CA guilty of misconduct for signing 2 sets of BS, one for ROC and other with Bank for availing Credit

The Disciplinary Committee of ICAI in the matter of The Superintendent of Police held CA guilty of misconduct for signing 2 sets of BS, one for ROC and other with Bank for availing Credit.

That vide report dated 07.02.2023, the Disciplinary Committee was of the opinion that CA. Syed Shahul Meeran K (M. No. 229834) was Guilty of Professional as well as Other Misconduct falling within the meaning of Item (7) of Part-I of Second Schedule and Item (2) of Part-IV of First Schedule to the Chartered Accountants Act, 1949 with respect to the allegations that the Respondent arranged false Balance Sheet and Audit Report of M/s Pavai Alloys & Steels (P) Ltd. (hereinafter referred to as “Company”) under the seal and signature of CA. Madhusudan Sardar for the financial year ended 2008 and 2013 and had certified false Stock Statement and Sundry Debtors Statement of the Company as on 31st July, 2013.

It was stated that the Company had availed Credit Facility from Indian Bank during the year 2007-08 and thereafter on various occasions till the year 2014 and on 17th July 2014 the Company’s account with Indian Bank became Non-Performing Asset (NPA). The Financial Statements certified by CA. Madhusudan Sardar for the financial year ended 2008 and 2013 were submitted to Indian Bank for availing said credit facilities. At the outset, it was noted (W-8 & D-50) that as per the lnstitute’s record the Respondent had cleared his Chartered Accountancy examination only in May 2012, thus, disciplinary proceedings of ICAI against him in respect of the year 2008 were dropped in the prima facie opinion itself due to lack of jurisdiction. Accordingly, the extant matter involved residual matters only.

The Committee considered the submissions of the Respondent already placed on record. It was noted that the Respondent had in his arguments tried to impose procedure defined under Code of Criminal Procedure, on the disciplinary proceedings of the Committee which could not be accepted. He had twisted the facts to argue in his favour. With respect to allegation against the Respondent that he had arranged false Balance Sheet and Audit Report for the year ended 2013 from CA. Madhusudan Sardar, it was noted that the Respondent questioned on credibility of CA. Madhusudan Sardar. It was noted that separate disciplinary proceedings were held against CA. Madhusudan Sardar vide Case Ref No. PR/G/229/17/DD/269/17/DC/1413/2021 for certifying false financial statements for FY 2008 and 2013 of the Company wherein he admitted to have committed the same due to lack of application of his mind at that time and blind belief and faith on Shri Syed Sahul Mareen – the Respondent who requested him for the attestation of the alleged financial statements. Same deposition was made by CA. Madhusudan Sardar in the extant matter. So there was no contradiction in the stand of CA. Madhusudan Sardar. Hence, his mere admission of being involved in erroneous episode did not make him unreliable evidence when he himself had played a key role and admitted for the same separately.

Further, the Committee noted that, for the same period, the Complainant Department had placed on record Form-23 ACA and Form 23 AC filed with Registrar of Companies as per which the audit firm M/s Jallaluddin and Jani Basha was the Statutory Auditor of the Company and the audit report along-with financial statements were certified by CA. K Jani Basha for the year ended 31st March 2013. Hence, the financials certified by CA. Madhusudan Sardar were second set of financials submitted to the Bank against credit facilities. Upon perusal of the said documents, it was noted that figures appearing in those financial statements submitted to ROC were altogether different from those signed by CA. Madhusudan Sardar for the year 2012-13. The Committee noted that CA. Madhusudan Sardar, the Witness, in his deposition before it corroborated with his statements dated 30/06/2016, 08/07/2016 and 17/01/2017 recorded before the investigating officer and admitted that he had trusted the Respondent and signed the financial statements without verification of relevant documents. Further, the Respondent in his statement recorded before investigating agency submitted to have worked with CA. K. Jani Basha as an accountant from 1999 to 2010 and that CA. K. Jani Basha was his father-in-law.

