Baba Ramdev’s Patanjali faces MCA heat to explain some ‘suspicious’ transactions
Synopsis
India’s government has requested Patanjali Ayurved, co-founded by Baba Ramdev, to clarify certain transactions flagged as suspicious by the economic intelligence wing. The Corporate Affairs Ministry is investigating potential corporate governance breaches and fund diversions. This follows previous scrutiny of Patanjali Ayurved and its affiliates regarding tax non-payment and misleading product claims.
India’s government has asked Patanjali Ayurved Ltd., a traditional medicine company co-founded by celebrity yoga guru Baba Ramdev, to explain some transactions deemed suspicious, according to people familiar with the matter.
The Corporate Affairs Ministry sent a notice to the company after the federal economic intelligence wing found transactions it labeled as abnormal and dubious, the people said, asking not to be identified citing rules.
While Patanjali Ayurved is a closely held company, its unit Patanjali Foods Ltd. is publicly traded. Its shares have declined close to 10% so far this month.
Patanjali Ayurved Faces Government Scrutiny Over Suspicious Transactions
Patanjali Ayurved Ltd., the prominent Indian FMCG company co-founded by Baba Ramdev, is under investigation by the Ministry of Corporate Affairs (MCA) for allegedly engaging in suspicious financial transactions. The MCA has issued a notice to the company, seeking clarification on certain transactions deemed abnormal and potentially dubious. The specifics of these transactions, including the amounts involved, have not been disclosed, as the probe is in its preliminary stages. The company has approximately two months to respond to the notice.
Background of the Investigation The investigation was initiated after the federal economic intelligence wing identified transactions that raised concerns about potential corporate governance breaches and fund diversion. The MCA is examining these aspects to ensure compliance with corporate laws and regulations. This scrutiny adds to the company’s ongoing legal challenges, including previous issues related to misleading advertisements and tax-related matters.
Previous Legal Challenges
In 2024, Patanjali Ayurved faced legal action for publishing misleading advertisements that violated the Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954. The Supreme Court issued a contempt notice to the company and its managing director, Acharya Balkrishna, for continuing to make unsubstantiated health claims despite prior assurances. The court later accepted an unconditional apology from the company, but warned against future violations. Additionally, the Directorate General of Goods and Services Tax Intelligence (DGGI) issued show-cause notices to Patanjali Ayurved and its subsidiary, Patanjali Foods Ltd., in April 2024. The notices alleged non-payment of Goods and Services Tax (GST) and wrongful claims of Input Tax Credit (ITC), amounting to significant sums. Penal proceedings were initiated against company officials in connection with these allegations
Implications for Patanjali Ayurved
The ongoing investigations and legal challenges could impact Patanjali Ayurved’s reputation and operations. As a closely held company, it is not listed on the stock exchange; however, its publicly traded subsidiary, Patanjali Foods Ltd., may experience market repercussions. Investors and stakeholders will be closely monitoring the outcomes of these investigations to assess potential risks and impacts on the company’s business activities.
Conclusion
Patanjali Ayurved Ltd. is currently under scrutiny by the Ministry of Corporate Affairs for alleged suspicious financial transactions. This investigation adds to the company’s existing legal challenges, including issues related to misleading advertisements and tax compliance. The company’s response to these allegations and the outcomes of the ongoing probes will be crucial in determining its future operations and standing in the business community.
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