CA held guilty of hiding deposits not allowed by Law by Falsification of Books of Company [Read Order]

The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) in the matter of Ms. Richa Kukreja Vs. CA. Lalit Kumar Marwah has held CA guilty of hiding deposits not allowed by Law by Falsification of Books of the Company.

That vide findings under Rule 18(17) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 dated 23rd September 2019, the Disciplinary Committee was of the opinion that CA. Lalit Kumar Marwah (M. No.503547) (hereinafter referred to as the “Respondent”) was GUILTY of Professional and Other Misconduct in terms of Section 22 of the Chartered Accountants Act, 1949 falling within the meaning of Clause (2) of Part IV of the First Schedule and Clause (1) of Part II of the Second Schedule to the said Act.

Facts of the Case:

The Committee noted that the captioned case was earlier listed before it for the award of punishment on 22nd March 2023, 11th April 2023, and 19th April 2023 and the same is again listed for the award of punishment before it in the present meeting. The Committee further noted that when the matter was listed on 22nd March 2023, the Respondent vide his e-mail dated 15th March 2023 submitted his request for adjournment of the matter seeking additional time for preparation. Thereafter, when the matter was listed on 11th April 2023, the Respondent informed that he would not be able to attend the meeting of the Disciplinary Committee scheduled on 11th April 2023 as he was present in the proceedings before the Hon’ble Delhi High Court and therefore, sought adjournment in the matter. Subsequently, when the matter was again listed on 19.04.2023, the Respondent vide his e-mail dated 17.04.2023 informed that he was not keeping good health and was undergoing treatment in the hospital and sought an adjournment of two weeks. In this context, the Committee noted that while acceding to the request of the Respondent for grant of adjournment at its meeting held on 11th April 2023, the Committee specifically directed that no further adjournment request of the Respondent be entertained in future and in case the Respondent fails to appear before the Committee in the next meeting the matter be decided based on merits of the case, ex-pa rte, the Respondent.

The Committee at its meeting held on 19.04.2023, noted that the captioned case was listed the third time before it and on earlier two occasions, the Respondent failed to appear before it. The Committee further noted that the approach of the Respondent was evasive, and he was not willing to appear before it and thereby attempting to delay consideration/disposal of the matter; he has been seeking adjournment one after another, although the Committee has arrived at its findings thereby holding the Respondent Guilty and matter is presently before it only for the award of Punishment under Rule 19(1). The Committee was of the view that sufficient opportunities to the Respondent, as part of principles of natural justice, have already been granted to him to appear and/or to file written submissions, and accordingly the matter was considered ex-parte. The Committee, in its meeting, held on 19.04.2023, on an overall consideration and keeping in view the facts and circumstances of the case, the material on record before it concluded hearing in the matter and took the decision.

Meanwhile, the Respondent filed a Writ Petition before the Hon’ble Delhi High Court W.P. (C) 4461/2023 and CM APPL. 17135/2023 Lalit Marwah v. The Institute of Chartered Accountants of India and the Hon’ble Court disposed of the petition with the following directions vide order dated 04.05.2023. The relevant portion of the order is as under: –

“10. Considering that the medical ground has been raised by the Petitioner for his personal non­appearance on the said date, this Court deems it appropriate to give one final opportunity to the Petitioner to appear physically before the /CAI, which would hear the Petitioner and thereafter, pass the final orders.

11. The contention of the Petitioner that there is a breach of Rule 18 of the ICAI Rules in the procedure adopted by the Disciplinary Committee. The said issue is left open and to be taken up in the Appeal, which may be availed of by the Petitioner against the final orders.

12. Once the final order is passed, the same shall not be given effect to for period of 30 days to enable the Petitioner to avail of his remedy against the finding of guilty as also against the sentencing order.

