CA signing SPICE documents without making Physical Verification Guilty of Professional Misconduct

The Institute of Chartered Accountants of India (ICAI) has found CA guilty of signing SPICE documents for the Incorporation of a Chinese company without making Physical Verification.

That charge against the Respondent was that he was grossly negligent in the conduct of his professional duties while certifying the SPICE form relating to the incorporation of M/s Tencent Fintech Private Limited (hereinafter referred to as “the Company”). Further, the rental agreement submitted along with such SPICe form for the registered office of the Company was not executed by the owner of the premises but by some other Company namely, M/s Brickspaces Pvt. Ltd.

That pursuant to the said findings, an action under Section 21B(3) of the Chartered Accountants Act, 1949 was contemplated against the Respondent and a communication was addressed to him thereby granting an opportunity of being heard in person/through video conferencing and to make representation before the Committee on 19th March 2024.

The Committee noted that on the date of the hearing held on 19th March 2024, the Respondent was present through Video Conferencing Mode and made his verbal submissions on the findings of the Disciplinary Committee. The Committee noted that the Respondent relied on his written representation dated 3rd October 2023, wherein, apart from reiterating his earlier submissions that he had seen the building used for the registered office many times, hence he did not undertake a specific visit before signing SPICE documents, had, inter-alia, submitted as under:

a. That he accepted his mistake in not physically verifying the registered address; however, he had never assisted in the creation of a fraudulent entity.

b. That his involvement was limited to the incorporation of the Company.

c. The Company was incorporated by the competent authority after a thorough scrutiny of the documents uploaded.

d. That after the incorporation, if the Company did not keep a proper registered office or had connections with Chinese individuals, the same should not be attributed to him.

e. That he considered himself a victim of people who involved him in the incorporation of the Company.

f. That he prayed for a lenient view on the matter, considering the insignificance of the procedural error.

The Committee considered the reasoning as contained in the findings holding the Respondent Guilty of professional misconduct vis-à-vis written and verbal representation of the Respondent made before it and noted that the Respondent’s involvement was limited only to the extent of incorporation of the Company.

Keeping in view the facts and circumstances of the case, material on record including verbal and written representations on the findings, the Committee is of the view that the Respondent admitted before the Complainant Department under section 207(3)(b) of the Companies Act, 2013 that he neither verified the original lease/ rent agreement between the owner of the property and M/s Brickspaces Pvt. Ltd. nor he knew anything about the agreement between the subject company and M/s Brickspaces Pvt. Ltd. Further he also admitted before the Complainant Department that he had not personally visited the registered office of the Company before filing its SPICe Form. Further, the Respondent undertook certification work which requires assertion of the accuracy of the facts stated therein, yet he chose to certify the facts of the registered office without actual verification. Accordingly, the Respondent is grossly negligent of Professional Misconduct falling within the meaning of Item (7) of Part I of Second Schedule to the Chartered Accountants Act, 1949.

The Committee noted that the professional misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 5th September 2023 which is to be read in conjunction with the instant Order being passed in the case.

The Committee, hence, viewed that the ends of justice would be met if appropriate punishment commensurate with his professional misconduct was given to him.

Accordingly, the Committee, upon considering the nature of the charges and the gravity of the matter ordered that the name of CA. Radhakrishnan AR (M.No. 022921) be removed from the Register of Members for a period of 2 (Two) months and a fine of Rs. 20,000 (Rupees Twenty Thousand only) be imposed upon him, to be paid within 90 days of the receipt of the order and in case of failure in payment of fine as stipulated, the name of the Respondent be removed for a further period of 30 days from the Register of Members.

For Official Order – Click Here