2022 (11) TMI 1430

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....f Blue Bird (India) Limited ("BBIL" for short) and has filed the present appeal questioning the directions issued by the Whole Time Member ('WTM' for short) of the Securities and Exchange Board of India ('SEBI') in its order of June 18, 2021 whereby the appellant has been restrained directly or indirectly from issuing any certificate related to audit of listed companies, compliance obligations of listed companies and intermediaries registered with SEBI under the SEBI Act, 1992, Securities Contracts (Regulation) Act, 1956 ('SCRA' for short), the Depositories Act, 1996 as well as under the provisions of the Companies Act, 2013 for a period of one (1) year from the date of the order. 2. The facts leading to the filing of the present appeal ....

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....rade Practices relating to Securities Market) Regulations, 2003 ('PFUTP Regulations' for short) as well as Clause 41, 49 and 50 of the Listing Agreement. 5. The WTM after considering the replies of the Company and its directors found that wrong disclosures were made by the Company in the balance sheet and that the CMD and other directors had used 15 entities to show fictitious purchases and share transactions and that these entities were directly or indirectly controlled by the CMD and other directors. The WTM found that the modus operandi of the Company was to defraud the bank of the money raised through working capital loans, letter of credits and cash credits. 6. Insofar as the appellant is concerned, the allegation against the app....

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....rmises and conjectures and is also perverse. 9. The charge is, that directors have colluded in ensuring that Company's financials are misstated. The charge against the appellant that it was not only negligent in the certification of accounts but was also engaged in dubious accounting practices to defraud the investors by manipulating the financial statements. This charge of manipulating the financial statements by colluding noticee nos. 2 and 8 was required to be proved by the respondent SEBI. Merely by holding that the appellant did not raise any query with regard to the transfer of funds and failure on the part of the appellant to raise red flags with respect to instances of fake transactions may show negligence on the part of the appe....

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....ollusion, there must be some material which could lead to an inference of collusion. Once a finding is given that the appellant was not involved in the fabrication and fudging of the books of accounts and the balance sheet and if the appellant had no intention or knowledge of such understatement being shown in the financials, the charge of fraud or collusion or connivance with the directors and promoters of the company cannot be levied, only on the ground that he was not diligent or cautious or did not check the outstanding loan details from the banks and through other sources. Lack of due diligence can only lead to professional negligence which would amount to a misconduct which could be taken up only by ICAI." 13. The said decision is ....