Ricoh India’s Fate to be Decided on August 16

Ricoh Comapny’s Final Verdict on August 16

Attendees visit the Ricoh Co. booth at the CP+ Camera and Photo Imaging Show in Yokohama, Kanagawa Prefecture, Japan. (Photographer: Kiyoshi Ota/Bloomberg)
Attendees visit the Ricoh Co. booth at the CP+ Camera and Photo Imaging Show in Yokohama, Kanagawa Prefecture, Japan. (Photographer: Kiyoshi Ota/Bloomberg)

At the hearing of the Ricoh India case on Friday, the Mumbai bench of the National Company Law Tribunal (NCLT) asked Ricoh’s parent company why it was unaware of the suspicious transactions that had taken place last year. The NCLT also said that the order will be passed on August 16.

In July 2016, Ricoh Company Ltd. (RCL), the Japanese parent company of Ricoh India Limited, filed a petition in the NCLT under company law provisions that govern oppression of shareholders and mismanagement of the company. RCL in its petition sought action against Ricoh India and its officials, under sections 213, 241 & 242 of the Companies Act, 2013.

Ricoh India’s Fate to be Decided on August 16

Ricoh India is under scrutiny for inconsistencies in its accounts after its auditor BSR & Co., raised an alarm in November 2015 over certain financial transactions undertaken by the company between July -September 2015. Thereafter Ricoh failed to file quarterly earnings for three quarters, that is October 2015 - June 2016. In May 2016, its stock was suspended from trading by the Bombay Stock Exchange. Ricoh India has filed a complaint with the Delhi police alleging fraud at the company. In its filing with the stock exchange it estimated the loss due to the alleged fraud at Rs 1123 crore.

RCL, in it’s petition to the NCLT, has asked for cancellation of its existing Ricoh India shares, so that it can recapitalise the losses of Rs 1,123 crore by buying new shares at a premium. RCL,currently holds 73.6 percent of Ricoh India, and has proposed to cancel all its shares, the company told the NCLT on Friday.

RCL’s counsel Janak Dwarkadas assured the court that if the share cancellation was permitted the parent would surely recapitalise the amount & is ready to deposit the money in an escrow account. Dwarkadas also stated that Ricoh India will use the premium amount towards working capital and for re-payment to lenders.

Dwarkadas also told the court that RCL was not seeking immunity from prosecution for anyone involved in the transaction, including their nominee directors on Ricoh India’s board. And that since the investigation was ongoing, any further shortfall would also be covered by the parent.

Lawyers representing market regulator Securities & Exchange Board of India (SEBI) & Bombay Stock Exchange (BSE) were also present in the court and stated that there was full co-operation from Ricoh India in the investigation. Both lawyers said they had no objection with RCL’s proposal for share cancellation.

Despite being the promoter, RCL denied any knowledge of this alleged scam. When the tribunal queried its ignorance, RCL claimed the fraud was cleverly disguised. RCL also said in court, that it suspects the parties involved in this unlawful activity might have received benefits in kind of promotions and bonuses.

Since the accounting irregularities came to light, Ricoh India’s top management, including the managing director and chief executive officer, chief financial officer and chief operating officer, were asked to step down. The company’s chairman too was replaced last month.

If NCLT denies cancellation of shares, then Ricoh India may be declared as a sick unit as its accumulated losses will exceed its net worth, fulfilling the legal definition of a ‘sick’ company. This may also trigger the winding-up of the company.

“We have confidence in the NCLT process initiated by Ricoh Company Ltd. If the NCLT were not to approve the capital infusion, we have alternative plans in place,” a Ricoh India spokesperson told BloombergQuint in an email response.