Agencies probing the alleged Rs 870-crore corporate fraud in the operations of Reebok India have detected a systemic “mismanagement” in the business planning and running of the company, allegedly done by some of its officials and employees.
The three agencies — the income tax (I-T) department under the finance ministry, the Serious Fraud Investigation Office (SFIO) under the Corporate Affairs Ministry and the Economic Offences Wing of Gurgaon police — have recorded the findings almost four months after a criminal case was filed by Reebok India against two of its former employees.
“The governance and operations in the company were mismanaged. The bills were inflated and not recorded correctly. So, the probe clearly indicates that it was not a corporate scam in the apparel manufacturing firm but a non-adherence to the rules and guidelines of business procedures in the firm,” sources privy to the probe said.
The guidelines under the Companies Act were violated, which is suspected to have led to other contraventions like tax evasion, they said.
The I-T department, which has indicated an alleged Rs 140-crore tax evasion in the case, the sources said, would now work to ensure that the company later does not claim any “bad debt”.
A bad debt is the amount that is owed to a business or an individual and has to be written off by the creditor as loss, as the debt cannot be collected due to a host of reasons.
“There were no serious borrowings or lendings of Reebok India. The probe agencies investigation will make sure that the firm does not qualify to claim bad debt from anywhere in the later course,” they said.
Probe agencies have also found that some of the officials of the company could have been involved in the inflation of bills and over-valuation of the goods of the firm.
In the much-publicised criminal complaint filed at the Gurgaon police’s Economic Offence Wing in May, Reebok India had alleged that its former Managing Director Subhinder Singh Prem and Chief Operating Officer Vishnu Bhagat were involved in a Rs 870-crore fraud by indulging in “criminal conspiracy” and “fraudulent” practices over a period of time. Gurgaon police had some days back arrested Singh and Bhagat along with three others—Sanjay Mishra, Prashant Bhatnagar and Surakshit Bhat.
Singh and Bhat were booked for fraud, criminal conspiracy and other charges under IPC for allegedly siphoning off the sportswear company's money by creating ghost distributors across the country and generating forged bills over the last five years.
While the I-T is scrutinising documents related to accounts and imports of the firm, the SFIO is probing the entire governance affairs of the company under Section 235 of the Companies Act.
According to sources, the probe agencies also do not rule out the culpability of accounting officials of the firm at this stage for their "deliberate" or "mistaken oversight" in account books which led to the alleged financial irregularities.
