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TMI Blog2020 (7) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... llants are not in-charge of the said Company and therefore not in a position to influence the decisions of the Company. Moreover, we also note that the submissions made by the appellants have not been dealt with in the impugned order in any meaningful manner thereby effectively confirming the interim directions without taking into account the submissions and the documents made available by the appellants. Given these factors we find it difficult to sustain the impugned order qua the appellants. Both the appeals succeed and the impugned order is quashed qua the appellants. However, SEBI is at liberty to issue a fresh show cause notice and proceed in the matter in case evidence against the appellants are available through the forensic audit report or through SEBI's own investigation - Misc. Application Nos. 3, 532 And 579 of 2019, Appeal No. 407 And 427 of 2018 - - - Dated:- 29-1-2020 - Tarun Agarwala, Presiding Officer, Dr. C.K.G. Nair, Member And M.T. Joshi, Judicial Member For the Appellant : Ashim Sood, Ms. Shreya Suri, Rhythm Buaria and Saurabh Bachhawat, Advs. For the Respondent : Gaurav Joshi, Sr. Adv. and Vivek Shah ORDER DR. C.K.G. NAIR, MEMBE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort/forensic review by PwC was also submitted to SEBI by Ricoh vide letter dated November 29, 2016. 3. Based on the aforesaid information, SEBI initiated an investigation in the matter, particularly to examine the role of the Key Managerial Person (KMP) responsible for such misstatements in the books of account of Ricoh. SEBI also summoned to Mr. Manoj Kumar, Mr. Arvind Singhal and Mr. Anil Saini three senior officials of Ricoh to appear before the investigating authority for recording their statements. Mr. Manoj Kumar and Mr. Arvind Singhal, in addition, also gave their written submissions. Thereafter, SEBI sought further details from Ricoh which was also provided by the Company. Thereafter based on its own investigation and findings it was noted by SEBI that the financial misstatements commenced from the financial year 2012-13 onwards and Ricoh suffered considerable amount of loss on account of transfers to third parties, write-offs or non-recovery of debts, non-existence of inventory etc. It was further noted that share price of Ricoh had gone up considerably on account of the misstatements in the accounts and consequent painting of a rosy picture regarding its profitability. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on whatsoever regarding any alleged role and involvement of the appellant in any fraudulent transaction in the interim order. It was also submitted that the appellant was not dealing with any of the financial matters of Ricoh; he was made MD only on April 13, 2016 and he was never Head of SCM and was only Senior Vice President, Corporate Strategy Office etc. However, these submissions are not considered and without considering the submissions the interim directions were confirmed vide the impugned order. Similarly, Mr. T. Takano also vide his letters dated June 6, 2018 and June 28, 2018 and personal hearing on June 11, 2018 also submitted that there was no evidence relating to his wrongdoings and only because he was the MD and CEO in previous years his name has been included in the list of those who are responsible for the alleged wrongdoings. Therefore, a vicarious liability has been cast upon this appellant without any evidence/finding about his role in the wrongdoings only because he was MD and CEO of Ricoh and such liability has been imposed without considering the submissions made by the appellant. 8. The learned Counsel for the appellants while substantiating the stand als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Counsel for the appellants relied on Union of India (UOI) v. Chaturbhai M. Patel Co. (MANU/SC/0046/1975) and submitted that in the absence of proving a case of fraud against the appellants the impugned order cannot survive. Further, by relying on Maharashtra State Board of Secondary and Higher Secondary Education v. K.S. Gandhi and Others [1991] 2 SCC 716 it was canvassed that If there are no positive proved facts, oral, documentary or circumstantial from which the inferences can be made the method of inference fails and what is left is mere speculation or conjecture the alleged prima facie violations cannot be sustained without evidence. Further relying on 63 Moons Technologies Ltd. v. Union of India 2019 SCC OnLine SC 624 it was submitted that only subsequent materials i.e., materials in the form of facts that have taken place after the order in question is passed, that can be looked at or relied on subsequent to passing of the impugned order and therefore the forensic audit report which is now available and sought to be used as evidence to sustain the impugned order at this stage is legally untenable. Learned Counsel for the appellant also relied on State of Goa and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for SEBI that KMPs such as MD CEO cannot take shelter under ignorance of the wrongdoings in the Company and place such wrongdoings only at the doorsteps of their junior officers. In the instant case the amount of misstatements is more than ₹ 1100 crore and no MD who has been at the helm for years can pretend ignorance of the same and get away with it. As regards Mr. A.T. Rajan irrespective of whether he was Head of SCM (in fact the order at page 12 states the designation correctly based on his own statement), in any case he was a senior officer of Ricoh as Senior Vice President and Chief Strategy Officer who was senior enough to be made the MD and CEO on April 13, 2016. Even if he was not in-charge of the finance division findings regarding misstatements of accounts relating to inventories squarely come within the Supply Chain Management unit which was his responsibility and given such a finding his involvement is not a matter of just conjecture and suspicion. 14. The learned Senior Counsel for the respondent SEBI also guided us through various transactions of Ricoh with FDSL and Redhex and other companies involved and the role of the KMPs of Ricoh and other third part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om also directions have been passed by the said orders, we had directed SEBI to make the forensic report known by the last week of August 2019. 17. Be that as it may. The more proximate issue before us is to decide whether the impugned order can be sustained on its own merits. Here we find paragraph 28 and 29 of the impugned order (quoted at paragraph 5 and 6 of this order) bring out only a suspicion about the role of the appellants. Moreover, we note that though the submissions of the appellants have been noted in detail in the impugned order they have not been dealt with appropriately. Concluding part of paragraph 28 of the impugned order states as below:- In the absence of any crystallised findings with regard to the individual roles of the Noticees, it would be premature to give credence to the submissions of the individual Noticees. Similarly, paragraph 29 of the impugned order further states that:- 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. 18. Therefore, the question before us is how long the appellants would be kept out of the market thro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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