The Securities Appellate Tribunal (SAT) has lifted a ban on VC-backed Tree House Education and Accessories Ltd and its executives from accessing capital markets, quashing a restraining order issued by the Securities and Exchange Board of India (SEBI) in March 2018.
The SAT, which takes up appeals pertaining to capital market regulator SEBI and Insurance Regulatory and Development Authority of India (IRDAI), quashed both the interim (March 2018) and confirmatory orders (November 2018) that banned five entities from accessing the markets for alleged financial irregularities.
These five entities are Tree House Education, its promoters and key executives Rajesh Bhatia, Geeta Bhatia, Giridharilal S. Bhatia, and Hiten Trivedi. The company counts FC VI India Venture (Mauritius) Ltd as one of its backers.
SAT, however, upheld the direction relating to forensic audit of Tree House, directing the company and its key executives for full cooperation for completion of audit.
“Appellants (Tree House and executives) shall extend full cooperation to enable the auditor to complete the forensic audit at the earliest. In the event if substantial new material/evidence is available, SEBI is at liberty to issue a fresh show-cause notice and proceed thereafter in accordance with law,” the quasi-judicial body stated in its 31-page order.
Shares of Tree House hit the upper limit of 5% to close at Rs 5.86 apiece on the BSE on Friday. The stock has touched a high of Rs 7.70 and low of Rs 3.33 in the past 52 weeks.
SEBI had barred the founders of the Mumbai-based pre-school chain Tree for failing to make full disclosures of transactions worth Rs 184.20 crore in its annual report and stock market filings.
Founders Rajesh Bhatia and Geeta Bhatia had provided several educational trusts with ‘refundable security deposits’ amounting to Rs 184.20 crore. SEBI had observed that the Tree House’s founders were fully aware of the manipulation and misstatements concerning the company’s financials and business operations, including alleged over-invoicing of furniture and fixtures.
In the past, Tree House had tried to revive its fortunes through a merger deal. But the education arm of media baron Subhash Chandra’s Essel Group scrapped the planned merger in December 2016.
Around the same time, parents filed a police complaint demanding refunds after the pre-school chain reportedly and abruptly closed hundreds of its centres in December 2016.
Before this, in October 2015, Tree House had sought to clarify Stakeholders Empowerment Services’ doubts over the high levels of receivables.