SEBI has barred three former top executives of Geodesic Ltd, which owned children’s magazine Chandamama, from the securities markets for one year for siphoning off funds.

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Those barred by the capital markets regulator are — Kiran Kulkarni, who was the managing director of Geodesic; Pankaj Kumar, who was the company’s chairman; and Prashant Mulekar, who was the director and compliance officer, according to a SEBI order.

Chandamama India Limited, publishers of the much loved Chandamama range of children’s magazines, was a subsidiary of Geodesic Ltd.

In its order, Sebi found that these persons were involved in siphoning of USD 125 million raised by the company through redeemable Foreign Currency Convertible Bonds (FCCBs) from overseas investors in 2008. The funds were mobilised for the purpose of investing in companies including wholly owned subsidiaries.

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As per SEBI, audited balance sheet of the company for FY 2011-12 was full of misleading financial data and did not contain the true and correct numbers pertaining to its financial health.

The forensic auditor appointed by SEBI in its report indicated that complex layered transactions were executed on behalf of the company and the persons behind such acts were Kulkarni, Kumar and Mulekar, who were the promoter and directors of the firm.

The funds were first invested in the foreign subsidiaries of the company — GTSL, Hong Kong and Geodesic Holding Limited Mauritius — from where such funds were further diverted to other entities.

"The investments which were reflected to have been made in the foreign subsidiaries, were further siphoned off from the accounts of those foreign subsidiaries to other various entities of suspected status and dubious antecedents," SEBI said in its 56-page order passed on Monday.

Ultimately, the company went under liquidation following directions of the Bombay High Court as it could not meet its obligation to redeem the FCCBs on their maturity due to lack of funds as the capital raised through the instruments had already been siphoned off through investments made in foreign subsidiaries, and through onward diversions to other entities for unexplained reasons, it added.

Accordingly, the Securities and Exchange Board of India (SEBI) restrained these persons from "accessing the securities market and further prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, for a period of one year".

SEBI started the investigation after receiving a letter in 2016 from the Company Registrar of the Bombay High Court. The letter informed Sebi about the order passed by the High Court in the matter of HDFC Bank Ltd versus Geodesic and further directed Sebi as well as the Enforcement Directorate to take action against the firm’s directors.

Following this, the markets regulator initiated an investigation into the books of accounts of Geodesic to ascertain the possible violations of regulatory norms. The investigation was conducted for the period of April 2011 to March 2012.

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(Edited by : Anushka Sharma)