Tetsuya Takano vs SEBI on 5 November 2026

ORDER

[Per: Dr. Dheeraj Bhatnagar, Technical Member]

The Appeal No. 349 of 2023 is filed by Tetsuya Takano, former Managing Director and CEO1 of RIL2 during FY 2012- 13, FY 2013-14, FY 2014-15 and FY 2015-16 against the order dated 30.01.2023 passed by the WTM3, SEBI4, holding him actively involved in committing fraud of misreporting of the financial statements of RIL during his tenure, thereby imposing penalty of Rs. 50 lakhs under Section 15HA of the SEBI Act5. Further, as the MD of the company, he has been held to have caused false information published on BSE Platform by signing fabricated and inflated financial results, for which penalty of Rs. 10 Lakhs has been levied under Section 23H of SCRA6.

1.2 The Appeal No. 350 of 2023 against the same order dated 30.01.2023 passed by the WTM, SEBI is filed by A. T. Rajan (noticee No. 5), for deliberately bestowing undue benefit in favour of Noticee No. 6 and FDSL by virtue of his position of Supply chain and Marketing Head for FY 2013-14 and 2014, thus establishing that he had an active 1 Chief Executive Officer 2 Ricoh India Limited 3 Whole Time Member 4 Securities and Exchange Board of India 5 Securities and Exchange Board of India Act, 1992 6 Securities Contracts (Regulation) Act, 1956

involvement in committing the fraud of inflating the revenue of RIL in collusion with FDSL and connected entities, leading to misreporting of financial statements of RIL. Penalty of Rs. 10 lakhs has been imposed on him under Section 15HA of the SEBI Act7. Appellants in both the appeals are collectively referred as ‘Appellants’. These appeals were heard together and are being disposed of by this common order.

1.3 Both the appellants have been restrained for a period of 5 years from holding the post of a Director or KMP8 and from accessing the securities market for a period of 3 years.

1.4 The same charge of having active involvement in misreporting of the financial statements of RIL was made against other KMPs of RIL, viz Mr. Manoj Kumar9, CFO (Noticee No. 1), Mr. Arvind Singhal10, CFO (Notice No.3) and Mr. Anil Saini11, COO (Noticee No.4), and penalty of Rs. 10 Lakhs under Section 15HA was levied on each of them. All of them have withdrawn their appeals.

2. We have heard Mr. Ashim Sood, learned Advocate for the appellant and Mr. J.P. Sen, learned Senior Advocate for the SEBI and considered documents placed on record.

3. Brief facts of the case are, Ricoh India Limited (‘Ricoh’ / ’the Company’ / ’RIL’ for short) was a subsidiary Company of Ricoh Company Limited, Japan and NRG group, Japan. The Company was dealing in multi-functional printers, hardware and IT related services in the Indian market. It was listed on 7 Securities and Exchange Board of India Act, 1992 8 Key Managerial Position

BSE12. The Company applied for Corporate Insolvency Resolution Process (CIRP) under the IBC13 on 14.05.2018, while these SEBI proceedings were ongoing and was eventually taken over by successful resolution applicant in November, 2019. The Company has not been made noticee in the show cause notice.

3.1 Mr. Takano14 was undisputedly the MD15 and CEO of the company since FY 2012-13 till his promotion to Asia Pacific Head of Ricoh Company Limited, Japan on 01.04.2015. Mr. Manoj Kumar (Noticee No.5), the then Senior Vice President took over as MD and CEO from FY 2016-17.

3.2 Mr. A. T. Rajan16 is shown in the impugned order as the Head of Supply Chain Management (‘SCM’ for short) and Marketing Division of RIL for FY 2013-14 and 2014, which is vehemently contested in the appeal by the appellant, by submitting that the appellant never served as the SCM head in the Company but he was majorly associated with ‘Strategy and Marketing Centre’.

4. The chronology of events leading to the impugned order is; M/s BSR & Co. LLP (‘BSR’ for short) were appointed as new statutory auditors of the Company for F.Y. 2015-16. While conducting limited review of financial statements for the quarter and half year ended 30.09.2015, BSR raised suspicion regarding certain transactions between the Company and its customers/vendors, based on which they recommended further review of transactions. Based on this, 12 BSE Limited 13 Insolvency and Bankruptcy Code, 2016 14 Appellant in Appeal No. 349 of 2023 15 MD- Managing Director 16 Appellant in Appeal No. 350 of 2023

the audit committee of the Company appointed M/s Price Water House Coopers Private Limited, India (‘PwC’ for short) to conduct forensic audit of the books of accounts for the specified period between 01.04.2015 and 30.09.2015. PwC submitted its preliminary report on 20.04.2016, which implicated noticee Nos. 3 and 4, i.e. Arvind Singhal and Anil Saini, who were Chief Financial Officer17 and Chief Operating Officer18 of the Company, respectively, as the key perpetrators of alleged mis-statements in the Company.

5. Accordingly, the Company informed the SEBI and BSE that its financial statements for the quarters ending 30.06.2015 and 30.09.2015 did not reflect true and fair picture of the state of affairs of the Company.

6. Considering the same, SEBI passed an ex parte interim order cum show cause notice19 (‘interim order’ for short) restraining the noticees from accessing the securities market and to show cause why suitable directions and prohibitions under Sections 11, 11(4) and 11B of the SEBI Act ought not to be issued. Further, a corrigendum was issued to that interim order on 06.03.2018 directing the BSE to appoint an independent auditor to conduct detailed forensic audit of Company’s books of accounts for F.Y.2012-13 onwards. The forensic audit carried out by the PwC was limited to the period 01.04.2015 and 30.09.2015.

7. Accordingly, BSE appointed CJS Nanda & Co. (‘Nanda’ for short), to conduct the audit. Not being satisfied with Nanda’s report, SEBI further appointed Pipara and Co. LLP (‘Pipara’ for short) to conduct the forensic audit and also 17 CFO - Chief Financial Officer 18 COO - Chief Operating Officer 19 Dated 12.02.2018

expanded the scope of investigation to the Company’s transactions with another entity called FDSL20 for the period between 01.04.2012 and 30.03.2016.

