Congress raises questions on 'substantial' LIC stake in firm under SEBI scanner

The Congress on Thursday questioned LIC's investment in Rajesh Exports Ltd after SEBI (Securities and Exchange Board of India) alleged large-scale financial irregularities at the company and launched a probe into its affairs.

Congress general secretary in-charge communications Jairam Ramesh claimed the market regulator's interim findings pointed to a "gigantic scam" involving the gold refining and jewellery company and raised concerns over LIC's exposure to the firm.

In a statement, Ramesh said SEBI's interim order dated 3 June alleged massive revenue misrepresentation by Rajesh Exports over a five-year period from 2020-21 to 2024-25.

He claimed the alleged inflation in revenues could amount to nearly Rs 15 lakh crore.

"This is a mind-boggling number. Investigations are continuing and a final report is awaited," Ramesh said.

The Congress leader also pointed out that LIC holds around 10.8 per cent stake in the company and questioned how the insurer failed to detect the alleged irregularities despite being a significant shareholder.

"How could LIC have missed such a huge fraud taking place in a company in which it has a substantial stake?" he asked.

Ramesh further alleged that the investment raised questions about whether LIC's acquisition of the stake had been influenced by the "ruling ecosystem". He also claimed that banks had considerable exposure to the company.

SEBI action

The Congress remarks came a day after SEBI barred Rajesh Exports promoter and Chief Executive Officer Rajesh Mehta from dealing in the company's securities, citing prima facie evidence of financial misrepresentation and diversion of funds.

In its 109-page interim order, the regulator alleged large-scale misrepresentation in financial statements and flagged instances of routing and layering of funds through personal accounts and related entities without adequate disclosures.

SEBI said repeated summons were issued to the company seeking explanations, records and supporting documentation regarding fund flows and financial statements, but satisfactory responses were not provided.

The regulator also noted alleged non-cooperation by the company's statutory auditors, who, according to the order, failed to provide audit working papers despite assurances during the investigation.

SEBI observed that around 97 to 99 per cent of the company's reported revenue appeared to have been inflated, describing the findings as "egregious and unheard of".

The regulator said Mehta exercised substantial control over the company's day-to-day affairs and financial operations.

Pending further orders, SEBI has restrained Mehta from buying, selling or dealing in the company's securities and directed both Rajesh Exports and Mehta to cooperate fully with the ongoing investigation.

The regulator has also ordered the appointment of a new forensic auditor after citing inadequate cooperation during an earlier forensic audit exercise.