When Nobody Stole Anything: The Rajesh Exports Puzzle

Introduction

On 3rd June 2026, the Securities and Exchange Board of India (“SEBI”) issued an interim order prohibiting Rajesh Exports Limited (“REL”) from buying, selling, trading or otherwise dealing in securities. This order is consequential not merely for its scale but for the novel legal problem it exposes which is what happens when reported revenues were never earned?

Factual Background

On 11 March 2024, an anonymous shareholder of REL emailed SEBI about the large trade receivables which were sitting unpaid for over two years. That thread, when pulled, led to an investigation revealing what SEBI now calls a misrepresentation of approximately Rs 15.15 lakh crore in consolidated revenues spanning five financial years from FY 2020-21 to FY 2024-25. Auditors of REL signed off on these accounts year after year without verifying the highly inflated revenue amounts while analysts covered the stock prices. For almost a decade, the number that eventually brought the whole practice into question was not spotted by any professional authority but, rather, was noticed by a retail investor who found it strange that the company was not collecting money which it was supposed to collect. This blog examines what that failure reveals about the structural assumptions embedded in India’s disclosure-based regulatory architecture.

The No-Theft Problem and Its Legal Significance

The Indian corporate fraud cases have mostly revolved around real businesses where the fraud was in hiding or siphoning off the money that were actually earned. The Satyam Scandal is the major and landmark governing precedent where its chairperson Mr. Ramalinga Raju inflated the Satyam Computer Services’ cash and bank balances by approximately Rs 5,040 crore and fabricated non-existent fixed deposits to hide a shortfall in revenue and operating margins, but the company itself was an operating IT services business with employees and clients. In these cases, the fraud slipped into the space between a real business and the numbers it reported where the legal question was always the same that where did the money go? In the present Rajesh Exports case, SEBI’s interim order appears to acknowledge that the fraud was not primarily one of theft as what allegedly happened never existed.

The alleged mechanism followed by REL was to report revenues through a chain of overseas subsidiaries like India to Singapore to Switzerland and terminating at Valcambi Societe Anonyme which is REL’s Swiss gold refinery that it acquired in 2015. Valcambi’s actual standalone revenues, audited by KPMG Societe Anonyme under the Swiss law, ranged between Rs 426 crore and Rs 743 crore annually during the relevant period. Against this amount, the REL’s consolidated revenues were reported somewhere between Rs 2.43 lakh crore and Rs 4.23 lakh crore per year which is a disparity of approximately five hundred times. Therefore, what allegedly never existed was the economic activity itself.

The Section 447 of the Companies Act, 2013 defines fraud broadly enough to capture deception by omission or concealment and not merely some affirmative misstatement, and notably does not require that the perpetrator gain or that anyone else lose, which matters here because REL’s defence will likely turn on characterisation rather than denial of the underlying numbers. This breadth is precisely why the standard of proof matters more than the definition. A Section 447 conviction follows ordinary criminal procedure and a prosecution can only be launched after the Serious Fraud Investigation Office(“SFIO”) completes an investigation under Section 212, which the Telangana High Court in Nekkanti Venkata Rao v. Jakka Vinod Kumar Reddy read as a deliberate filter against frivolous prosecutions and criminal proceedings. Further, SEBI’s civil enforcement track, by contrast, runs on a lower threshold. The Supreme Court in SEBI v. Kishore R. Ajmera held that civil liability rests on a preponderance of probabilities, and proof beyond reasonable doubt is not an indispensable requirement merely because the regulations also carry penal consequences.

Two parallel proceedings against REL and Rajesh Mehta can therefore reach different outcomes which, on paper, are materially the same facts, and there is no formal mechanism requiring the SFIO investigation to await, or be bound by, SEBI’s findings. The accused can credibly argue before the criminal forum that the consolidated revenue figures reflect a permissible accounting interpretation of group structure rather than fabrication, an argument considerably harder to sustain before SEBI given the size of the gap between Valcambi’s standalone numbers and REL’s consolidated figures.

The more operative mechanism is SEBI’s civil enforcement under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 2003 (“PFUTP Regulations”) where Regulation 3(b) prohibits employing any device or scheme to defraud in connection with securities, while Regulation 4(2)(k) specifically targets the dissemination of information the disseminator knows to be false or misleading and designed to influence investor decisions.

Further, the Civil enforcement mechanism under Sections 11 and 11B of the SEBI Act operates at a lower evidentiary threshold which exactly explains why the interim order has already restrained Rajesh Mehta from dealing in REL securities.

What the Law Can and Cannot Answer

There are several questions that deserve sustained attention as this case develops, each carrying important consequences for the future of India’s securities market.

First, Section 143(12) of the Companies Act, 2013 read with Rule 13 of the Companies (Audit and Auditors) Rules, 2014 places a positive obligation on the statutory auditors of a company to report suspected fraud involving amounts above Rs 1 crore to the Central Government. Under Section 140(5), an auditor who acts in a fraudulent manner or colludes in fraud is liable under Section 447. In the case, a five hundred-times gap between a subsidiary’s standalone audited revenue and the parent company’s consolidated figure which is repeated across five consecutive financial years is not the kind of discrepancy that survives ordinary substantive testing of intercompany reconciliations. The primary legal question is therefore not whether REL’s auditors had a reporting obligation under Section 143(12), since that obligation is undisputed, but whether their records can prove that they actually checked the consoldiation.

Second, SEBI alleges that Rs 338.90 crore was routed through Rajesh Mehta’s personal bank accounts between April 2020 and September 2025, without disclosure as a related party transaction. Further, Regulation 23(2) of the Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”) requires the approval from the prior audit committee for related-party transactions. REL admitted that the money was moved without showing the original bank account, which counts as a violation because Section 188 makes the outcome depend on board and audit‑committee approval and not on whether the transaction itself was legitimate. An unapproved related-party transaction is voidable at the Board’s option if not ratified within three months, and any director who authorised it must indemnify the company for the resulting loss, which means the Rs 338.90 crore transferred to Rajesh Mehta’s personal accounts is not merely undisclosed but potentially unwound, with REL’s independent directors carrying personal indemnification exposure if the audit committee’s prior approval, required under Regulation 23(2), cannot be evidenced.

Conclusion

Indian courts have never had to decide at such a large scale, what consolidated revenue legally represents. In the Satyam case, the fraud involved assets that did not exist on an otherwise real balance sheet. The Rajesh Exports matter, if SEBI’s findings are correct, the situation becomes different because it concerns a consolidated figure built largely on economic activity that never existed at all. Once a consolidated number is filed, there is no statutory mechanism to separate a genuine consolidation error from a fabricated figure.

What makes the Rajesh Exports case significant is not only its scale but also what it reveals about India’s disclosure‑based regulatory system. Rules such as LODR, quarterly results, auditor sign‑offs and related‑party disclosures all rest on the assumption that reported numbers reflect genuine economic activity. Yet REL reported ₹15.15 lakh crore in revenues over five years through subsidiaries whose audited standalone revenues accounted for only a small fraction of that figure while also continuing to remain listed and making regular disclosures.

The challenge now is to rethink how audits, cross‑border oversight and independent director accountability should evolve. Exposure to fraud should not depend on a single shareholder email, but on a system strong enough to catch structural failures before they reach the market.

The real importance of this case lies in whether India’s securities framework can move from assuming numbers are real to proving they are real, so that trust in disclosures is earned rather than presumed.