8. Mr. T. Takano and Mr. A. T. Rajan in their replies dated 06.06.2018 and 28.06.2018 to the SCN inter alia submitted that they had no knowledge of the alleged fraudulent transactions or mis-statements in the books of accounts of the Company and that their names were added on the basis of conjectures and surmises only. On consideration of the replies, the SEBI passed a confirmatory order21 confirming the directions contained in the interim order. The appeal22 filed by the appellants against the confirmatory order was allowed by this Tribunal23 on the ground that the order was passed without considering appellants’ submissions. However, SEBI was granted liberty to issue a fresh SCN, in case evidence was available in the Forensic Audit Report (FAR) or SEBI’s own investigation.

9. SEBI thereafter issued a fresh SCN24 based on the finding of Pipara report and its own investigation report. Appellant had requested for relevant documents including the investigation report, which was declined by the SEBI on the premise that the investigation report was an ‘internal document’ and it was not relied upon by the SEBI while issuing the SCN. Appellants challenged the SCN before the Hon’ble Bombay High Court, which held that since the investigation report prepared under Regulation 9 of the PFUTP

20 Fourth Dimension Solution Limited 21 Confirmatory order dated 16.08.2018 22 Appeal No.427 of 2018 before Securities Appellate Tribunal, Mumbai 23 Order dated 29.01.2020 passed in Appeal No.427 of 2018 24 SCN dated 19.03.2020

Regulations25 was solely for internal purposes and not relied upon by the SEBI, it was not necessary to be furnished26 and their review against that order was also disposed of. Mr. Takano had challenged the High Court’s order before the Hon’ble Supreme Court of India. His appeal (T. Takano v. SEBI)27 was allowed and the investigation report was made available to him. Appellant thereafter filed an additional reply before the SEBI. After adjudication, the impugned order has been passed.

10. Before us, Mr. Sood, learned Advocate for the appellants in both appeals, raised a preliminary objection that the directions in the impugned order are without jurisdiction having been issued without following the due process prescribed by the Hon’ble Supreme Court of India in T. Takano v. SEBI28 and requested that the same may be decided first and the case may be heard on merits only if the appellant fails in the said preliminary objection.

11. Elaborating further, Mr. Sood submitted that in terms of Regulation 9 of the PFUTP Regulations, the following three steps have to be followed by the SEBI before issuing directions or taking action under Regulations 11 and 12:

(i) Consideration of the investigation report referred;

(ii) According reasonable opportunity of being heard; and

25 SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 26 WP No.3293 of 2020 decided on 29.09.2020 by Hon’ble Bombay High Court 27 Civil Appeal Nos.487-488 of 2022, decided on 18.02.2022 by the Hon’ble Supreme Court of India [also 2022 SCC OnLine SC 210] 28 Ibid. 17

(iii) Recording satisfaction of the Board that there was violation of the Regulations.

12. He submitted that SEBI has been taking a consistent stand before the High Court, the Supreme Court and in its communications with the appellant that it had not relied upon the investigation report. Whereas, before this Tribunal in its written submissions, SEBI has taken a position that the material in the investigation report was ‘bodily lifted’ from the Investigation report while issuing the SCN. This is a case of approbation and reprobation and submitted that on this ground itself, the impugned order is liable to be set aside.

13. In reply to the aforesaid preliminary objection, Mr. J. P. Sen, learned Senior Advocate for SEBI, submitted that SEBI has duly considered the investigation report as mandated by Regulation 10 of the PFUTP Regulations. Since the SCN was based on the investigation report, it did not seek to rely or use the same as an independent document. He relied on para 14(ii) of T. Takano (Supra), which reads as under:

“14. On behalf of the respondents, Mr. CU Singh, learned senior counsel, made the following submissions:

(i) …;

(ii) SEBI conducts an investigation under Section 11C of the SEBI Act, where, based on the findings arrived at during the investigation, allegations are levelled in the show cause notice. Together with the show cause notice all the documents that have been relied upon by the investigator are provided to the noticee. In the present, case all the relevant documents have been provided to the noticee, including the report of Pipara and Co. which formed the basis of the show cause notice. The appellant is not entitled to any other documents;”

14. Mr. Sen submitted that the appellants failed to peruse the paragraph Nos. 6 and 7 of the written submission of the SEBI filed before the Hon’ble Apex Court in T. Takano (Supra) as under :- “6. In terms of Section 11C of the SEBI Act, SEBI conducts a number of investigations to ascertain as to whether an entity has violated any of the provisions of securities laws. Based on the findings arrived at during the investigations, allegations are levelled in the SCN along with copies of all the documents relied upon and the same are provided to the Noticee. In the present matter also, the Petitioner has already been provided copies of all the documents relied upon in the SCN.

7. Further, under quasi-judicial proceedings initiated by SEBI, the competent authority proceeds on the basis of allegations levelled in the SCN and the copies of documents annexed therewith which are provided to the Noticee. No other material, document or investigation report is taken into consideration by the competent authority which is not provided to the Noticee and, thereafter, Orders are passed only after giving opportunity to file reply and personal hearing as per the principles of natural justice.”

15. He submitted that the same was also recorded by the Hon’ble Supreme Court in T. Takano (Supra). In view of this, he emphasised that SEBI did ‘consider’ the investigation report as required under Regulation 10 of the PFUTP Regulations. Further, since the SCN was based on the investigation report itself, the same was not to be treated as an independent document.