13. The petition, along with all pending applications, is disposed of in these terms.”

In compliance with the direction of the Hon’ble Delhi High Court, the Committee listed the captioned case again for passing an order under Rule 19(1) on 18.05.2023 in order to give an opportunity to Respondent and the Respondent appeared before it physically in the present meeting. The Respondent submitted written submissions dated 17.05.2023 sent vide email dated 18-05-2023 on the findings of the Disciplinary Committee dated 23.09.2019.

The charges levelled against the Respondent and decisions thereon are contained in the findings dated 23.09.2019 of the Committee arrived under Rule 18(17) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007; and the present Order under Section 218 (3) of the Chartered Accountant Act, 1949 be read along with the said findings dated 23.09.2019.

The Respondent in his submissions dated 20th November 2019 and 17th May 2023 among others, submitted that he was initially held not guilty by the Director (Discipline) in Prima Fade opinion and after that, the Board of Discipline held him Guilty of professional and other misconduct in terms of Section 22 of the Chartered Accountants Act, 1949 read with Clause (2) of Part IV of the First Schedule and Clause (1) of Part II of the Second Schedule to the said Act without assigning detailed reasoning. The Respondent further submitted that the Disciplinary Committee without following Rule 18 of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 had completed the inquiry and he was not provided with a fair opportunity to defend the charges.

The allegations against the Respondent were that he was expected to know all the statutory provisions and correct procedure relating to the treatment of Deposits as described under Section 58A of the Companies Act,1956 and was aware that the Company was not allowed to take deposits, but deliberately connived with other officials of the local management and aided the local management in the falsification of the books of account of the company in a manner that the deposits as taken by the company be hid thereby also falsified the books of account which did not give the true and correct picture of the affairs of the company.

The Prima Fade Opinion dated 30.07.2017 of Disciplinary Discipline was considered by the Board of Discipline in its meeting on 13th September 2017, and the Board did not agree with the prima face opinion of the Director(Discipline) that the Respondent is Not Guilty of “Professional Misconduct” and decided to refer the matter to the Disciplinary Committee under Chapter V of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007.

Accordingly, the case was referred to the Disciplinary Committee and the Respondent was given adequate opportunity at the time of the hearing before it under Rule 18. The Respondent was aware of the charges and cannot take a plea that he was not aware of the charges against him as he had submitted his written submissions after the Prima Facie Opinion in respect of various charges levelled against him at the time of hearing under Rule 18 of the Chartered Accountant (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007. Accordingly, the issues raised by the Respondent were dealt with in the Findings dated 23.09.2019 of the Committee. The Committee observed that it has already arrived at a finding in the matter, thereby holding the Respondent ‘Guilty’ and the matter is now before it only for the award of punishment.

The Committee was of the view that, as part of principles of natural justice, adequate opportunities have already been granted to the Respondent under Rule 18 of the Chartered Accountants (Procedure of Investigation of Professional and Other Misconduct and Conduct Of Cases) Rules, 2007. Further, according to the facts and circumstances of the case and material available on record, it was noted that Respondent was working with the Company as Manager (Receivable) and was responsible for maintaining the true and correct affairs of the accounts of the Company, but he misused his position and played an active part in the fudging and falsification of the accounts. Further, he was aware that the Company was not allowed to take deposits, but deliberately connived with other officials of the management and aided the management in the falsification of the books of account of the company in a manner that the deposits as taken by the company be hid thereby also falsified the books of account which did not give the true and correct picture of the affairs of the Company.

Accordingly, the Committee was of the view that the ends of justice can be met if reasonable punishment is given to him in commensurate with his above professional and other misconduct.

Order:

Thus, keeping in view, the facts, and circumstances of the case as aforesaid, the material on record and submissions of the Respondent before it, the Committee ordered that the name of the Respondent i.e., CA. Lalit Kumar Marwah (M. No.503547), New Delhi, be removed from the register of members for a period of One (01) Year and a fine of Rs. 1,00,000 be also imposed upon him to be paid within 30 days of receipt of this order.

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