CA not guilty of certifying MCA Form 32 where Director’s consent was marked as ‘sd/-‘ [Read Order]

The Disciplinary Committee of ICAI in the matter of Shri Vineet Rai Vs. CA. Nirmal Kaushik has held CA guilty of certifying MCA Form 32 where the Director’s consent was marked as ‘sd/-‘.

It is observed that the Respondent has inter alia made the following written/ verbal submissions in his defense:

(i) That the preparation and presentation of the Cash Flow Statement or for that matter preparation and presentation of the financial statements is the responsibility of the Management which has been enshrined in Section 134(5) of the Companies Act, 2013 and under SA-200 issued by the ICAI as well. Accordingly, I cannot be held responsible for the formatting and sequencing of the signatures of the directors. My responsibility was limited to ensuring that the cash flow was not materially misstated and was in compliance with AS – 3 issued by the ICAI and the requirements of Schedule Ill. The cash flow statement presented to the bench materially in all aspects complies with the said requirements.

(ii) That, the financials including the Cash Flow Statement were approved by the Board of Directors and a copy of such Financials and Cash Flow Statement have been stated to be attached with his Written Statement and appropriate Management Representation Letter with regards to such Cash Flow Statement was also obtained.

(iii) That, it was by an inadvertent mistake that while preparing AOC-4 the Cash Flow Statement was not attached which was a technical mistake of the management of the Company and it was by an inadvertent mistake that while preparing AOC-4, the Cash Flow Statement was not attached which was a technical mistake of the management of the Company and he has verified the records of the Company to check that AOC-4 matched with the financial statements signed by him.

(iv) That the Complainant has also not raised any Complaint with regard to the revenue of the Company. The complainant has simply filed a canned Complaint like it has been doing with hundreds of professionals. I submit that the Complainant had no idea with regards to the operations of the Company or even had any clue if at all this was a Chinese Company or an Indian Company.

(v) That all other allegations against me are outside the scope of the inquiry. As per Rule-3 of the Rules, any matter that is evaluated by the Committee or the DD ICAI must be routed through a Complaint. Therefore, I humbly request that you consider this technical point in your inquiry and limit your investigation to the charges against me in Form-I only.

(vi) In addition, during the hearing, we discussed the provision of details from Form 26AS obtained from the Income Tax website. I am pleased to attach the requested pages for your reference. These documents provide concrete evidence that the company was operating and had significant clients such as ITC lnfrotech India Ltd., Hexaware Technologies Ltd., Virtusa Consulting Services (P) Ltd., Persolkelly India (P) Ltd., Fidelity Information Services India (P) Ltd., WIPRO Ltd., Collabera Technologies Private Ltd., Intellect Design Arena Ltd., BNP Paribas India Solutions (P) Ltd., Fino Payments Bank Ltd., Tech Mahindra Ltd., Ensono Technologies LLP and Zensar Technologies Ltd. and other leading tech companies in India. We have attached the reconciliation of the revenue of both the financial years 2018-2019 and 2019-2020 and Form 26AS of the Company for the FY 2018-2019 and 2019-2020 respectively.

Before giving findings in the matter, the Committee noted the following background about the facts which are given here-in-below:

In respect of the first allegation, the Committee noted that Respondent has neither commented upon the Cash Flow Statement as part of financial statements nor has given any opinion in this regard. In respect of the above charge, the Respondent through his verbal and written submissions requested the Committee that it was merely an omission while filing AOC-4 and constitute technical error in nature and does not constitute gross negligence on the part of the Respondent and this omission is inadvertent, unknowingly, and unintentional. On perusal of variations in the alleged Cash Flow Statement creating doubt on the authenticity and genuineness, the Committee noted that preparation of the Cash Flow Statement that comprises part of the financial statements of the Company is the responsibility of the Management. The Committee directed the Respondent to provide a copy of the affidavit by the Management of the Company stating that the alleged Cash Flow Statement was part of the original set of financial statements submitted with ROC.

It is seen that the Respondent has duly submitted a notarized affidavit by the director of the Company to that effect. Hence, on perusal of said affidavit, it is evident that the Board of Directors have approved and adopted the financial statements of the Company and submitted with ROC and the Board has issued a Management Representation Letter to the Respondent. Accordingly, the Committee opined that the benefit of the same needs to be extended to the Respondent for the said omission of attaching Cash Flow Statement while filing form AOC-4 and thus he is held Not guilty of Professional Misconduct falling within the meaning of item (7) of Part I of Second Schedule to the Chartered Accountants Act, 1949.

In respect of allegations pertaining to certification of e-form- 32 (for appointment of Director and his consent to act as such), lt was observed that the consent letter of Ms. Madhu Kedia (Director) was not signed and was only marked as ‘Sd’ and the said e-form-32 was certified by the Respondent. The Committee noted that the matter pertains to 2006 and adequate time has been elapsed since the filing of the said form. The Committee also noted that e-form-32 was approved by the MCA and this issue has never been raised ever and the said Director has also never raised any concern on this aspect. Hence, considering the facts mentioned above, the Committee held Respondent Not Guilty of Professional Misconduct falling within the meaning of Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.

Thus, in the considered opinion of the Committee, the Respondent is NOT GUILTY of Professional and Other Misconduct falling within the meaning of Item (2) Part IV of the First Schedule and Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.

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