16. We have carefully considered the rival submissions and the records. We are benefitted by the decision of the Hon’ble Apex Court in appellant’s own case, in paragraph No. 41 of T. Takano (Supra), it was held that ‘it is the duty to disclose such report if it is relevant for the satisfaction of the enforcement authority for determination of the alleged violation. The Hon’ble Supreme Court29 has held as under :- 29 2022 SCC OnLine SC 210

“ 40. The investigation report forms the material considering which, the Board arrives at a satisfaction regarding whether there has been a violation of the regulations. If it is satisfied that there has been a violation of the regulations, after giving a reasonable opportunity to be heard, the Board is empowered to take action according to Regulations 11 and 12. It would not suffice for the first respondent to claim as it did before the High Court that it did not rely on the investigation report. The ipse dixit of the authority that it was not influenced by certain material would not suffice. If the material is relevant to and has a nexus to the stage at which satisfaction is reached by an authority, such material would be deemed to be important for the purpose of adjudication. The written submissions of the Board clearly state that the findings of the investigation report are important for the authority to decide whether there are any prima facie grounds to initiate enforcement proceedings under Regulation 10. The relevant-extract of the submissions is reproduced below:

"It is submitted that Regulation 9 of PFUTP Regulations require the Investigating Authority to submit the report after completion of the investigation to the appointing authority. However, the provision does not require furnishing of the report to the Noticee. Further, the investigation report is merely a culmination of documents which the investigating authority relies on/come across while conducting the investigation and is not a piece of evidence in itself. It is a report which is necessary for an authority, who orders an investigation, to decide as to whether there are prima-facie grounds to initiate enforcement proceedings or not. Therefore, before the authority makes up his mind, he will either himself investigate or direct his subordinates to investigate in the matter. It is only after the authority receives the report of the investigation that he can decide as to whether action is called for or not. Therefore, the investigation report is in the nature of inter- departmental communications between officers investigating the matter and authority who can decide any enforcement action against the entity.”

The findings recorded in the investigation report against the Noticee are brought out in the SCN and the copies of all the documents that are relied upon by SEBI, while issuing the SCN are always shared with the concerned. The present case is no exception." (Emphasis supplied)

41. The above extracts indicate that the findings of the investigation report are relevant for the Board to arrive at the satisfaction on whether the Regulations have been violated. Even if it is assumed that the report is an inter-departmental communication, as held in Krishna Chandra Tandon (supra), there is a duty to disclose such report if it is relevant for the satisfaction of the enforcement authority for the determination of the alleged violation. [Emphasis supplied]

17. The Hon’ble Apex Court in T. Takano (Supra) has extracted portions from SCN and observed that the SCN is based on findings recorded in the investigation report, the relevant paragraph reads thus:

“50. The notice to show cause issued to the appellant is for violation of the provisions of the SEBI Act, SCRA and PFUTP Regulations. The show cause notice has specifically referred to what was revealed during the course of the investigation and has invoked the provisions of the PFUTP Regulations in the allegations against the appellant. Para 8(2) of the show cause notice is extracted below:

“(II). It is alleged that Mr. T. Takano, during whose tenure the business transactions with FDSL started by virtue of his positon as MD & CEO of Ricoh during FY 2012-13 to FY 2014-15, was actively involved in committing the fraud and had knowingly restricted the mandate given to PwC to six month so as to succeed in hiding his role in the commission of fraud of publishing untrue financial statement of Ricoh which resulted in misleading the investors about the financial performance of the company and thereby resulted in inducement of traders in the scrip. The said acts of the Noticee No. 2 are alleged to be violation of regulations 3(b), (c), (d), 4(1) and 4(2)(e), (f), (k) and (r) of SEBI (PFUTP) Regulations, 2003 and clause 49(V) read with 41(II)(a) of the erstwhile Listing Agreement.”

Since the show cause notice has specifically relied upon the report of the investigation and invokes, inter alia, a violation of the PFUTP Regulations by the appellant, the mandate of Regulation 10 must be complied with. However, while directing that there should be a disclosure of the investigation report to the appellant, it needs to be clarified that this would not permit the appellant to demand roving inspection of the investigation report which may contain sensitive information as regards unrelated entities and transactions.” [Emphasis supplied]

18. We also note that the said show cause notice dated March 19, 2020 was issued based on facts unearthed during the investigation, which is clearly disclosed in the paragraph Nos. 5 and 6 of the said SCN, as under :- “5. It has been observed from the facts unearthed during the investigation that certain entities (Noticees) have colluded to defraud the shareholders of Ricoh in particular and investors in general by devising a scheme or artifice to siphon assets of Ricoh inter alia by manipulating the books of accounts of Ricoh by using various entities connected and controlled by them. FDSL also gained undue benefits at the expense of Ricoh, under the pretext/garb of false and fabricated sales and purchase invoices.”

“6. Based on the finding contained in the forensic audit report dated October 25, 2019 and the detailed investigation carried out by SEBI, the following was observed:” [Emphasis supplied]

Thus, on facts it is evident that the said show cause notice was based on the findings recorded by the SEBI in its investigation and by the forensic auditors in their report, which have been compiled in the investigation report document. The said investigation report in itself is not independent piece of evidence but is a compilation of various evidences gathered through the forensic audit and the independent investigation of the SEBI and also suggests future course of action.

19. Under the circumstances, we find no merit in the preliminary objection made by the appellant. We shall now decide the appeal on merit in the following paragraphs.

20. Mr. Sood submitted that SEBI has alleged in the SCN that the appellant was actively involved in committing fraud in the Company, however, it failed to produce any evidence. In fact, while SEBI has established fraud against other noticees by placing reliance on correspondences and financial trails, no similar finding or material has been produced against the appellant. Secondly, he submitted that SEBI has failed to establish whether any benefit was received by the appellant as there is no material on record which shows appellant’s connection with noticee No.630 or any of his companies. His third argument is that the impugned order travels beyond the SCN and therefore, the findings rendered are vitiated.

21. Elaborating the charges made against the appellant, Mr. Asim Sood submitted that the WTM has proceeded against the appellant based on the following three findings:

a) Mr. Takano misrepresented to the Company’s Board regarding the execution of Master Rental Agreement (‘MRA’ for short) with a company namely, M/s Connect Residuary Private Limited, which is connected with noticee No. 6 (Amalendu Mukherjii). Mr. Takano obtained approval of the Board on September 25, 2014 without informing the board that the agreement was already got executed in December 2013 and thus, being MD and CEO failed to identify or raise red flags to such transactions.

b) Mr. Takano was one of the authorised signatories for availing ‘Vendor Financing Facility’ (‘VFF’ for short) as per board resolution dated 13.08.2013 of which the sole beneficiary was FDSL, an unlisted company controlled by noticee No. 6. This was done to provide 30 Noticee No.6 - Amalendu Mukherjee preferential treatment to FDSL. FDSL provided fake purchase/sales orders to the Company, resulting in fictitious inflation of revenue and financial mis- statement of RIL. As MD of RIL, the appellant was in the Board of Directors, which approved that resolution.

c) Mr. Takano restricted the mandate of PwC to conduct forensic audit, with an intent to conceal his role in the fraudulent transactions.

