Rajesh Exports case: NFRA begins probe after Sebi flags alleged ₹15.15 lakh crore mismatch

A month after the Securities and Exchange Board of India (SEBI) issued an interim order against gold refiner and jeweller Rajesh Exports, alleging massive misrepresentation of its revenues, the National Financial Reporting Authority (NFRA) says it has begun its probe into the case.

“We have started our process,” Nitin Gupta, the chairperson of NFRA, said on the sidelines of a FICCI conference on governance. He, however, refused to share any timeline for the probe. He also did not share any initial observations in the matter.

SEBI, in its interim order on June 3, had alleged that Rajesh Exports prima facie misrepresented about Rs 15.15 lakh crore, which is almost 99.80 per cent of its revenues, attributed to subsidiaries during the financial years 2020-21 to 2024-25.

In the order, SEBI also alleged prima facie misconduct and dereliction of duty on the part of the statutory auditors and said the order would be forwarded to the NFRA for appropriate action.

Rajesh Exports has denied any wrongdoing and had stated, following the order, that the revenue reported by the company was correct and that the entire matter was the result of confusion and a communication gap.

Speaking during the FICCI summit, Gupta stressed the need for board independence, especially in promoter-driven companies. He also said corporate environments should be such that difficult questions are not only tolerated but expected, and that even the most junior official should feel equally entitled to raise them.

Governance and accountability will become even more crucial as artificial intelligence (AI) gains traction and increasingly influences corporate decision-making. While AI holds immense promise, it also poses risks, Gupta pointed out.

“AI in technology can become a powerful enabler of better governance. But there is a caveat. The same system that can flag an anomaly can also manufacture a plausible-sounding, but entirely hallucinated, explanation for it,” he noted.

Given how rapidly AI and related technologies are evolving, Gupta also stressed the need for governance to become more agile.

“We need governance that can sense, learn and adapt continuously, while still anchoring itself in enduring principles of integrity, accountability, and public interest,” said Gupta.

Separately, speaking during the summit, Rajesh Dangeti, Chief General Manager of the Corporate Finance Department at SEBI, stressed that while technology may automate decision-making, it cannot automate accountability.

“One of the greatest misconceptions surrounding AI is that responsibility somehow shifts from people to machines. It does not. Technology may assist decision-making, but it cannot replace fiduciary responsibility,” said Dangeti.

He, therefore, stressed the need for managements to continue remaining accountable, for audit committees to continue overseeing financial integrity, and for risk management committees to continue overseeing emerging risks, even as AI changes the tools.