Eros under scrutiny: SEBI takes action, ED conducts raids in financial misconduct case

New Delhi: Sebi has ordered the attachment of bank accounts as well as shares and mutual fund holdings of 10 individuals to recover Rs 1.25 crore, saying they have not complied with the regulator's investigation in the matter of Eros International Media.

The recovery proceedings were initiated against these 10 individuals – Gourab Ray Chaudhuri, Manisha Kumari Singh, Vinod Kumar Agarwal, Sutapa Mukherjee, Sumit Bhoot, Abhishek Das, Dev Govind Binani, Debosmita Ghosh Dastidar, Debjit Medda, and Anindya Bikas Datta – after they failed to pay the fine imposed on them by the regulator, Sebi said in 10 separate orders passed on Thursday and Friday.

In its notices, the Securities and Exchange Board of India (Sebi) has ordered attachment of bank, demat accounts and mutual fund folios of these individuals to recover pending dues.

Going by the notices, dues totalling Rs 1.25 crore were pending with these individuals with the amount including interest and recovery costs.

As per the notices, Sebi said there is sufficient reason to believe that the defaulters may dispose of the bank accounts and securities in the demat accounts or mutual fund folios and "realisation of the amount due under the certificate would, in consequence, be delayed or obstructed".

Accordingly, the regulator has asked all banks, depositories, mutual funds not to allow any debits from the accounts of these individuals. However, credits have been permitted.

Further, the markets watchdog has directed all banks to attach all accounts, including lockers, of the defaulters.

The Enforcement Directorate Friday said it recently carried out searches against leading entertainment company Eros International Media and some linked entities as part of a probe into a Rs 2,000-crore foreign exchange law violation case.

The searches were undertaken on February 5 at five locations in Mumbai under the Foreign Exchange Management Act (FEMA), the probe agency said.

In a statement, the ED said the searches were part of an ongoing probe in the case of alleged "fund diversion" by Eros International Media and the other entities of EROS group.

"Incriminating" documents pertaining to overseas entities, immovable properties, overseas bank accounts and digital devices were seized, it said.

The federal probe agency said the probe was initiated based on SEBI investigation against EROS group and its promoters for alleged misrepresentation of finances and "diversion/siphoning" of funds amounting to around Rs 2,000 crore.

The main entity of EROS group is Eros International Media, which is an Indian motion picture production and distribution company.

Eros co-produces, acquires and distributes Indian films in multiple formats worldwide, including theatrical, television syndication and digital platforms, the ED said.

The agency said "evidences" have been gathered, which indicates that EROS paid about Rs 2,000 crore as content advances to certain entities betweenthe  2012-13 and 2020-21 fiscal years.

"Eros wrote off major amounts due from these entities under the pretext of non-recovery due to the COVID-19 pandemic as a part of a balance sheet cleaning exercise." "In this manner, EROS devised a scheme to inflate its financial statements by paying content advances, which were later diverted or round-tripped back to the company, with fictitious movie rights purchases used to hide the true nature of these transactions," the agency claimed. 

In October last year, Sebi slapped penalties totalling Rs 2 crore on 17 entities, including these 10 individuals, for non-compliance with its investigation and failure to provide complete and timely information in the matter of Eros International Media.

The matter pertains to alleged financial irregularities and mismanagement concerning agreements between Eros International Media (EIML) and Spicy Entertainment & Media (SEML), along with other related entities.

In June 2023, the regulator, in an interim order, prohibited five entities, including Eros International, from the securities markets in a case pertaining to the possible diversion of funds based on prima facie findings.

Thereafter, the regulator confirmed the ban against them in October 2023, through a confirmatory order.