22. Re: (a), Mr. Sood submitted that SEBI has relied on factors which are not present in the SCN to hold the appellant guilty. There is no supporting material to establish appellant’s involvement in the alleged fraud. SEBI has failed to establish appellant’s connection with other noticees and particularly, with Amalendu Mukherjee (the noticee No. 6), who was alleged as the mastermind. SEBI has also failed to prove that the appellant has received any kind of benefit.

23. He submitted that while it is stated in the SCN that appellant was ‘actively involved in the fraud’, SEBI’s case is based only on one Board meeting without considering other contemporaneous records. Placing reliance on one Board meeting is insufficient to meet the standard of preponderance of probabilities. SEBI has not provided copies of other Board meetings, agenda and other material to the appellant, which is in violation of principles of natural justice. Appellant ceased to be associated with the Company with effect from April 1, 2015 and did not have access to the records. He submitted that the minutes of the Board meeting contain an erroneous statement attributable to the appellant. However, it does not establish any fraud or appellant’s link with the alleged fraudulent activities.

24. Re: (b), Mr. Sood submitted that appellant was merely one of the authorised signatories to avail Vendor Financing Facility (‘VFF’ for short), a new scheme that allowed direct financing of the suppliers by the banks. Admittedly, he did not execute any document in this regard. Further, the Board resolution dated 13.08.2013 does not give any authority to the appellant in selecting vendors or deciding payment modes or purchase terms. Therefore, he cannot be held liable for any fraud, merely being one of the authorised signatories. He submitted that the alleged transaction continued even after appellant’s resignation and the volume of such transactions also increased. He further submitted that a Director is not expected to distrust his employees. He relied upon Chintalapati Raju v. SEBI31.

25. Re: (c), Mr. Sood submitted that during the course of the hearing, SEBI has dropped this allegation.

26. Mr. Sood submitted that SEBI’s specific charge in the SCN is that appellant was actively involved in the fraud. The allegation does not pertain to vicarious liability under Section 27 of the SEBI Act. In such a situation, liability must be founded on clear and specific allegations. In the present case, the SCN has failed to attribute any distinct role of the appellant. Therefore, the allegations in the SCN are vague and hence unsustainable in law.

31 (2018) 7 SCC 443

27. On merits, regarding allegation that appellant was the Supply Chain Management (SCM)32 head, Mr Asim Sood submitted that, the appellant neither served as the SCM head in the Company nor was even a member of the SCM department during his tenure in the Company. He was majorly associated with ‘Strategy and Marketing Centre’.

During his tenure in the Company, he held the following positions:

a) FY 2012-13: Chief Marketing Officer and Head- Corporate Strategy Office;

b) FY 2013-14: Chief Marketing Officer;

c) FY 2014-15: Chief Marketing Officer and Chief Strategy Officer;

d) FY 2015-16: Senior Vice President and Chief Strategy Officer;

e) FY 2016-17: Managing Director and Chief Executive Officer;

f) FY 2017-18: Managing Director and Chief Executive Officer.

28. Mr. Sood submitted that impugned order fails to prove that the appellant in any way facilitated or participated or had any knowledge of the fraud. He submitted that allegation of fraud must be clear. To support this, he relied on Oswal Agro Mills Ltd. v Custodian33 and Seetal Enterprises v Tinna Oils and Chemicals Ltd.34 Further, the allegations cannot travel beyond the show cause notice. To support this, he relied on Hindustan Lever Ltd. v. Director General 32 Supply Chain Management 33 2003 SCC OnLine Bom 1306 34 1996 SCC OnLine Ori 141

(Investigation & Registration)35 and Samsung (I) Electronics (P) Ltd. v. State of U.P.36

29. Regarding allegation as to role of the appellant in vendor financing facilities, Mr. Sood submitted that the allegation that appellant has given preferential treatment to FDSL by co-signing the sanction letters for availing ‘vendor financing’ is misconceived and the appellant was mere signatory to vendor financing facilities. He submitted that the Board resolution does not authorise the appellant to take decision regarding choice of vendor, mode of payment or terms, etc. nor is there any material suggesting that the appellant was involved in selecting vendors or structuring of the fraudulent scheme. When decision-making authority or knowledge is absent, an authorized signatory cannot be attributed with liability. He placed reliance on the judgment in Bijoy Kumar Moni v Paresh Manna37.

30. Mr. Sood submitted that in case of fraud, the standard of preponderance of probabilities is different from other violations. He relied on Dilip S Pendse v. SEBI38. The allegation against the appellant is, active participation and collusion in the fraudulent scheme. Therefore, a higher threshold within the standard of preponderance of probabilities is required. SEBI is obligated to place on record specific material and cogent evidence to establish a nexus between the appellant and the alleged fraudulent scheme, however, SEBI has not produced any such material or evidence in the nature of any correspondence or financial trail 35 (2001) 2 SCC 474 36 (2024) 127 GSTR 93 37 2024 SCC OnLine SC 3833 38 2009 SCC OnLine SAT 177

and prayed that in view of this, the impugned order may be set aside.

31. In response, Mr. J. P. Sen, learned Senior Advocate for SEBI made detailed submissions.

Appeal No. 349 of 2023

32. With regard to the allegation of misrepresentation to Company’s Board [point (a)], Mr. Sen submitted that while obtaining the approval of the Master Rental Agreement (‘MRA’ for short) from the Company’s Board on 25.09.2014, the appellant did not disclose that the said agreement was already executed on 06.12.2013 without seeking the Board’s approval. The minutes of the Board meeting dated 25.09.2014 recorded that Mr. Takano informed the Board that Company intended to procure from ‘Connect Residuary39’ certain IT and IT-related assets on OPEX40 model. The Board approved the said MRA. However, no financial analysis data was placed before the Board nor the fact of execution of MRA was already done on 06.12.2013 was disclosed to the Board.

