Sebi will also issue further orders against five companies, including Mishtan Foods and its promoter and CMD Hiteshkumar Gaurishankar Patel, for alleged financial mismanagement, fraudulent transactions and corporate governance lapses. The company was restricted from the stock market until then.
The regulator also barred Mishtan Foods Limited (MFL) from raising funds from the public, as well as Hiteshkumar, Navinchandra Patel (CFO) and Ravikumar Patel (former CFO). , barred 12 companies, including Jatinbhai Patel (former executive director), from collaborating. Until further orders, transactions with Sebi registered entities, listed companies or companies seeking to raise funds from the public are prohibited.
After an extensive investigation, regulators found that the company was transferring funds among its promoters, directors and their relatives under the guise of legitimate trading activities. The payment deadline is within 45 days from the date of order.
Sebi also banned key individuals and entities associated with the company from trading in the stock market for two years.
The interim order came after a multi-year investigation into allegations of misconduct. Regulators said Mishtan Foods engaged in circular transactions with fictitious buyers and suppliers, many of which were shell entities controlled by company directors or their associates. “These transactions inflated the company’s financial performance on paper and misled investors and regulators,” Sebi said. The investigation also revealed that the company routed funds through a web of interconnected organizations. For example, suppliers such as Arihant Corporation and Mishtann Shoppee were found to have non-existent operations but were recorded as significant transactions in Mishtann’s financial statements.
The company allegedly used these entities to make it appear that it was conducting business activities, while funds were diverted to the personal accounts of directors and their relatives.
Sebi’s investigation also revealed another red flag in which the company had claimed that it was not incurring transportation costs for the goods, a claim contradicted by statements made by officials.
The regulatory investigation also found discrepancies in the company’s inventory records, with significant discrepancies between its declared inventory and its actual holdings.
Mishtan Foods has been asked to provide a detailed plan to return the misappropriated funds. The company’s promoters, directors and auditors are under continuous scrutiny and criminal proceedings may be initiated under Sebi rules.
(Based on agency opinion)
