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The Kerala High Court on Saturday (26 September) issued notice to Securities and Exchange Board of India (SEBI) in a writ petition seeking directions to SEBI to consider a complaint alleging irregularities in the financial reporting, related party transactions and cross-border dealings of Kitex Garments Ltd. (KGL) and its group entities. 

Justice Bechu Kurian Thomas issued the notice. 

The writ petitioner is a share holder in the company. According to the petition, the petitioner had submitted a detailed complaint to SEBI on April 16. 2026, raising concerns regarding transactions involving KGL, Kitex Childrenswear Limited (KCL) and their US-based joint venture, Kitex USA LLC (KUL).

The petitioner has submitted that his concerns arose from his examination of publicly available annual reports, audited financial statements, statutory auditors' reports and related-party disclosures of the companies. 

A central issue raised in the petition concerns transactions between KGL and KUL. The petitioner alleges that KGL disclosed export sales to KUL aggregating to approximately Rs 1,838.03 crore during FY 2016-17 to FY 2024-25.

The petition further points to substantial trade receivables from KUL, including approximately Rs 216.05 crore in FY 2019-20, Rs 221.58 crore in FY 2021-22 and Rs 122.77 crore in FY 2024-25.

According to the petition, KGL's investment in KUL, amounting to approximately Rs 27.76 crore, was written down in FY 2024-25, while substantial receivables continued to remain outstanding. The petitioner relies on observations attributed to the statutory auditors concerning the recoverability of those receivables.

The petition also states that KUL subsequently paid approximately Rs 94.86 crore towards outstanding receivables during FY 2025-26. The petitioner questions the circumstances surrounding the subsequent realisation and has sought examination of the underlying transactions, fund flows and banking records.

The petition also raises questions concerning commission payments to KUL. It states that KCL made aggregate commission payments of approximately Rs 46.98 crore to KUL between FY 2019-20 and FY 2024-25. It separately refers to approximately Rs 44.36 crore in commission payments by KGL to KUL during the same period.

The petitioner contends that the transactions require examination of the underlying agreements, invoices, services allegedly rendered, computation of commission and corresponding banking transactions.

Another issue raised concerns changes in the manner in which transactions between KCL and KGL were classified in financial disclosures. According to the petition, transactions that had previously appeared under heads such as rent, job work charges, expenses recovered and revenue from services were, from FY 2021-22 onwards, substantially reflected under the consolidated head “Revenue from Sale of Goods”. The petitioner says the change warrants examination for consistency and transparency of related-party disclosures.

Reliance is also placed on a Draft Audit report dated December 7, 2024 prepared by the Officer of the Deputy Commissioner, State Goods and Services Tax Department, Kerala. 

The petitioner submits that the report treated KUL as a related entity and referred to the applicability of the Reverse Charge Mechanism, with proposed proceedings under Section 74 of the Kerala State GST Act involving approximately Rs 5.63 crore under that head, out of a stated total exposure of approximately Rs 6.12 crore.

It is submitted that the petitioner has filed a detailed complaint against Kitex Groups of companies and  its group entities on 16 April 2026 before SEBI, detailing the financial statements, annuals reports and other documents. 

It is further submitted that the despite the complaint being filed, SEBI has not examined the same and no reasoned decision has been communicated to the Petitioner. 

"That the continued failure of the 1st Respondent to consider the complaint assumes greater significance since the 284 Respondent is a listed company having substantial public shareholding. Any material irregularity in the financial affairs or related party transactions of the 224 Respondent would directly affect the interests of the public shareholders."  the petitioner submits

The petitioner has thus sought a writ of mandamus directing SEBI to consider the April 16 complaint and pass a reasoned order within a time-bound period.

A further relief sought is a direction to SEBI, while considering the complaint, to examine whether it should make any representation or objection before the NCLT in connection with the proposed scheme of arrangement between KCL and KGL, and to take appropriate steps before the scheme is sanctioned.

Today, when the matter was taken up, the counsel for SEBI sought time for instruction and took notice on behalf of SEBI while notice was issued to other respondents (Kitex Garments Ltd. and Kitex Childrenswear Ltd.) 

The matter is posted after two weeks for further consideration. 

Case Title: Muhammed Firdouz A V v Chief General Manager and Ors. 
Case No: WP(C) 32914/ 2026

Counsel for Petitioner: Bijoy P. Pulipra, Kesiya Biju, Nithya Sumam Das, Varsha Vijay Menon, R.S. Anandan, Karthik K.S, Sreejith V, Nimiya Feroz, Abhijith U, Kishor Kumar K

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