33. With regard to allegation of active involvement of the appellant as MD and CEO and regarding VFF [point (b)], Mr. Sen elaborated the details of fraud on RIL by the noticee No. 6 and FDSL and related entities with active involvement of the Appellant and other KMPs of the Company. The investigation report and the FAR unravel the scheme, which shows that majority of purchases and sales of RIL were made through FDSL and related entities, including imparting benefit of VFF and MRA, which benefited these entities, with alleged 39 Connect Residuary Private Limited 40 Operating Expenditure

siphoning of funds from RIL and causing huge losses to it in short time. The blatant nature of these fraudulent transactions, which led to fictitious increase in revenue accrued in the books of the Company without actual realisation of receipts, could not have been possible without active involvement of the appellant and other KMPs.

34. He submitted that FDSL was introduced to RIL and transactions with it and related entities started while the appellant was MD and CEO. Further, bulk of FDSL linked transactions were executed during his tenure only, even though such transactions admittedly continued even after his tenure, when Manoj Kumar (Notice No.1) took over from him. He submitted that the appellant has not been exclusively charged in this regard and other KMPs have also been charged for their active involvement in the fraud. The appellant approved the financials of the Company for three consecutive financial years as MD of RIL, and never questioned the accuracy of the sales/purchase figures arising from Ricoh’s ITS business with FDSL or Amalendu and his conduits nor was alarmed about huge rising debts mainly relating to FDSL group, despite high purchases from than shown in the books. As the MD, he was responsible for ensuring that financials are duly prepared and adequate safeguards put in place to take note of the above red flags over the years. The Directors are liable to be charged for fraud when they wilfully ignore the red flags. To support this contention, he relied upon N. Narayanan v. SEBI41.

35. Mr. Sen submitted that a person committing Securities fraud falls within the ambit of Regulation 3 of the PFUTP

41 (2013) 12 SCC 152

Regulations and Section 12A of SEBI Act, which covers in its ambit, Directors and officers of a company. He submitted that the appellant has been charged for his direct liability as a Director and not for his vicarious liability under Section 27 of the SEBI Act, as contended by Mr. Sood.

36. In the present case, appellant failed in his duty to prepare proper financial statements and ignored visible red flags, which could have been identified and acted upon to prevent the fraud. It also helped him in attaining target of tripling Ricoh’s revenue, while helped him in career advancement. Further, instead of taking note of red flags and taking actions against guilty officers of the Company, he gave high annual performance grading to noticee Nos. 1, 3 and 4, who were identified as perpetrators of fraud in the PwC’s forensic audit report. Therefore, in view of this being his direct liability, he is rightly charged under Section 12A of SEBI Act and it has no relevance over non-invocation of Section 27 of SEBI Act.

37. Regarding the allegation of appellant being the Supply Chain Management (SCM) head, Mr. Sen Ld. Senior advocate for the respondent submitted that the appellant’s role is evident from the Company’s Corporate Announcement dated 13.04.2016, announcing appellant’s appointment as MD and CEO, which also included his role as SCM. Further, even the organizational chart of the Company [for FY 2014-15 to FY 2015-16], which was relied upon by the appellant, shows that SCM and Marketing departments were reporting to the appellant thereby making him responsible for all the actions of these departments. The SCM

department was responsible for identifying vendors upon receipt of purchase order from the customer. Being SCM and Marketing head, the appellant directed orders to FDSL, facilitating the creation of fictitious purchase in the Company’s books for years42. This is substantiated by the fact that none of the Amalendu entities including FDSL, were found at the address provided to the forensic auditor for physical verification.

38. Regarding preferential treatment offered to FDSL through vendor financing facility, Mr. Sen submitted that the vendor financing involved an arrangement by the Company with various banks to pay the vendors against the invoices to FDSL and associate entities and supporting documents submitted by the Company. FDSL was the sole beneficiary and it received preferential treatment in this vendor facility of the Company. Being the authorised signatory, the appellant was involved in executing all the vital documents for the Company’s facility. Further, the forensic audit places documentary evidence of the appellant’s direct involvement in channelizing funds to FDSL across four facilities namely, Bank of America, HSBC Bank, Citi Bank and Deutsche Bank, where appellant was signatory to the invoices, applications and agreement pursuant to which the funds were paid. The interest burden was borne by the Company while all the benefits of short-term working capital accrued to FDSL.

39. In view of the above, he submitted that the appellant had active involvement in committing the fraud of inflating the revenue of RIL in collusion with FDSL and entities connected with it thereby leading to misreporting of financial statements of RIL. The untrue financial statements resulted in misleading the investors about the 42 See para 275 of the impugned order financial performance of the Company and thereby resulted in inducing the investors to trade in the scrip of RIL.

40. We have carefully considered the facts of the case in the light of the rival submissions and on perusal of the documents placed before us. We frame the following questions for deciding the appeals:

Appeal No. 349 of 2023

I. Whether the appellant can be held directly liable for his active involvement in committing the fraud of misreporting of the financial statement of RIL during the FY 2012-13 to FY 2014-15 when he was the MD & CEO of the Company?

II. If so, whether levy of penalty of Rs. 50 Lakhs on the appellant under Section 15HA of the SEBI Act is justified?

I. Whether the appellant can be held liable for deliberately imparting undue benefit in favour of noticee No. 6 and FDSL by giving them business in preference to other vendors as Head of Marketing and Supply chain for FY 2013-14 and 2014-15 and for his active involvement in committing the fraud of inflating the revenue of RIL in collusion with FDSL and entities connected with it thereby leading to misreporting of financial statements of RIL?

II. If so, whether penalty of Rs. 10 Lakhs have been rightly imposed on the appellant under Section 15HA of the SEBI Act?

41. To appreciate the conspectus of the case, which is common for both the appeals, we note the following relevant facts brought before us:

 Ricoh India Ltd. (RIL) was a subsidiary of Ricoh group of companies Japan and NRG Japan. 73.6% of its shares were held by the then Japanese promoters of the company.

