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TMI Blog2022 (10) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... with knowledge and intention in the absence of which the appellants cannot be accused of fraud. There is also no finding by the AO on collusion with the Company in the absence of which the charge of aiding and abetting the Company cannot be sustained. It is an admitted fact that the appellants had qualified the annual accounts on the matter of utilization of funds of the IPO and such a qualification is mentioned in the Annual Report which is in the public domain. In absence of a finding that there was deceit or inducement, the appellants can only be held guilty for professional lapse or negligence for which the appropriate authority to take action is ICAI. SEBI has already made a complaint to the ICAI in the instant case and ICAI is holding an inquiry against the appellants. Section 12(A)(a) (b) of SEBI Act is not applicable to the appellants as they are not dealing in securities. Further, in absence of proof of fraud, connivance, deceit or manipulation Section 12(c) of SEBI Act and Regulation (3) and (4) of PFUTP Regulations are not applicable.Thus, for the reasons stated aforesaid, the impugned order cannot be sustained and is set aside. - Justice Tarun Agarwala, Pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial year 2014-15 the appellants had given qualified opinion in the independent auditors report dated May 30, 2015 that there has been variation in the utilization of money between the objects of public issue contained in the prospectus and actual utilization which was needed to be authorized from the Members. In view of this, we are unable to comment upon the appropriateness of variation in utilization of money . Contrary to the qualified opinion in the annual report, the appellants issued an unqualified utilization certificate dated May 30, 2015. Further, the actual utilization of IPO proceeds was significantly different from the certificate issued by the appellants and the unqualified utilization certificate issued by the Statutory Auditor was not true, was misleading and contained information in a distorted manner which may influence the decision of the investors. 4. The appellants filed their replies and written submissions dated December 22, 2017, January 4, 2018 and June 21, 2019 wherein they denied the allegations. The appellant availed of the opportunity of personal hearing on December 22, 2017 and again on June 14, 2018. The gist of the replies and submissions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015 aided and abetted the Company in carrying out fraudulent, unfair and manipulation acts in violation of PFUTP Regulations. They stated that there is no finding in the impugned order that the appellants were instrumental in preparing false and fabricated accounts in connivance with the Company. The UUC gives information identical to the qualified audit report which formed part of Annual Report. The Annual Report was in the public domain and was filed with Stock Exchanges while the UUC was not disclosed to any shareholder or investor. 8. Respondent no. 1 urged that Clause 52 IV(D) of SME Listing Agreement casts obligation on issuer to prepare statement of funds utilized for purposes other than those stated in the prospectus and place it before the audit committee on annual basis. The statement is to be certified by the statutory auditors of the issuer. Accordingly the appellants issued a utilization certificate dated May 30, 2015. It was found that the appellants have falsely certified utilization of IPO proceeds by issuing an Unqualified Utilization Certificate thereby aiding and abetting the Company in disseminating false financial position to the investors. 9. This Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was only some omission without any mens rea or connivance with anyone then on such evidence SEBI cannot give any further directions. 13. In Price Waterhouse Co. Vs. SEBI in appeal no. 6 of 2018 decided on 09.09.2019, this Tribunal while considering the role of the appellant as a firm of the C.A.s and after considering the judgment of the Bombay High Court (supra) found that the scope of the enquiry was only restricted to the charge of conspiracy and involvement in the fraud and not to any charge of professional negligence since the C.A. / C.A. firm were not dealing directly in the securities. This Tribunal held that in absence of inducement, fraud was not proved nor there was connivance or collusion by the C.A.s and therefore, the provision of section 12 (A) of SEBI Act and Regulation 3 4 of PFUTP Regulations are not applicable. This Tribunal held that gross negligence or recklessness in adhering to the accounting norms in the course of auditing can only point out to the professional negligence which would amount to a misconduct to be taken up only by ICAI. 14. In the instant case, the show cause notice alleged that the UUC issued by the appellants, which was also inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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