CA held guilty of professional misconduct for filing bogus form with ROC

Council of the Institute of Chartered Accountants of India  Vs. Ved Prakash Verma (Delhi High Court), Appeal No. CHAT.A.REF. 5/2012, Date of decision: 10th July, 2014

The Disciplinary Committee of the petitioner gave the following reasons for holding respondent No.1 guilty as aforesaid:-

(I)   that the Economic Offences Wing of the Delhi Police, on the complaint of the complainant company had found that Sh. Sanjay Daksha, Sh. Sofi-ur­rehman, Sh. Binod Rajhans did not figure in the complainant company records before 8th March, 2004, on which date many anti-dated documents were filed in the Registrar of Companies Office claiming that they were Directors of the complainant company since 1993-94; however, the concerned Form 32 was filed in the office of Registrar of Companies only on 8th March, 2004.

(II)  that on 8th March, 2004, the respondent No.1 being the former Chartered Accountant and Auditor of the complainant company, in collusion with Sh. Sanjay Daksha, Sh. Sofi-ur-rehman, Sh. Binod Rajhans filed a series of documents in the office of Registrar of Companies and on the basis whereof Sh. Sanjay Daksha, Sh. Sofi-ur-rehman, Sh. Binod Rajhans were claimed to be the shareholders and Directors of the complainant company since the year 1993.

(III)         no additional fees, as required to be paid for late filing of Form 32, had also been paid.

(IV)        The Company Law Board had also taken cognizance of the aforesaid facts.

(V)           Sh. Sanjay Daksha, Sh. Sofi-ur-rehman, Sh. Binod Rajhans claimed to have become the shareholders of the complainant company on transfer of shares in their favour, but were unable to produce Form No.2 and there were other discrepancies also in relation to the said transfer and there were other omissions in the share certificates.

(VI)        Sh. Sanjay Daksha, Sh. Sofi-ur-rehman, Sh. Binod Rajhans had before the Company Law Board admitted that Sh. Sudhir Gupta was a Director of the complainant company till 4th October, 1999; the said Sh. Sudhir Gupta had deposed that Ms. Mausumi Bhattacharjee was in total control of the affairs of the complainant company holding 94% shares in the company and that the said Sh. Sanjay Daksha, Sh. Sofi-ur-rehman, Sh. Binod Rajhans were not connected with the affairs of the company in any manner whatsoever; Sh. Sudhir Gupta had also denied sending any resignation letter of Ms. Mausumi Bhattacharjee to the Registrar of Companies; Company Law Board had also taken note of the fact that said Ms. Mausumi Bhattacharjee had been filing balance sheets, audit reports and annual returns etc. and had been appearing in the Court cases of the company in Dehradun / Uttaranchal and that the Bank of Baroda, Bhikaji Cama Place, Delhi had issued a certificate that Ms. Mausumi Bhattacharjee was maintaining and operating a current account of the complainant company as authorized signatory thereof. The Company Law Board had further taken note of the fact that the shareholding of Ms. Mausumi Bhattacharjee of 1680 shares out of 3226 shares as per Form No.2 dated 17th November, 2000 filed with the Registrar of Companies had not been disputed. The Company Law Board had thus declared that Ms. Mausumi Bhattacharjee continued to be the Director of the complainant company and her purported resignation letter dated 1st August, 2001 and Form No.32 filed with the Registrar of Companies was null and void.

(VII)     The respondent no.1 has appended his signatures at various places on the Shareholders Register where the names of aforesaid Sh. Sanjay Daksha, Sh. Sofi-ur-rehman, Sh. Binod Rajhans appeared and the names of all the said three persons appeared to have been entered in the said Register at one time in the same hand; the appearance of the respondent no.1’s signature on the Shareholders Register could not be co-related with the position of the respondent no.1 as Statutory Auditor of the company and the respondent no.1 was unable to explain the same.

(VIII)  That the Company Law Board had also concluded that the respondent no.1 was involved with mala fide intention to assist the aforesaid Sh. Sanjay Daksha, Sh. Sofi-ur-rehman, Sh. Binod Rajhans in filing Form No.2 and Form No.32 in the office of the Registrar of Companies appointing them as Directors of the company and that the said act of the respondent No.1 was unbecoming of a Chartered Accountant.