 M/s. Sahni Natarajan & Bahl (SNB) were the Company’s statutory auditors since FY 2001-02 to FY 2014-15. Noticee No. 1 (Manoj Kumar) who was the CEO of the Company had completed his articleship with the said audit firms earlier. In terms of ICAI notification, new statutory auditors were to be appointed and BSR & Co. of KPMG group were appointed as the statutory auditors of the company in FY 2015-16. BSR, in the limited review of the financial statements for the period ending September 30, 2015, noted certain suspicious transactions between RIL and its customers and vendors. During the tenure of appellant, no such adverse observations were made by the then auditors SNB as were later pointed out by BSR. In these proceedings, SNB has also been charged (noticee No. 7).

 Based on these reports, SEBI found several fraudulent transactions in active collusion with Fourth Dimension Sales Ltd. (FDSL) and its promoter and majority shareholder (Amalendu Mukherjee). The SCN charged FDSL and certain related entities, devised a scheme or artifice to enter into fictitious transactions with RIL to siphon off assets of RIL. It was also alleged that undue benefit was given to FDSL and related entities at the cost of RIL under the pretext of false sales and purchase invoices. The appellant and other KMPs have been charged for their active involvement in committing fraud of misrepresentation of financial statement of RIL.

42. The following specific instances of ‘fraud’ were highlighted in the SCN:-

I. Manipulation in the books of accounts.

(A) Sales recorded before receiving order in RIL’s books

i. Recording of sales by RIL even before receiving Order Sale Form (OSF) for corresponding sales from FDSL.

(B) In FDSL’s books

ii. Artificially recording sales of products to RIL by FDSL even though FDSL had negative inventory of stock and such transactions were not supported by the actual delivery of products.

(C) Writing Off of bad debts of RIL

iii. Writing off Rs. 1.71 Crores in the books of accounts of RIL in June, 2017 in spite of sales made to 9

parties. Bulk of such sales was made to entities directly or indirectly connected with FDSL, i.e., M/s. REDHEX (Rs. 72 Crores), M/s. Vedavaag (Rs. 58. 37 Crores) and New Code IT Code Services Pvt. Ltd. (Rs. 59.27 Lakh).

II. RITS Partners Scheme

iv. Under this program, 3 partners were empanelled to whom RIL offered its resources with IT services (REDHEX, M/s. Vedavaag & FDSL). All of these are FDSL related entities. In this program, orders were placed by RIL to FDSL and supplies were made by FDSL directly to the customers of RIL, without actually being received/ dispatched by RIL. investigation revealed that such customers were not found on the respective addresses mentioned in their invoices or on the addresses mentioned in the database of MCA.

III. Purchase of UID Kits / MRA Agreement.

v. RIL had purchased 3850 UID kits in 2013-2015 from FDSL for Rs. 36.37 Crores. 2700 Kits were purchased from FDSL on June 12, 2013 and the same were rented out to M/s. Vedavaag (FDSL related entity) on June 12, 2013 and rental income from it was Rs. 27.12 Crores. Subsequently, RIL sold all 3850 kits for Rs. 23.01 Crores to two companies, namely, M/s. AS International and Connect Residuary Pvt. Ltd. (both are connected to FDSL). RIL took on lease 4650 kits from Connect for a price of Rs. 65.71 Crores and thus, incurred overall loss of Rs. 55.21 Crores.

vi. The appellant has been charged for taking approval from the Company’s Board for this transaction, on September 25, 2014 whereas RIL had already entered into the MRA on December 6, 2013 with regard to the said 2700 UID kits. Thus, the transaction of sales and lease back followed by purchase and lease back with FDSL entities, resulting in huge loss to RIL was not brought before Board for 8 months after active execution, and when brought in September 2014, no financial analysis were presented that could have disclosed incurrence of loss.

IV. Vendor Financing Facility

vii. Under the VFF, RIL procured goods and services from selected vendors only, who were provided funds by the bank of America and HSBC Bank on behalf of the RIL. FDSL was the sole beneficiary of the VFF, who was released funds amounting to Rs. 555 Crores by the banks during the FY 2014-15 and 2015-16. Release of funds by the banks required approval of two signatories of RIL, one each from Set-A & Set-B in terms of Board’s resolution dated August 13, 2013. Set –A comprised of the appellant (Mr. T Takano) & Mr. A. T. Rajan, while Set-B comprises of Mr. Manoj Kumar, Arvind Singhal, Rajesh Kumar Sood. Thus, it was held that the appellants along with noticee Nos. 1 and 3 were in knowledge of the

scheme, having approved the VFF and eventually allowed release of funds to FDSL by banks, being an authorised signatory in this regard.

viii. There are findings in the FAR about siphoning of funds from RIL, though in the impugned order, no specific directions have been issued in this regard. In particular, the finding of transfer of Rs. 10 Crores to one Rudra Enterprises (another FDSL’s related entity) on September 9, 2014, out of which Rs. 1 Crore was transferred to one RNM IT Solutions Pvt. Ltd. (‘RNM’ for short). The said RNM was managed by Amalendu Mukherjee of FDSL and his wife along with wives of the noticee Nos. 3 and 4. This shows close connection of KMPs of RIL with FDSL and Amalendu.

43 . In our considered view, the above matrix of transactions between RIL on one side and FDSL and its related entities on the other side (as purchaser or seller) suggests strong connection between Amalendu/FDSL and KMPs of RIL, which is too conspicuous to be missed, least by the MD and CEO of RIL, himself a Japanese national representing the promoters. Further, again FDSL was also selected as the sole beneficiary under the VFF, a facility introduced with the emergence of FDSL in the orbit of RIL, which got benefitted to the tune of Rs. 555 Crores. Also, another new facility of sale and lease back of UID Kits was again with FDSL related entities, in which the Company incurred losses of Rs. 55.21 Crores. Lastly, there are charges of transfer of funds to RNM, which was managed by Amalendu Mukherjee and his wife along with wives of the noticee Nos. 3 and 4 (both KMPs of RIL).

