TaxTMI 
TaxTMI 
2022 (7) TMI 367
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....er investigation on account of allegations of siphoning off by its promoters. 3.2 In brief, the allegation against the applicant is that he being a Chartered Accountant and one of the partners at ASRN & Associates [the firm appointed as stock auditors by the consortium of banks led by Punjab National Bank (hereinafter "PNB") for Financial Year 2015-16] failed to perform his duty independently and diligently by not verifying the stock in transit, and he is accused to be in collusion with the office bearers of M/s Bhushan Steel Limited. 3.3 It is stated that he is involved in providing and using wrong information to calculate the Drawing Power figures wrongly based on the figures given by M/s Bhushan Steel Limited. 3.4 A complaint dated 01.07.2019 was filed under Section 439(2) read with Section 436(1)(a),(d) and (2) read with Section 212(15) of the Companies Act, 2013 read with Section 621(1) of the Companies Act, 2013, read with Section 193 of the Code of Criminal Procedure, 1973 by the respondent, Serious Fraud Investigation Office (SFIO). The respondent also relies upon Investigation Report dated 27.06.2019 filed with the Ministry of Corporate Affairs. 3.5 As per the ....
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..... 72. The Stock Auditors A-199 Pankaj Mahajan, CA and A-200 Sunil Bhatia, CA appointed by the Banks also colluded with the above-mentioned accused and did not discharge their duties diligently. 73. A-158 Brij Bhushan Singal, A-159 Neeraj Singal, A-160 Nitin Johri, A-161 Pankaj Kumar Aggarwal, A-179 Pankaj Tewari, A-183 Sunil Agarwal, A-184 Rajat Jain, A-185 Rajesh Sharma, A-181 Vivek Mittal, A-180 Saurabh Mittal of BSL, alongwith A-186 R.K. Mehra, CA of Mehra Goel & Co., connived in making false, misleading statements relating to Stock-in-Transit for the credit facilities availed from bankers during the period covering F.Y. 2013-14 to 2015-16. 74. Thus A-1 BSL, A-158 Brij Bhushan Singal, A-159 Neeraj Singal, A-160 Nittin Johari, A-181 Vivek Mittal, A-180 Saruabh Mittal, A-179 Pankaj Tewari, A-183 Sunil Aggarwal, A-184 Rajat Jain, A-185 Rajesh Sharma, A-190 Pankaj Mahajan, A-200 Sunil Bhatia, A-186 R.K. Mehra, A-161 Pankaj Kumar Aggarwal are liable for fraudulent inducement of creditors as laid down in Section 36 (c) of Companies Act 2013 and are liable to be punished u/s 447 of the Companies Act, 2013." 3.6 The Investigation Report records as under:- ....
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....ates conducted the stock audit on behalf of PNB for the period of "BSL" as on 30.09.2016. The auditors failed to verify the supporting documents of "SIT" which "BSL" had shown at Rs.5389.58 crore (refer para 4.4 (Table No. 4.7) of factual matrix) specifically keeping in view the nature of account of "BSL" which was classified as "Non-Performing Asset since 1.10.2014/Doubtful". 5.1.15. Thus, both the Stock Auditors, failed to perform their duties independently and diligently by not verifying the stock in transit, and thereby colluded with the officers of "BSL" in providing and using the wrong information to calculate the DP figures wrongly based on the figures given by "BSL" management. The Stock Auditors also got influenced and did not perform their assigned duty diligently and professionally." 3.7 Based on the conclusions in the Investigation Report and allegations contained in the complaint, the learned Special Court was pleased to summon the applicant under Section 36(c) read with Section 447 of the Companies Act, 2013vide summoning orders dated 16.08.2019. 3.8 The applicant filed his bail application and sought to be supplied with the complete Charge Sheet in acc....
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....m was appointed by the bank, Punjab National Bank, and they colluded with the BSL and did not discharge their duties diligently. The issue under investigation in the case of M/s Bhushan Steel Limited was1.9 xv - "Role of Stock auditor who conduct audit of BSL in the F.Y. 2014-15 & 2015-16.". 7.2 He submits that a bare perusal of the appointment letter dated 29.10.2016 shows that the applicant was appointed as aStock Auditor for conducting stock audit for the year 2016-17. The terms of appointment were as under:- "(Appointment Letter dt. 29.10.2016) PUNJAB NATIONAL BANK Large Corporate Branch, Tolstoy House, New Delhi-110001 Email:[email protected] Ph:91-11-23752604, 23311654 Fax:91-11-23323480/41522135 LCB/Stock Audit M/s ASRN & Associates Chartered Accountants 608, Padma Towers - I Rajindra Place New Delhi Dear Sir, Reg. Stock Audit as at 31.10.2016 We have pleasure to appoint you as Stock Auditor of M/s Bhushan Steels Ltd. (Shri Pankaj Tiwan) Phone No. 8588870836) for conducting stock audit for the year 2016-17. The Proforma of Stock Audit Report along with Checklist/ Scope of Stock Aud....
