Regulator bars company and HarshawardhanSabale from securities markets for seven years following findings of financial misrepresentation.
The Securities and Exchange Board of India (SEBI) has imposed a combined penalty of ₹33.08 crore on Varanium Cloud Ltd, its promoter HarshawardhanHanmantSabale and seven other entities in a case involving alleged financial misrepresentation and diversion of funds raised from investors.
Along with the monetary penalties, the market regulator has barred Varanium Cloud and Sabale from accessing the securities market for seven years. Sabale has also been prohibited from serving as a director of any listed company or SEBI-registered intermediary during the same period.
₹62.51 crore in issue proceeds diverted.
According to SEBI’s final order, ₹62.51 crore raised through Varanium Cloud’s public issues was diverted to related parties and other entities. This included ₹18.98 crore from the company’s initial public offering (IPO) and ₹43.53 crore from its subsequent rights issue. The regulator said Sabale controlled the movement of the funds and approved the transfers. Of the total amount identified as diverted, ₹32.73 crore was transferred to Sabale, according to the findings cited in the order.
SEBI has directed Varanium Cloud to recover ₹62.51 crore, along with interest at 12% from the respective transaction dates.
Promoter ordered to disgorge unlawful gains.
The regulatory action also extends to gains made through trading in Varanium Cloud shares. SEBI found that Sabale made unlawful gains of ₹128.77 crore and directed him to disgorge the amount along with 12% annual interest calculated from the relevant dates of share sales until payment.
The findings followed a regulatory examination into the affairs of the NSE Emerge-listed company. SEBI had earlier raised concerns over the use of public issue proceeds and the accuracy of information presented by the company. The case centres not only on the alleged diversion of investor funds but also on disclosures made by Varanium Cloud. SEBI found instances involving misrepresentation in the company’s prospectus and non-disclosure of pending litigation.
The regulator’s earlier proceedings had also examined alleged fictitious transactions and financial statements that did not accurately reflect the company’s underlying business activity. For investors, the case also highlights the importance of scrutinising offer documents, fund utilisation and financial disclosures before participating in SME IPOs or rights issues.