44. We note this Tribunal while confirming the findings of SEBI in Appeal No. 211 of 2020 in case of Insider Trading in the shares of RIL by Amalendu Mukherjee, upheld the finding of close relation and connivance of Amalendu Mukherjee with KMPs of RIL to the extent of holding him as an insider qua RIL, on lifting of corporate veil of FDSL. This order has attained the finality. In holding so, this Tribunal has relied upon the findings of-

i. Limited review of RIL accounts by BSR;

ii. Forensic audit of PwC; and

iii. Forensic audit of Pipara & Co.

45. Keeping in view the above, we decide both appeals as under:

I. Whether the appellant can be held directly liable for his active involvement in committing the fraud of misreporting of the financial statement of RIL during the FY 2012-13 to FY 2014-15 when he was the MD & CEO of the Company?

46. The sum and substance of Mr. Sood’s argument is that merely informing the Board about Master Rental Agreement, does not ipso facto imply that he was actually involved in the fraud and secondly despite being one of the authorised signatories for VFF, he had not actually executed any document not did the Board resolution dated 13.08.2013 gave him any authority in selecting vendors, payment modes or purchase terms. However, we are not convinced with these microscopic and technical arguments. Whether the appellant was actively involved in the fraud needs to be determined based on examination of the overall conduct of the appellant as MD, including various acts of commission and omission.

47. As the MD of the company, the appellant was expected to safeguard the interest of shareholders of the Company by being watchful and alert and set the agenda of the Board and guide/take necessary corrective actions. It appears that the appellant has tried to portray a picture that he was completely unaware of what was happening in the Company. It should have raised antenna for the MD of any company to notice that while purchases and sales had suddenly starting increasing disproportionately, requiring huge borrowing from the banks for purchases but commensurate receipts were not being realised causing mounting debts, and all of that primarily related to one group of entities only.

48. It is noteworthy that FDSL and related entities started wide ranging transactions including fictitious purchase/sale with RIL during the tenure of appellant only, which continued till his last day in the office. During the period the FDSL-RIL transactions took place, RIL suffered huge losses reaching the peak of Rs. 1123 Crores as disclosed to the stock exchange on June 19, 2016, while FDSL (with 73.25% shareholding of Amalendu Mukherjee) showed huge increase in revenue to Rs. 1491 Crores in FY 2016-17.

49. With his experience and knowledge, appellant ought to have noted unusual nature of transactions with FDSL group and raised red flags as the Managing Director of the Company. On the contrary, appellant has misreported the financial statements during his tenure which only implies that the appellant was actively involved in approving the allegedly fraudulent transactions with FDSL and related entities. The Apex Court in paragraph No. 32 of N. Narayanan (supra) has held thus:

“32. Responsibility is cast on the Directors to prepare the annual records and reports and those accounts should reflect ‘a true and fair view’. The over-riding obligation of the Directors is to approve the accounts only if they are satisfied that they give true and fair view of the profits or loss for the relevant period and the correct financial position of the company.”

50. It is worth noting that the other KMPs, who have also been charged for their active involvement in of misreporting of the financial statements of RIL and imposed penalty, have withdrawn their appeals. Mr. Manoj Kumar43, CFO (Noticee No. 1), Mr. Arvind Singhal44, CFO (Notice No.3) and Mr. Anil Saini45, COO (Noticee No.4) were imposed penalty of Rs. 10 Lakhs each under Section 15HA, who have preferred to withdraw appeals. Thus, the appellant has not been exclusively charged for active involvement but has been charged with other KMPs for misrepresentation in books of accounts of RIL. On perusal of the facts of the case and the impugned order, we find that the appellant has been charged in his individual capacity for his active involvement in the fraud and not held for his vicarious liability for violations committed by the Company.

51. Two specific instances have been brought before us by Mr. Sood. With regard to the first specific instance relating to non-disclosure to the Board about Master Rental Agreement of UID Kits signed in December, 2013 (again with FDSL related entities) by the appellant as the MD, it is seen that the appellant brought the decision for approval of the Board of directors much later on September 25, 2014, without disclosing that the agreement was already got executed 8 months ago. The impact of this MRA agreement was gain by FDSL related entities of Rs. 55.21 Crores at the cost of same amount by RIL. The nature of transactions itself appears to be unreasonable and no financial analysis was brought before the Board. The fact that the MD himself withheld the fact of signing of MRA from the Board of directors for 8 months and did not produce relevant financial analysis that could have clearly disclosed likely occurrence of loss evidently shows that the appellant was actively involved in the fraud involving FDSL entities.

52. Regarding the observation that the appellant was an authorised signatory for VFF, the submission of Mr. Sood that appellant has not actually signed any document for release of funds has no merit. It is unbelievable that the MD of the Company will not come to know of a new and unusual financing facility by the Company that allowed releasing funds directly to suppliers without commensurate checks and balance for ensuring supply, only when one day, he gets an occasion to sign/approve document for fund release and if that occasion does not come, he has no role even if funds get siphoned off. Undisputedly, VFF was a new facility, where the supplier was released advance funds directly by the RIL’s bankers on approval by two sets of authorised signatories and both the appellants, i.e. the appellant in this appeal (MD and CEO) and appellant in Appeal No. 350 of 2023 (Marketing Head) were in one such set. As MD of the Company, the new facility could not have been operationalised without appellant being in knowledge of it. The fact that FDSL was the sole beneficiary and huge amount was transferred to it without commensurate supply, should have alarmed the MD of the Company, absence of which implies active involvement of the appellant in misreporting of the financial statements of RIL along with other KMPs.

53. In view of the above, we hold that the appellant has been rightly charged for being actively involved in committing fraud of misreporting of the financial statements of RIL during his tenure, being the MD of the company along with other KMPs, who were also held responsible for this charge. In view of details of the transactions with FDSL, we are in agreement with SEBI and hold that the appellant was well aware of the financial statements of the Company being fraudulent and untrue in nature. Despite knowing that the appellant continued to approve such inflated financial results over the period of four years, and disclosed those false and misleading financial statements to the investors by filing the same at BSE, thereby defrauding the gullible investors to believe in the rosy picture about the financial affairs of the Company as painted by those false and misleading financial statements thrown at them. In view of the above, the Question No. I is answered in affirmative.

