SEBI Exonerates Directors in ACIL Cotton Audit Fraud Case Due to Insufficient Evidence

MUMBAI, May 26, 2025 : The Securities and Exchange Board of India (SEBI) has formally closed its adjudication proceedings against Chetan Sukhdev Pandit and Prahlad Vithaldas Panchal, bringing an end to a lengthy investigation into alleged fraudulent audit practices involving ACIL Cotton Industries Ltd. and three other entities.

Case Background

The matter traces back to a 2015 complaint filed by chartered accountant Dinesh S. Bang. He alleged that his firm’s name was falsely presented as the statutory auditor in the financial statements of four companies ACIL Cotton Industries Ltd., Universal Credit and Securities Ltd. (UCSL), Mindvision Capital Ltd. (MCL), and RFL International Ltd. spanning the financial years 2011 to 2018.

Following the complaint, SEBI initiated a detailed inquiry and, in 2021, issued a show cause notice to various individuals. The notice included allegations of multiple breaches under the SEBI Act, the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, the Listing Obligations and Disclosure Requirements (LODR), and provisions of the Securities Contracts (Regulation) Act (SCRA).

Allegations Against the Directors

Among those named were Chetan Pandit, who previously served as a director at UCSL, and Prahlad Panchal, listed as a director of MCL. The allegations against them included:

• The unauthorised use of auditor credentials in official regulatory filings
• Submission of inaccurate or misleading financial documents
• Non-compliance with official summons issued under Section 11C of the SEBI Act

Responses from the Accused

Both Pandit and Panchal firmly denied any involvement in the alleged misconduct.

• Chetan Pandit explained that he had resigned from UCSL on January 17, 2013, and had no further association with the company thereafter. He claimed the company’s 2012–13 annual report falsely attributed a signature to him, misrepresenting his continued role in its affairs.
• Prahlad Panchal stated that he was unaware of any directorship at MCL and only became aware of the issue in late 2023 after receiving a bank account attachment notice. He alleged that his identity had been stolen and that forged signatures had been used in filings with the Registrar of Companies.

Both individuals also questioned the legitimacy of SEBI’s summons, pointing to mismatches in addresses, absence of recipient signatures, and logistical challenges such as building redevelopments, which made delivery ineffective.

SEBI’s Findings and Ruling

Upon evaluating the submissions and available records, SEBI’s Adjudicating Officer, Amit Kapoor, concluded that neither Pandit nor Panchal could be held responsible for the alleged violations.

• In Pandit’s case, SEBI acknowledged the absence of any direct involvement in the alleged misstatements or improper use of audit details during his tenure.
• For Panchal, SEBI accepted the possibility that his identity had been misused and found no credible evidence tying him to the actions in question.

The order cited the precedent set in Mukesh D. Ambani vs SEBI, highlighting that a person’s title as director does not automatically imply liability unless there is concrete proof of their participation in the wrongful conduct.

Final Decision

As the investigation failed to establish any definitive breach of regulations by the two individuals, SEBI dismissed all charges and opted not to impose any penalties. The final order, dated May 23, 2025, was officially issued to both parties today, formally concluding the proceedings in this matter.