He also admitted to have prepared two sets of Balance Sheets for 2008 and 2013 as one for submitting to Indian Bank for availing Credit facility and one for filing with ROC and the major differences between the two Balance Sheets had also been specified by the Respondent in his admission before CBI. Accordingly, the Committee viewed that there was no doubt that the false financial statements for the year 2013 submitted to Indian bank for availing credit facility, although certified/ signed by CA. Madhusudan Sardar, but the Respondent had arranged the false statements through CA. Madhusudan Sardar. It was noted that the Respondent denied the statements made by him before the Complainant Department and when he was asked to have retracted from those statements before any court of law, he simply stated that he would when the Court would ask him. In other words, as per present status, he had made an admission which till date not retracted. Mere denial before the Committee did not degrade the evidentiary value of his statement. Moreover, the extant case was primarily based on an admission by CA. Madhusudan Sardar. CA. Madhusudan Sardar was called as witness before it for his examination and he reiterated his submissions without any coercion.

The Counsel of the Respondent was given ample opportunity to cross examine him before the Committee. The Counsel for the Respondent even after detailed examination failed to bring anything in favour of the Respondent which may point his innocence in the matter. An admission by CA. Madhusudan Sardar of his own guilt under the provisions of CA Act, 1949 had afford a support to the truth of his confession against others too including the Respondent. The Respondent statement had been used only to corroborate the facts as confessed by CA. Madhusudan Sardar. Accordingly, the Committee viewed that the Respondent was fully involved and was hand in glove with the management of the Company to facilitate them in their illicit motive and thus, liable for unbecoming of member.

With respect to second allegation that Respondent certified false Stock Statement and Sundry Debtors Statement as on 3i5t July 2013, the Committee noted that the Respondent had brought on record certain working papers and copy of ledger accounts for the period l’t April 2013 to 31st July 201.3 based on which he contended to have certified the alleged Stock and Debtors Statements. From the perusal of the working papers brought on record by the Respondent, it was noted that the Committee during proceedings observed discrepancies in both the Stock Statement as well as the Debtors Statement certified by him based on which it was evident that the Respondent had not performed his professional duties diligently when certifying the said statements. Again, the Respondent in his submissions of extant hearing tried to twist the facts stating that if debtors balance was reducing it was only leading to low risk. Again, it was not a case of audit but that of certification, wherein a chartered accountant undertakes the responsibility to report on accuracy of data and hence the argument of stating the figures of low risk is unacceptable.

Further, it was noted that the Respondent completely omitted to obtain external confirmation for certifying the Debtors’ Statement. It was viewed that certification of figures merely based on the information given in ledger completely defeat the purpose of obtaining the certification. In such circumstances, a chartered accountant instead of verifying the accuracy of data, only certified the figures as shown by the management in the books of accounts signify the casual approach adopted by him in rendering his professional duties. It was noted that the alleged Stock and Debtors Statement was submitted by the Company to Indian bank for availing adhoc limit of Rs.5 Crores for a period of 3 months in addition to the then existing cash credit limit. Hence, such statement formed the basis to cause loss to the Bank. It was noted that the findings of the extant case were not based on the Statement recorded by Mr. Periyasamy but it was used to corroborate the findings of the Committee based on its independent examination.

Further, Mr. Periyasamy was also called during hearing, but he did not appear even after specific notice issued to him and fresh reliance being placed by the Respondent on the statement of Shri Annamalai and Shri Natarajan could not be entertained at the fag end of the proceedings. Accordingly, the Committee observed that there was sufficient evidence to point out at misconduct on the part of the Respondent. Accordingly, both the charges were proved and established before the Committee.

The Committee thus viewed that the misconduct on the part of the Respondent has been held and established within the meaning of Item (7) of Part I of Second Schedule as well as Item (2) of Part IV of First Schedule to the Chartered Accountants Act, 1949 and keeping in view the facts and circumstances of the case as aforesaid, ordered that the name of the Respondent CA. Syed Shahul Meeran K (M. No. 229834) be removed for a period of 6 (Six) months from the Register of members alongwith a fine of Rs. 25,000/- (Rupees Twenty Five Thousand Only) be levied upon him that shall be payable within a period of 3 (Three) months from the date of receipt of the Order and in case he failed to pay the same as stipulated, the name of the Respondent be removed from the Register of members for a further period of 1 (One) month as per the order of the Committee.

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