2016 (9) TMI 657 - HC - Indian Laws

Chartered Accountant Guilty of Misconduct for Fund Fraud

The High Court found a Chartered Accountant guilty of misconduct under the Chartered Accountants Act, 1949 for fraudulent activities related to fund ... Misconduct as per Section 21 and 22 of the Chartered Accountants Act - penalty of suspension of the name from the Register of Members - Held that:- The respondent is a Chartered Accountant. We fail to understand as to how come he proceeded to London and Norway if he had no documents with him concerning either Mr. Sanjay Aggarwal or M/s Sanvijay Rolling and Engineering Ltd., for obtaining funds. As a Chartered Accountant he ought to know that a person would advance a credit to an individual or a company after satisfying itself with the credit worthiness of the individual or the company. All documents required for a due diligence ought to have been taken by the respondent. It is a clear case where the respondent No.1 has cheated M/s Sanvijay Rolling and Engineering Ltd., Nagpur. Indeed, we concur that the respondent No.1 has committed misconduct as per Section 21 and 22 of the Chartered Accountants Act, 1949. The recommendation is to remove the name of the respondent from the Register of Members for a period of one year.The conduct of the respondent justifies the proposed penalty. We answer the Reference in the affirmative holding that the respondent is guilty of misconduct and we impose the penalty of suspension of the name of the respondent No.1 Rakesh Verma from the Register of Members for a period of one year. Issues: Misconduct under Chartered Accountants Act, 1949Analysis:The judgment delivered by the High Court pertains to a case involving misconduct by a Chartered Accountant under the Chartered Accountants Act, 1949. The respondent, a member of the Institute of Chartered Accountants, was found to have engaged in fraudulent activities related to obtaining funds. The respondent had entered into a Memorandum of Understanding (MOU) to secure funds but failed to fulfill the obligations outlined in the agreement. The respondent accepted an advance fee of &8377; 2.5 lakhs but did not secure any loan as per the MOU. The disciplinary committee found that the respondent was aware that the funds were meant for a specific company, as evidenced by the cheque received. Despite claiming to have attempted to secure funds for another individual, the respondent failed to provide any evidence of taking necessary steps or requesting required documents. The respondent's actions, including traveling abroad without essential documents for fund procurement, were deemed as misconduct under Sections 21 and 22 of the Chartered Accountants Act, 1949.The High Court concurred with the disciplinary committee's findings and recommendations, concluding that the respondent had indeed cheated the company involved. As a result, the court imposed a penalty of suspending the respondent's name from the Register of Members for a period of one year. The court emphasized that as a Chartered Accountant, the respondent should have been aware of the necessary due diligence and documentation required when dealing with financial transactions. The judgment highlights the importance of upholding professional standards and ethical conduct within the accounting profession.