The
Delhi High Court has upheld the
Institute of Chartered Accountants of India ( ICAI’s) decision to not to entertain the complaint filed against the Auditor after seven years of signing Audit Report.
The petitioner has filed the present petition impugning an order
dated 1st February, 2019 passed by
respondent no.2. By the said order,
the Board of Discipline had concurred with the prima facie opinion of
the Director (Discipline), recorded under Rule 9(1) of the Chartered
Accountants (Procedure of Investigations of Professional and Other
Misconduct and Conduct of Cases) Rules, 2007 and the petitioner was
informed of the same.
JMG is a member of
ICAI
and is a practising Chartered Accountant. The petitioner has alleged
that the accounts and audit report in respect of seven separate
companies mentioned in the complaint had not been prepared in compliance
with the provisions of the Companies Act, 1956 and directions issued by
the
Reserve Bank of India (RBI) in respect of a non-banking financial company.
The issue whether the petitioner company is permitted to carry on the
activity of filing complaints against various Chartered Accountants was
considered by this Court in the decision rendered today in W.P. (C)
8071/2019.
The Court rejected the contention that the activity of the petitioner
in pursuing complaints against various Chartered Accountants was
otherwise permitted under its Memorandum of Association. This Court also
observed that the use of a corporate façade of the petitioner by its
directors/promoters for pursuing complaints against various Chartered
Accountants, unconnected with its business, cannot be countenanced.
Justice Vibhu Bakhru
observed that, “A plain reading of the aforesaid Rule indicates that
there are several grounds on which the Director (Discipline) would
refrain from entertaining any complaint made more than seven years after
the same is alleged to have been committed. The Director (Discipline)
would reject the complaint if he is satisfied that it would be difficult
for securing proper evidence of the alleged misconduct. The second
ground for doing so is if the member, against whom such allegation is
made, would find it difficult to lead evidence to defend himself. And,
the third is on account of changes, rendering the inquiry to be
procedurally inconvenient or difficult”.
In the present case, JMG had clearly stated in his response that he
had retired from the firm of Chartered Accountants that was appointed to
conduct the audit in view of disputes inter se the partners of the
firm. He had also pointed out that the complaint had been made beyond
the period of seven years and the Chartered Accountants were not
required to maintain audit records for more than seven years..
Keeping aforesaid in view, the Director (Discipline) accepted JMG’s
plea for invoking Rule 12 of the Rules. He declined to entertain the
complaint and forwarded his prima facie opinion that JMG was not guilty
of the alleged misconduct.
The Court also said that, no infirmity with the Director’s
(Discipline) opinion. Plainly, no interference with the opinion of the
Board of Discipline is called for in proceedings under Article 226 of
the Constitution of India, unless the same is perverse or so
unreasonable that no sensible person could possibly arrive at such a
view. The contention that since JMG had responded to the allegations
after securing the audit papers, the same would preclude recourse to
Rule 12 of the Rules, is unmerited.
The Court also said that, the decision of the Director Discipline to
not to entertain the complaint and the decision of the Board of
Discipline to concur with the aforementioned opinion cannot be faulted.
While dismissing the petition, the Court also said that,
“This
Court is of the view that the present petition is a frivolous one and
the filing of such petitions ought to be discouraged, as it takes up
considerable judicial time at the cost of bona fide litigants who are in
urgent need of relief. The Court also imposes the Cost Rs. 1,00,000
(One Lakh only) against the petitioner”.