Rajesh Exports order puts auditors, audit committee under the scanner

Rajesh Mehta, Chairman, Rajesh Exports Ltd.
| Picture Credit score:
PAUL NORONHA

The Securities and Trade Board of India’s (SEBI) interim order in opposition to Rajesh Exports has put the firm’s statutory auditors, audit committee and board under the scanner, elevating questions on the failure to independently confirm abroad subsidiary revenues is as important as the ₹15.15 lakh crore misrepresentation allegation, and that the case could carry implications nicely past securities legislation.

Statutory auditors BSD & Co. and P.V. Ramana Reddy & Co., who had signed off on the firm’s accounts between FY21 and FY24 have been referred for his or her conduct to the Nationwide Monetary Reporting Authority (NFRA). Each auditors undertook throughout depositions to supply lacking subsidiary monetary statements and audit working papers, however had not executed in order of the date of the order.

Verification failure

“Crucial side is the verification failure,” stated Soumya Singh, Co-Founding Accomplice at Thistle & Regulation. “The place most of the consolidated income will depend on abroad subsidiaries, the board, audit committee and auditors have the next accountability to make sure that the numbers should not simply consolidated mechanically, however are able to unbiased verification.”

The group audit course of has damaged down essentially, with a number of inconsistencies in how revenues had been consolidated, a senior auditor stated. The intermediate Swiss holding entity GGR, by way of which Valcambi SA’s revenues flowed into Rajesh Exports’ consolidated accounts, didn’t have a statutory audit.

Whereas Rajesh Exports stated the audited monetary statements of step-down subsidiaries had been first consolidated at its Singapore subsidiary earlier than being included into the dad or mum firm’s accounts, the Singapore entity’s personal annual stories acknowledged that it ready solely standalone monetary statements and was exempt from making ready consolidated accounts.

Amit Tungare, Managing Accomplice at Asahi Authorized, stated the findings raised elementary questions on fiduciary oversight. “If 97 to 99 per cent of the firm’s income reportedly originates from abroad subsidiaries like Valcambi, and people numbers can’t be tallied, what precise knowledge was the audit committee counting on to log off on the financials? It suggests a possible rubber-stamp tradition the place unbiased verification was both essentially flawed or totally absent,” he stated.

“The expectation as we speak is that boards should have entry to unbiased verification mechanisms, periodic audits, transaction-level visibility and efficient danger reporting techniques,” stated Tushar Agarwal, Founder and Managing Accomplice of C.L.A.P. JURIS.

Additional, SEBI discovered that company funds aggregating to ₹338.90 crore had been routed by way of the private checking account of promoter-chairman Rajesh Mehta, for which the firm didn’t furnish board or audit committee approvals.

Alay Razvi, Managing Accomplice at Accord Juris stated, “The allegation that firm funds had been routed by way of the promoter’s private financial institution accounts may set off PMLA proceedings, creating compounding authorized publicity nicely past SEBI’s civil penalties,” he stated. “The precedent of previous IPO irregularities by Rajesh Mehta raises issues about recurring governance tradition reasonably than remoted accounting errors,’ he stated.

Revealed on June 7, 2026