Chartered accountant found guilty of professional misconduct for issuing false valuation certificates without due diligence under Section 21(6)(b)

Bombay HC upheld professional misconduct finding against a chartered accountant who issued false valuation certificates to companies for obtaining bank credit facilities. The accountant failed to maintain working papers, conduct due diligence, or verify facts before issuing eleven certificates. Despite admitting omissions and inability to produce supporting documents, the accountant contested the disciplinary committee's findings. The court found the accountant guilty of negligence constituting misconduct, noting his awareness that banks relied on professional certificates for credit decisions. The HC confirmed the reprimand under Section 21(6)(b) of the Act, emphasizing that accepting contrary views would undermine professional discipline and regulatory objectives.

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Issues Involved:
1. Allegations against the Chartered Accountant
2. Defense by the Respondent
3. Findings of the Disciplinary Committee
4. Reconsideration by the Council
5. Final Judgment by the High Court

Summary:

1. Allegations against the Chartered Accountant:
The Institute of Chartered Accountants of India (Petitioner) filed a complaint under Section 21(v) of the Chartered Accountants Act, 1949, against the Respondent, a Chartered Accountant. The complaint, dated 28th July 2006, from the Superintendent of Police, CBI, alleged that the Respondent assisted various companies in availing large credit facilities from banks by issuing false documents certifying the valuation of work completed by these companies. Additionally, the Respondent was accused of certifying sales registers and supply bills without verifying facts and figures.

2. Defense by the Respondent:
The Respondent, in a written statement dated 9th July 2007, termed the complaint as frivolous and premature, citing pending criminal complaints against the main accused. He claimed that the certificates were issued after due checking of relevant records and obtaining necessary explanations and verification.

3. Findings of the Disciplinary Committee:
The Disciplinary Committee held multiple meetings and, after hearing the parties and examining evidence, found the Respondent guilty of professional misconduct under Clauses (7) and (8) of Part-I of the Second Schedule to the Act. The Committee's report, dated 3rd February 2010, highlighted the Respondent's inability to provide substantial material to justify the certificates issued. The Council, in its 297th meeting, referred the matter back to the Committee for further inquiry on specific issues, including the examination of bank employees and the basis of the Respondent's satisfaction regarding the valuation of assets.

4. Reconsideration by the Council:
The Committee reconvened and, despite the Respondent's non-cooperation and absence from hearings, reiterated its findings in a further report dated 10th January 2015. The Council, after considering the report and the Respondent's written representation, held the Respondent guilty of professional misconduct and recommended reprimanding him to the High Court.

5. Final Judgment by the High Court:
The High Court, after reviewing the Committee's reports, the Respondent's deposition, and the Council's recommendation, found no irregularity in the procedure followed. The Court noted the Respondent's admission of guilt and his failure to verify documents and perform due diligence. The Court emphasized the importance of integrity and probity in the profession, agreeing with the Delhi High Court's view in a similar case. Consequently, the High Court accepted the Council's recommendation and reprimanded the Respondent under Section 21(6)(b) of the Act, with no order as to costs.

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