As per the order dated 16th August, 2016, it has been acknowledged by the Board of Directors of Ricoh India to SEBI that there has been no siphoning of funds in the company. Does this mean that the much widely publicised mis-information regarding fraud happening in Ricoh India was a mere strategy to get funds infusion from the parent company by by-passing the law and thereby targeting a team of senior management? Seven individuals have been punished for the last six months even when the complainant itself admits that no funds have been siphoned of the company, is it natural justice?

However their misery is not going to end before 30th September, 2018 or even later, on prima facie basis.

In its order dated 16th August, 2018, SEBI has given strict instructions to Ricoh India Limited and its directors to extend co-operation to the forensic auditors in making available the required documents and clarifications strictly within the timeframe specified therefor. Any failure to comply with the said direction on part of Ricoh India and its directors may lead to adverse inferences against them.

The initial ad interim ex-parte order dated 12th February, 2018 had ordered for a detailed forensic audit of Ricoh India to be completed within 3 months of the date of the order. Thereafter through a corrigendum dated March 6, 2018 it was extended for a period of 6 months from the date of order. The period expired on 11th August, 2018. SEBI has taken a very serious note of the email communications between the forensic auditor and BSE stating that Ricoh is not extending co-operation in providing documents/information and clarifications required by the auditors. The current order has given a very strict warning to Ricoh and its directors for providing co-operation to the forensic audit team. Accordingly SEBI thought it fit to extend the timeline for completion of audit till 30thSeptember, 2018.

The current order also states the details of the replies and personal hearing of the Notices in this regard. A brief summary of the various replies are mentioned here under:

* In the Annual Report for FY 2016-17, in point No. 4(x) of the Directors Report, the directors have acknowledged that the accounts for the year ended March 31, 2016 were prepared and finalized merely based on assumptions and estimates and during FY 2016-17 , the amounts so identified during previous year significantly differ from those estimates, assumptions and judgements. Also significant further assumptions are required to be made for getting the split between errors and change in estimates. Therefore it is evidenced that the directors had fictitiously created unwanted and unnecessary provisions during FY ended March, 2016 so as to show high losses and then were considered to be reversed in next FY for reporting higher profits.

* The statutory auditor in their Audit Report has mentioned that ‘we have not been able to obtain sufficient appropriate audit evidence to provide a basis of audit opinion. Accordingly we do not express an opinion on the standalone financial statements.’ Therefore no reliance can be placed on the financial statements and the reported loss of Rs. 1123 crores.

* Mr. A.T. Rajan, ex-MD & CEO, also one of the notices in the order, has submitted a letter, dated 25th July, 2016, against a query by SEBI and has acknowledged that there has been no siphoning of funds from the company. Neither there is any mention of siphoning of any funds from the company. This admission clears that there has been no mis-appropriation of funds and assets of the company.

* EOW, New Delhi has discarded the complaint filed by Ricoh against the noticees.

* Mr. Bibek Chowdhury, the Head-Internal Audit, who was part of the Ricoh India investigation team has submitted that ‘He denies the authenticity and correctness of the PWC report.’

* The statutory duty is cast upon the members of the Audit Committee for conducting fair and proper internal audit. In the entire SCN, there is no whisper against any member of the Audit Committee who is always held liable for misstatement in financial results or failure of internal controls, as evident as per Reg.18(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The members of the Audit Committee of the company for 2014-15 and 2015-16 remained the same.

* Mr. Bibek Chowdhury has also stated in his reply that he was wrongly mentioned as being elevated to the position of CFO and there is nothing to prove the same and no such letter of elevation has been received by him. But on the reading of the Annual Report for FY 2015-16, he has signed as the financial statements of the company as CFO.

* The company had made two unsuccessful attempts at delisting in the past and the need of funds has been felt in the company for long. It seems the company sensed an opportunity in the current crisis to get the parent company to infuse funds by directly petitioning Hon’ble NCLT by reporting huge losses pertaining to previous years.

* The budget guidelines used to come from Ricoh Japan and Singapore.

* The company’s IT system and its ERP is not capable of providing debtors aging and inventory details, so the provisions have been made on arbitrary basis.

* The Internal audit team of Ricoh Asia Pacific (Regional) Audit Team, based in Singapore had issued an Internal Audit Compliance Report, which covered all aspects of financial controls for the period ended March, 2015. The said report mentions that the company is in compliance of all the aspects of the internal financial and accounting controls of the company. Such report has been relied upon by the notices.

* Whistleblowers complaints were given under pressure.

* Ricoh directors had filed complaint with SEBI against one of the notices in April, 2016, however the same directors issued Purchase Orders worth Rs. 1000 crore in July, 2016 and made payment of Rs. 250 crores during the whole FY till end of March, 2017. How it justifies that any person who is accused of carrying out fraud in a company is still doing business with the company worth Rs. 1000 crores and payments are being made to the tune of Rs. 250 crores. This is fraud by Ricoh India management and defies any logic and business management.

* The Board of Directors of Ricoh India had submitted to SEBI that the company had incurred estimated losses of Rs. 1123 crores in July, 2016. Ricoh files a petition before Hon’ble NCLT in July, 2016 for infusion of funds, based on this estimated loss. By Oct’16 the company receives the funds infusion from the parent company. The Financial statements for the year ended March,2016 was approved by the Board on 17th November, 2016 which reported a loss of Rs. 1118 crores. This again defies logic. The directors had already finalised an amount to be shown as losses and then to work out the same loss figure, took their own time to make estimates and assumptions by creating provisions to match the losses as per the estimates finalised in July, 2016 so as to get the required funds infusion, even before the financial results for the FY ended March 2016 were finalised in November, 2016.

The above order also summarises by stating that ‘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 Notices.’