Markets regulator Sebi on Thursday imposed fine on Raymond Ltd for not obtaining approval for certain related party transactions involving the lease of JK House.
About Company
Raymond Group is an Indian branded fabric and fashion retailer incorporated in 1925.
It produces suiting fabric, with a capacity of producing 31 million meters of wool and wool-blended fabrics.
The group owns apparel brands like Raymond, Raymond Premium Apparel, Park Avenue, Park Avenue Woman ColorPlus & Parx.
All the brands are retailed through ‘The Raymond Shop’ (TRS), with a network of over 700 retail shops spread across India and overseas, in over 200 cities.
Amount of imposed fine
For violation of market norms in the process, Sebi levied a fine of Rs 7 lakh on Raymond.
What result to fine?
Raymond violated provisions of Listing Obligations and Disclosure Requirements(LODR) Regulations by not providing the Lease Agreement details of JK House Sebi said in an order.
About Lease Agreement of JK House
Raymond had entered into a lease agreement with its wholly-owned subsidiary Pashmina Holdings Ltd in March 1994.
Pursuant to which it granted a lease of four duplex flats situated in JK House to Pashmina for nine years.
Pashmina, in turn, sub-leased these four duplex flats to certain tenants.
Through another deed of lease, Raymond granted the lease for duplex flats to Pashmina for another nine years.
Thereafter, Raymond decided to demolish and reconstruct JK House and entered into four separate agreements in November 2007 with Pashmina as the second party and the respective sub-lessees as the third party.
The payment of rent for the alternate accommodations provided to the sub-lessees – due to the tripartite agreements – was a related party transaction for which approval of audit committee was required but Raymond failed to do so.
Market Norm
Sebi through a circular in April 2014, amended LODR norms, which required approval for such transactions from the audit committee.
What SEBI Commented
Considering the stature of the firm, Sebi said it is expected to maintain a higher level of due diligence in its compliance with the provisions related to corporate governance.
However, the Noticee has not only failed to do so but also allowed the sub-lessees to unduly benefit at the loss of itself and its public shareholders.
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