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....s to the allegation that no physical verification of the stock has been done by the Auditor, the Ld. Senior counsel submits that as per the "Implementation Guide to Standard on Audit (SA) 530 Audit Sampling" issued by the Institute of Chartered Accountants of India, the auditor is not expected or required to carry out physical verification of each and every transaction having regard to the fact that the volume and spread of transactions in modern businesses are incredibly enormous. In such cases, it is recommended by the Institute that only "test check" be carried out. 7.6 Additionally, the Stock Audit Report by the applicant's firm, discloses the Asset Classification of BSL as "Non Performing Asset since 01.10.2014/Doubtful". 8. In opposition to the grant of bail, Mr. Ripu Daman Bhardwaj, the Ld. CGSC has submitted the following arguments. 8.1 The period of stock audit of BSL was as on 30.09.2016. The visits of the stock auditor to company plants commenced from Dec. 2016 onwards and the last visit was on 15.02.2017 and report was submitted on 15.02.2017. Hence, there is a gap of more than 3 months from the date of his commencement, and he has not taken stock statement of ....
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....- 2017. As per the Stock Audit Report dated 15.02.2017 by the applicant firm it pertained to the period 01.04.2016 to 31.10.2016. Hence, the stock audit report did not pertain to the period under investigation. The observations of Gaurav Kumar (supra) are relevant and read as under: "48. The contention raised on behalf of the petitioner that the assignment was received by the applicant in February-March, 2016 and that the applicant could thus not be liable for the statutory record which was filed in the year 2008-09 to 2014-15 available on the MCA website cannot be overlooked in as much as the role attributed against the applicant by the SFIO commenced only from February-March, 2016...." 11.2 This was the first appointment of the applicant and he was not an auditor of BSL prior to the said date. Mr. Rajan Malhotra, who was the relationship manager at PNB, states: "Q. no. 11 In reference to your answer to question no. 10, please state since you was relationship manager, why you had accepted the stock audit report. Whether you consider the verification of stock auditor from other entity. Ans: It is correct that company was under financial stress and no f....
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.... of India & Ors. Dated 18.08.2021[MANU/SCOR/25854/2021]. c. Additionally, the same summoning order dated 16.08.2019 has been quashed by a coordinate bench of this court against Dr. Rajesh Kumar Yaduvanshi, who was a Nominee Director appointed PNB on the board of BSL. [Dr. Rajesh Kumar Yaduvanshi v. SFIO, CRL. REV.P. No. 1308 of 2019 vide order dated 21.09.2020]. d. Co-accused, Mr. Pankaj Mahajan who is also a practicing Chartered Accountant at the firm, M/s. A.C. Gupta & Associates is also admitted on bail by a coordinate bench of this court in BAIL APPLN No. 1813 of 2022 titled Pankaj Mahajan v. SFIO dated 29.06.2022. e. A coordinate bench of this court also enlarged Rupesh Purwar, coaccused no. 203 on bail. He was signatory to the Financial Statements of the company for the FY 2013-14 and 2014-15 in his capacity as the Company Secretary, which he had signed for the purpose of regulatory filing of the Company. [Rupesh Purwar v. SFIO, CRL. M.C. No. 2878 of 2022 dated 29.06.2022] 11.4 I am of the view that since the ex-promoters/directors and similarly situated chartered accountants have been granted bail, there is no reason why the Applicant should be ....
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.... not find merit in the contentions and submissions of the learned CGSC. 16. The application is allowed. The Applicant, Mr. Sunil Bhatia (accused no. 200) in complaint case no. 770/2019 is enlarged on bail subject to the following conditions: i. The applicant shall furnish a personal bond with two local sureties in the sum of Rs. 25,000/- each, to the satisfaction of the Trial Court; ii. He shall appear before the Court as and when directed; iii. In case he changes his address, he will inform the IO concerned and this Court also; 17. The application stands disposed of in the aforesaid terms. 18. Since regular bail has been granted, the application for interim bail in CRL. M. (BAIL) - 737/2022 is now infructuous. ============= Document 1 ASRN & Associates Chartered Accountants Position of accounts as on 30.09.2016:: 1150 608 Padma Tower-! Rajendra Place, New Delhi-110008 The Company is enjoying fund based and non-fund-based working capital facilities under consortium arrangement with PNB as leader of consortium banks as under: Position of Accounts as on 30-09-2016: (Working Capital Fund based) 49773 (Amount in ....