(IX)        That the respondent No.1 had signed the balance sheets of the complainant company for the years 1995 to 2003 as auditor in the name of a Chartered Accountants firm which was closed with effect from 1st October, 1995.

(X)           That the respondent no.1 filed all the aforesaid balance sheets together with the Registrar of Companies on 8th March, 2004.

(XI)        The respondent no.1 had failed to bring any evidence on record to establish himself as having been duly appointed by the company for the purpose of statutory audit.

(XII)     That during the period when the respondent no.1 filed the balance sheets of the complainant company as Statutory Auditor in the name of a closed Chartered Accountants firm V.S. Verma & Sood, he was the proprietor of the firm V.P. Verma & Company.

(XIII) The respondent No.1 was not eligible to use the name of the closed Chartered Accountants firm V.S. Verma & Sood and which he was not entitled to and the respondent No.1 was thus guilty of contravention of Regulation 190(1) of the Chartered Accounts Regulation, 1988.

(XIV) That the respondent no.1 inspite of repeated opportunity failed to produce the document of his appointment as auditor of the complainant company and from which it was evident that the respondent no.1 had signed the balance sheets of the complainant company for the years 1995 to 2003 without a valid appointment.

(XV)    That from the aforesaid conduct of signing of balance sheets of the company without authority in the name of a closed chartered accounts firm, the respondent no.1’s integrity becomes doubtful.

(XVI) That the aforesaid balance sheets for the years 1995 to 2003 were authenticated on behalf of the complainant company by Sh. Sanjay Daksha as Director and whose appointment as Director had not been proved before the Company Law Board. The signing of the said balance sheets by the respondent No.1 as auditor also showed that the respondent No.1, while signing the balance sheets failed to verify that Sh. Sanjay Daksha was actually the Director of the company or not.

(XVII)   That the respondent No.1 while signing the aforesaid balance sheets had also not commented on the fact that the company had not filed annual accounts and annual returns for continuous three financial years.

(XVIII)  That the respondent No.1 had failed to furnish any explanation for the aforesaid lapses.

(XIX) That the respondent No.1 had thus failed to comply with Section 215(1) of the Companies Act, 1956 and was grossly negligent in conduct of his duties and of professional misconduct.

The petitioner Council accepted the aforesaid reasoning of the Disciplinary Committee and held the respondent No.1 guilty of professional misconduct as aforesaid and has recommended that the name of the respondent no.1 be removed from the register of members for a period of six months.

We are satisfied that the prescribed procedure has been followed in the conduct of the complaint of professional misconduct against the respondent no.1. We, on perusal of the material placed before us, are also satisfied with the reasoning aforesaid recorded by the Disciplinary Committee of the petitioner institute for holding the respondent No.1 guilty as aforesaid. We also find the punishment recommended by the petitioner Council to be proportionate to the misconduct of which the respondent No.1 has been found guilty of.

Though the jurisdiction of this Court under Section 2 1(6) of the Act is wide, without any restriction but in our opinion, the findings of the members of the Disciplinary Committee of the petitioner and the views of the petitioner Council are entitled to great weight in light of the fact that they are the experts with regard to the matters pertaining to profession of chartered accountants and know the intricacies of the profession on account of their personal experience. Moreover, the said bodies have been created to maintain a high standard of conduct and discipline amongst the members of the petitioner institute. Thus, unless gross violation or disregard of the provisions of the Act or the Regulations made thereunder or of the principles of natural justice and fairness is to be found, this Court would be slow to interfere with the finding of such professional bodies. Reliance in this regard can be placed on Chief Controller of Exports, New Delhi Vs. G.P. Acharya AIR 1964 Cal. 174, Council of the Institute of Chartered Accountants of India Vs. C.H. Padliya MANU/MP/0139/1976 and The Council of the Institute of Chartered Accountants of India Vs. B. Mukherjea AIR 1958 SC 72 (though under the old Section 21).

We accordingly accept the recommendation of the petitioner institute and remove the respondent No.1 from the membership of the petitioner institute for a period of six months effective from this date.