II. If so, whether levy of penalty of Rs. 50 lakhs on the appellant under Section 15HA of the SEBI Act is justified?

54. In our view, due to the fraud, the Company incurred huge loss of Rs. 1123 Crore in a short period. The Company underwent CIRP and gave exit to public shareholders at the open offer price. Considering the key role of the appellant in

running the affairs of the Company and the adverse impact on the public shareholders of such fraud of misreporting of the financial statements, in our view, levy of penalty under Section 15HA on the appellant is justified.

55. However, we note that while other 4 KMPs have also been held liable for their active involvement in the fraud of misreporting of the financial statements of RIL for their specific acts of omission and commission. Keeping in view our findings in the above Paragraphs, in our view, the appellant is also liable for penalty and the directions issued by the SEBI. However, while Mr AT Rajan, Mr. Manoj Kumar46, CFO (Noticee No. 1), Mr. Arvind Singhal47, CFO (Notice No.3) and Mr. Anil Saini48, COO (Noticee No.4) all have been imposed penalty of Rs. 10 Lakhs each under section 15HA, in the case of the appellant penalty of Rs. 50 lakhs has been imposed. Undisputedly, the appellant had no previous history and such violations are not repetitive in his case. On the other hand, in the preliminary report of PwC submitted on 20.04.2016, which implicated noticee Nos. 3 and 4, i.e. Arvind Singhal and Anil Saini, who were Chief Financial Officer49 and Chief Operating Officer50 of the Company, respectively, were identified as the key perpetrators of alleged mis-statements in the Company. Their wives allegedly held interest in RNM, along with Amalendu and his wife and funds were allegedly transferred to RNM from RIL, indirectly. Such transactions with FDSL continued even after appellant resigned and when Mr. Manoj Kumar took over as CEO from the appellant. However, all these other KMPs were levied modest penalty of

49 CFO - Chief Financial Officer 50 COO - Chief Operating Officer

Rs. 10 lakhs only, which they preferred to pay and withdrew their appeals.

56. In our considered view, there is no reason to have a different case for the appellant, nor has been made out in the impugned order. In view of the same, the amount of penalty under Section 15HA is reduced to Rs. 10 Lakhs. In view of the above, we answer Question-II in Negative.

Appeal No. 350 of 2023

I. Whether the appellant can be held liable for deliberately imparting undue benefit in favour of noticee No. 6 and FDSL by giving them business in preference to other vendors as Head of Marketing and Supply chain for FY 2013-14 and 2014-15 and for his active involvement in committing the fraud of inflating the revenue of RIL in collusion with FDSL and entities connected with it thereby leading to misreporting of financial statements of RIL?

57. The main defence of the appellant is that he was not the head of Supply Chain division of the Company, and hence was not responsible for the dealings with the FDSL and related entities and was majorly associated with ‘Strategy and Marketing Centre’. On the other hand, SEBI, relying upon the Company’s Corporate Announcement dated 13.04.2016 announcing his appointment as MD and CEO, also includes SCM as his work area. Further, Company’s organizational chart [FY 2014-15 to FY 2015-16] relied upon by the appellant, shows that SCM and Marketing departments were reporting to the appellant thereby making him responsible for all the actions of this department, including identifying vendors upon receipt of purchase order from the customer.

58. Undisputedly, the appellant was one of the KMPs of the Company which had a sleek management. In his own admission, he was Chief Marketing Officer and Head- Corporate Strategy Office since 2012-13 and a Board member. As Marketing Head itself, he was responsible to review continuance of sales to FDSL group even though there was poor realisation from FDSL group resulting in huge debts for Ricoh. As Marketing Head, he could not be unaware of the financial terms of transaction of purchase and lease back of UID kits, which were to invariably result in losses. Further, sales from FDSL were recorded before receiving Order Sale Form (OSF) from FDSL. Despite all these alarming signs, he did not reconsider marketing/sales to FDSL entities, and on the contrary, in short time, FDSL grabbed largest shares of sales by RIL, resulting in huge losses to the listed entity Ricoh.

59. Regarding the role of the appellant in vendor financing facilities, the explanation that appellant was a mere signatory to vendor financing facilities (VFF) and had no role in taking decision regarding choice of vendor, mode of payment or terms, etc. holds no ground, as appellant was not only responsible for all marketing/sales decisions, (a large number of which were made to tainted FDSL entities) but also was admittedly, one of the two signatories along with Takano in Set-A, and since Takano has not signed any fund release document, by implication, appellant had signed such documents from Set –A. Further, as the Strategy Head, he was responsible for strategic analysis of strategy new facilities such as VFF and to evaluate its efficacy. The fact that FDSL was the sole beneficiary of VFF and a huge amount was transferred to it without ensuing receipt of commensurate supply should have alarmed him as Marketing Head too, in order to ensure that the supply was duly made to buyers brought in by Marketing Division.

60. In view of the above, we hold that the appellant has been rightly charged for deliberately imparting undue benefit in favour of noticee No. 6 and FDSL by giving them business in preference to other vendors as Head of Marketing and Supply chain for FY 2013-14 and 2014-15 and for his active involvement in committing the fraud of inflating the revenue of RIL in collusion with FDSL and entities connected with it. In view of the above, the Question No. I is answered in affirmative.

II. If so, whether levy of penalty of Rs. 10 lakhs on the appellant under Section 15HA of the SEBI Act is justified?

61. Keeping in view our decision in paragraph Nos. 55 and 56, we answer this Question No. II in Affirmative.

62. In view of the above, the following :-

ORDER

i. Appeal No. 349 of 2023 is partly allowed. Penalty under Section 15HA is reduced to Rs. 10 Lakhs. Remaining portions of the order remain undisturbed.

ii. Appeal No. 350 of 2023 is dismissed.

iii. Pending interlocutory application(s), if any, are also disposed of.

iv. No costs.

Justice P. S. Dinesh Kumar Presiding Officer

Ms. Meera Swarup Technical Member

Dr. Dheeraj Bhatnagar Technical Member 05.11.2026 PTM

MRS PRAMILA Digitally signed by MRS PRAMILA Date: 2026.11.05 14:47:33 +05'30'