2020 (7) TMI 31
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....ndependent auditor/audit firm for conducting a detailed forensic audit of the books of account of Ricoh India Limited ('Ricoh' for short) from the financial year 2012-13 till March 6, 2018. The said forensic audit had to be completed and the report submitted to SEBI through BSE within six months from March 6, 2018 i.e. latest by early September 2018. Since both these appeals are filed challenging the same impugned order, by consent of the parties, both the appeals are heard together and decided by this common decision by taking Appeal No. 407 of 2018 as the lead matter. 2. Following certain observations by the statutory auditor of Ricoh M/s. BSR & Co. LLP while conducting review of the financial statements of quarter ending June 30, 2015 and half year ending September 30, 2015 Ricoh ordered a preliminary investigation through Price water house Coopers Private Limited, India ('PwC' for short). Based on the findings in the preliminary investigation report Ricoh sent a letter to SEBI dated April 20, 2016 stating that the financial statements of the Company for the quarters ending June 30, 2015 and September 30, 2015 did not reflect the true and fair view of the state ....
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.... Ashim Sood representing the appellants submits that the impugned order has been passed in absolute disregard of the settled principles of natural justice and fair hearing. Though written submissions of the appellants were taken on record by the WTM of SEBI those submissions have not been considered while confirming the interim order. Moreover, both the appellants were not given another opportunity for personal hearing though the appellants repeatedly sought the same while filing their supplementary submissions. 6. Further, it was contended by the learned Counsel for the appellants that SEBI relied only on the findings in the preliminary report/forensic audit by PwC but the same report did not find any evidence against the appellants nor their names were included in any wrongdoing. Therefore, while relying on the said PwC report, instead of sticking to the finding in the report that three employees of Ricoh and an outside entity was involved in the malafide activities of financial wrongdoing, the names of the appellants have been arbitrarily added in the Show Cause Notice and thereafter an ex parte interim order was passed against them without any basis. However, the appellants fu....
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.... 29 of the said order which reads as follows:- "I note that the independent auditor/audit firm, appointed by the BSE for conducting a detailed forensic audit of the books of accounts of Ricoh for the financial year 2012-13 onwards, as per the directions in the Interim Order, is yet to submit its report to SEBI through BSE and a clear picture regarding the financial affairs of the company and the role of various Noticees in the alleged fraud is yet to emerge pending such investigation. Therefore, it would be prudent to keep all questions related to the role of the Noticees in the alleged fraudulent and manipulative activities open so that the investigations pending in the matter may not be prejudiced in any manner by this order. Consequently, I find it appropriate not to vacate the directions issued against the Noticees vide the Interim Order at this stage, in the interest of the investors and the integrity of the securities market." 9. Therefore, the learned Counsel for the appellants contended that there is no evidence relating to any malafide activities or any collusion or abetment from the side of the appellants. The forensic report as ordered by SEBI had to be made available....
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.... tune of Rs. 1118 crore. By giving a rosy picture and thereby appellants misleading the public has resulted in considerable loss to the investors and therefore passing the impugned order was very much in public interest since it was relating to the interest of a listed Company, its investors and the stakeholders at large. 12. The learned Senior Counsel for respondent SEBI further contended that for unknown reasons the PwC report was restricted to chose a six months period of June and September quarters of 2015 only when it was already on record that misstatements of accounts started from financial year 2012-13 onwards. Hence, the attempt of the management of Ricoh, which included the appellants and other noticees, was just to cover up the entire issue and hence the limited brief of enquiring into six months financial statements given to the PwC but even this report of PwC dated November 17, 2016 points out serious anomalies in the financial statements of Ricoh as given in paragraphs 4 and 5 at page 3 of the impugned order. Similarly, its dealing through entities such as FDSL and Redhex belonging to relatives of the noticees, transfer of funds and transactions of circular nature th....
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.... SEBI to pass a final order taking into account the evidence contained in the forensic report and other evidence collected in the interim and thereby issuing a comprehensive show cause notice. On instructions, the learned Senior Counsel further submitted that such a show cause notice will be issued within one week and subject to the appellants cooperation a final order can be passed within a very short time as may be allowed by this Tribunal. 15. The learned Senior Counsel, relying on Chairman, All India Railway Recruitment Board and Another v. K. Shyam Kumar and Others [2010] 6 SCC 614 submitted that additional grounds can be looked into to examine the validity of an order in public interest. SEBI has passed the impugned order under section 11 and 11B in public interest. Similarly, relying on K.K. Ahuja v. V.K. Vora and Ors. [MANU/SC/1111/2009] it was contended that the role of MD or Joint MD and their accountability are well established in law and hence application of Section 27 of the SEBI Act to contend that Mr. Takano is squarely covered in the matter. 16. Having heard the detailed submissions made by the learned counsel for the parties and having perused the documents place....