Authority: Adjudicating Officer, Securities and Exchange Board of India (Amit Kapoor)

Order Date: June 16, 2026

Case Overview

Securities and Exchange Board of India (SEBI) conducted an investigation into Prime Focus Limited (PFL), a company listed on BSE and NSE, and its officials for alleged violations of securities laws during FY 2019-20 to FY 2021-22. The investigation focused on PFL's preparation of financial statements in accordance with applicable Accounting Standards, specifically examining two intra-group business transfers:

1. Sale of VFX Business Division to DNEG Creative Services Limited (DCSL) in FY 2019-20 for ₹273.43 crore, resulting in a gain of ₹200.27 crore (net of tax)

2. Sale of Post-Production Services Business to DNEG India Media Services Limited (DIMSL) in FY 2021-22 for ₹365 crore, resulting in a gain of ₹250.20 crore

SEBI alleged that these transactions constituted "common control business combinations" under Appendix C of Ind AS 103 and should have been accounted for using the pooling of interests method rather than recognizing gains. The show cause notice alleged that PFL and its officials violated:

  • Section 12A(b) and (c) of SEBI Act, 1992
  • Regulation 3(c), (d), 4(1), 4(2)(f) and (k) of PFUTP Regulations
  • Regulation 4(1)(a), (b), (e), 48, and Clause 2 of Part B of Schedule V read with 34(3) of LODR Regulations

The noticees included the company (Noticee 1), promoters Naresh Malhotra (Noticee 2) and Namit Malhotra (Noticee 3), non-executive director Ramakrishnan Sankaranarayanan (Noticee 4), CFO Nishant Avinash Fadia (Noticee 5), and independent directors Rivkaran Singh Chadha (Noticee 6), Kodi Raghavan Srinivasan (Noticee 7), Padmanabha Gopal Aiyar (Noticee 8), and Samu Devarajan (Noticee 9).

Final Outcome

The Adjudicating Officer dismissed all allegations against all noticees. Key findings include:

1. Applicability of Ind AS 103 Appendix C: The AO found that Appendix C of Ind AS 103 applies only to the acquirer/transferee (the subsidiaries), not to the transferor (PFL). The AO referenced ITFG Bulletin 22, which explicitly states that Appendix C "lay down accounting for a common control business combination only from the perspective of the transferee."

2. Accounting Treatment in Standalone Financial Statements: The AO found that PFL correctly applied Ind AS 16 (Property, Plant & Equipment) and Ind AS 38 (Intangible Assets) for the sale of business divisions, recognizing gains as the difference between disposal proceeds and carrying value. The gains were properly classified under exceptional items rather than revenue.

3. Accounting Treatment in Consolidated Financial Statements: The AO found that any gains recognized in PFL's standalone financial statements were properly eliminated during consolidation as required by Ind AS 110, resulting in net-zero impact on consolidated financial statements.

4. Receipt of Sale Consideration: The AO noted that while major portions of sale consideration (79.10% of ₹224.48 crore) were received after SEBI investigation initiation, there was no evidence of fund rotation among group entities.

5. Derivative Charges Against Directors: Since the primary allegation against PFL was not established, all derivative charges against directors and officers were automatically dismissed.

The adjudication proceedings initiated vide SCN dated December 11, 2023 stand disposed of with no violations established against any noticee.

Topics: SEBI Adjudication, Accounting Standards, Intra-group Transactions