SEBI Drops Proceedings Against Prime Focus in Misleading Financials Case

The Securities and Exchange Board of India (SEBI) has officially disposed of adjudication proceedings against Prime Focus Limited and its directors, clearing them of allegations regarding misleading financial statements. After a thorough investigation, the market regulator concluded that the company’s accounting treatments for business transfers were accurate and compliant with Indian Accounting Standards.

The Core of the Investigation: Business Transfers and Profits

The case originated from SEBI’s scrutiny of transactions conducted by Prime Focus during the financial years 2020 and 2022. The investigation focused on two major business transfers: the visual effects (VFX) division was transferred to DNEG Creative Services, and the post-production services business was later sold to DNEG India Media Services—both of which are indirect subsidiaries under common control.

The regulator had raised concerns that these transactions artificially inflated the company's financial health. Specifically, the VFX transfer resulted in gains of ₹200.27 crore in FY20, and the post-production transfer contributed ₹250.20 crore in FY22. SEBI's investigation suggested that without these gains, Prime Focus would have reported a consolidated loss of ₹267.83 crore in FY20.

Clarification on Ind AS Compliance and Accounting Norms

The central dispute revolved around whether Prime Focus should have applied the provisions of Ind AS 103, which governs business combinations under common control. However, SEBI’s adjudicating officer, Amit Kapoor, ruled that these specific provisions were inapplicable to the company's situation.

The order clarified that Appendix C of Ind AS 103 applies to the acquirer (the entity taking over the business), whereas Prime Focus acted as the transferor (the entity selling the business). Instead, the company correctly applied Ind AS 16 (Property, Plant, and Equipment) and Ind AS 38 (Intangible Assets). The gains were recognized as the difference between the disposal proceeds and the carrying value of the assets, and crucially, they were disclosed as "exceptional items" rather than regular revenue.

Relief for Directors and Consolidation Accuracy

ಪ್ರತ್ಯೇಕ ಹಣಕಾಸು ಹೇಳಿಕೆಗಳ ಜೊತೆಗೆ, SEBI ಸಂಯೋಜಿತ ಲೆಕ್ಕಪತ್ರಗಳನ್ನು (consolidated accounts) ಸಹ ಪರಿಶೀಲಿಸಿತು. Ind AS 110 ಅಗತ್ಯತೆಗಳಿಗೆ ಕಟ್ಟುನಿಟ್ಟಾಗಿ ಅನುಗುಣವಾಗಿ, ಸಂಯೋಜನಾ ಪ್ರಕ್ರಿಯೆಯ ಸಮಯದಲ್ಲಿ ಗುಂಪು ಒಳಗಿನ ವಹಿವಾಟುಗಳಿಂದ (intra-group transactions) ಬಂದ ಲಾಭಗಳನ್ನು ಸರಿಯಾಗಿ ತೆಗೆದುಹಾಕಲಾಗಿದೆ ಎಂದು ನಿಯಂತ್ರಕರು ಕಂಡುಕೊಂಡರು. ಇದಲ್ಲದೆ, ಕಂಪನಿಯ ಶಾಸನಬದ್ಧ ಲೆಕ್ಕಪರಿಶೋಧಕರು ಈ ಲೆಕ್ಕಪತ್ರ ನಿರ್ವಹಣಾ ವಿಧಾನಗಳ ಬಗ್ಗೆ ಯಾವುದೇ ಆಕ್ಷೇಪಣೆಗಳನ್ನು ಎತ್ತಿಲ್ಲ ಎಂಬುದು ಗಮನಕ್ಕೆ ಬಂದಿದೆ.

ಈ ತೀರ್ಪು ಪ್ರವರ್ತಕ-ನಿರ್ದೇಶಕರು ನರೇಶ್ ಮಲ್ಹೋತ್ರಾ ಮತ್ತು ನಮಿತ್ ಮಲ್ಹೋತ್ರಾ ಹಾಗೂ ಸಿಎಫ್‌ಒ (CFO) ನಿಶಾಂತ್ ಫಾಡಿಯಾ ಸೇರಿದಂತೆ ಒಂಬತ್ತು ವೈಯಕ್ತಿಕ ನೋಟಿಸ್ ಪಡೆದವರಿಗೆ ಗಮನಾರ್ಹ ಪರಿಹಾರವನ್ನು ನೀಡಿದೆ. ಕಂಪನಿಯ ವಿರುದ್ಧದ ಲೆಕ್ಕಪತ್ರ ಉಲ್ಲಂಘನೆಯ ಪ್ರಾಥಮಿಕ ಆರೋಪವನ್ನು ವಜಾಗೊಳಿಸಿರುವುದರಿಂದ, ನಿರ್ದೇಶಕರ ವಿರುದ್ಧದ ಪರೋಕ್ಷ ಆರೋಪಗಳು ಉಳಿಯಲು ಸಾಧ್ಯವಾಗಲಿಲ್ಲ. ಮಾರಾಟದ ಆದಾಯದ ಸಮಯದ ಕುರಿತು ಪ್ರಶ್ನೆಗಳಿದ್ದರೂ ಸಹ, ಅಕ್ರಮ ಹಣದ ಸುತ್ತೋಲೆ (fund rotation) ಅಥವಾ ನಕಲಿ ವಹಿವಾಟುಗಳ ಬಗ್ಗೆ ಯಾವುದೇ ಪುರಾವೆಗಳು ಸಿಗಲಿಲ್ಲ ಎಂದು SEBI ಕಂಡುಕೊಂಡಿದೆ.

ಪ್ರಮುಖ ಅಂಶಗಳು