Aarti Drugs Limited, a prominent pharmaceutical company, recently received cautionary notices from both BSE (Bombay Stock Exchange) and NSE (National Stock Exchange of India) for a compliance violation under SEBI's Listing Obligations and Disclosure Requirements (SEBI LODR) Regulations, 2015.

Background of the Violation

The violation pertains to a failure to submit an announcement regarding an order from the Maharashtra Pollution Control Board (MPCB) dated July 13, 2024. The company was required to disclose this information to the stock exchanges within 24 hours of receiving the order, as mandated by Regulation 30 of the SEBI LODR. This regulation stipulates that listed companies must inform the stock exchanges about any action taken or orders passed by regulatory bodies against the company or its key stakeholders, including its directors or senior management.

The delay in submission occurred despite the requirement under sub-para 20 of Para A of Part A of Schedule III of the SEBI LODR, which states that such disclosures must be made immediately, within a span of 24 hours, following receipt of the order. In this case, the company did not meet the prescribed deadline, which led to the cautionary letters being issued by both BSE and NSE.

Details of the Cautionary Notices

• BSE Limited and NSE observed the delay and issued cautionary emails/letters to Aarti Drugs. These notices highlighted that the company had not submitted the necessary intimation within the required 24-hour period.

• The exchanges have made it clear that such non-compliance is a serious matter, and Aarti Drugs is expected to take corrective measures to avoid future lapses. The exchanges also advised that the company should ensure future compliance with SEBI’s regulations and exercise due diligence to avoid recurrence.

• No financial impact: The company confirmed that the delay in submission had no material financial or operational impact. However, the reputational risk from non-compliance could affect investor confidence.

Company’s Response and Corrective Action

Aarti Drugs has acknowledged the violation and assured that steps will be taken to improve internal processes and ensure timely compliance in the future. The company will also present this issue before its Board of Directors, as suggested by the exchanges, to discuss the matter and implement corrective actions.

Conclusion and Way Forward

Aarti Drugs Limited has taken the cautionary notices from BSE and NSE seriously and has pledged to adhere to the compliance requirements in the future. The company has indicated that it will ensure adherence to Regulation 30 of SEBI LODR going forward and has committed to avoiding similar lapses in the future. The exchanges have emphasized the importance of submitting timely disclosures, especially in the context of regulatory orders, to maintain transparency and trust in the financial markets.

As advised by BSE and NSE, Aarti Drugs has been reminded to exercise caution and follow all disclosure regulations moving forward. Any future deviations in compliance could lead to more severe actions from the exchanges, including possible penalties. Thus, Aarti Drugs will focus on strengthening its compliance framework to avoid further non-compliance issues.

In light of this incident, companies listed on Indian stock exchanges are reminded of the importance of adhering strictly to the timelines set forth by the SEBI LODR regulations and ensuring that disclosures are made accurately and on time to uphold the integrity of the financial markets.

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