the absence of any such clear evidence, the primary charge against the Noticee that he certified that the financial statements do not contain any misstatements, is not tenable and cannot be sustained.”

Therefore, it concluded that it could not confirm that Pathak acted as CFO during the relevant period. It also found no link between him and the alleged violations.

Accordingly, SEBI gave him the benefit of doubt and closed the show-cause notice dated 18 August 2020 without any penalty or directions.