CA who signed Form 8 for Chinese LLP with unsigned Attachment told to be careful [Read Order]

The Disciplinary Committee of ICAI in the matter of Registrar of Companies Vs. CA Piyush Dadich has reprimanded Chartered Accountants for Signing Form 8 for Chinese LLP with an unsigned Attachment.

The extant complaint was filed by the Registrar of Companies, Karnataka (hereinafter referred to as ‘the Complainant’ or ‘the Complainant Department’) wherein it was stated that certain LLPs were incorporated at the behest of Chinese nationals for doing illegal and unauthorised business in India including power bank scams. Such LLP’s main object was stated to be trading and exporting of gift articles, human resources outsourcing or logistics etc. These LLPs were incorporated and promoted by Chinese nationals.

At the outset, it was noted that the Respondent in his written submissions inter-alia stated that he had facilitated the incorporation of LLPs in good faith and for legitimate business. As per him, the LLPs were incorporated to carry out the business of e-commerce and have been doing the e-commerce business since incorporation The Respondent submitted a copy of letters dated 7th October 2022 addressed on behalf of respective LLPs to the Disciplinary Directorate of the Institute clarifying their business activities, their existence and their status of cases with other regulatory authorities He argued that he was not involved in their day-to-day business activities.

As regards the allegation that M/s. Runto Technology LLP was incorporated by two Chinese associated with other 3 LLPs, all having the same address, the Committee noted that the address of the registered office as mentioned in the Fillip Form (form for incorporation of Limited Liability Partnership) (C-14 read with C-16) for Mis. Runto Technology LLP was stated to be “193, 39th Main, 1st Cross, BTM 211d Stage, Bangalore, Karnataka 560068” and it was supported by the Rental agreement (C-27 to C-30) entered into between the owner of the premises and M/s. Runto Technology LLP, NOC of the owner (C-31) and electricity bill of the said premises.

The Respondent vide his written submissions dated 7th October 2022 submitted that though these LLPs had the same address, they had entered into separate rental agreement which were shared by the client with him. He brought on record a copy of the same. The Respondent further stated that he had physically verified the place at the time of incorporation and was convinced by the internal arrangement between the LLPs.

The Committee noted that the Respondent while certifying the form Filling (C-14 to C-19) stated that “all the requirements of the Limited Liability Partnership Act, 2008 and the rules made thereunder have been complied with, in respect of incorporation and matters precedent and incidental thereto.”

It was noted that the Respondent had also submitted separate rent agreements in respect of all three LLPs and that he had assisted only in the incorporation of M/s. Runto Technology LLP only. As far as the allegation of the same address was concerned, the Committee viewed that the knowledge of incorporation of other LLPs on the same address could not be assumed to be in the knowledge of the Respondent and that the rent agreement of the said LLP was with respect to only ‘piece and parcel’ of alleged address.

In light of the above, the Committee viewed that considering the documents available on record, the allegation against the Respondent of incorporation of M/s. Runto Technology LLP on the same address as that of the other three LLPs was not sustainable. Thus, the Committee viewed that the Respondent was 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 in respect of the extant allegation.

As regards the allegation that the Respondent certified Form 8 (Statement of Accounts and Solvency) (C-83 to C-89) of M/s Runto Technology LLP for FY 2019-20 with an unsigned attachment, the Committee noted that Form 8 was required to be filed pursuant to Rule 24 of Limited Liability Partnership Rules, 2009 containing Statement of Account and Solvency.

It was noted that the Respondent had submitted that the extant matter pertained to an attachment to Form 8 with respect to the disclosure of the following details as required under the Micro, Small and Medium Enterprises Development (MSME) Act,2006:

(i) details of delayed payments due at the end of the accounting year,
(ii) total interest paid on all delayed payments,
(iii) interest accrued but not due and
(iv)total interest due but not paid.

The Respondent argued that the said amounts were NIL and had been mentioned as such in the attachment. Since it was the NIL attachment, it was not signed by the partners. However, they had signed the Form 8 itself. He argued to have not provided any false disclosure of information. Further, there was no change in the information provided in the attachment.

The Committee further noted that the Respondent digitally signed Form 8 (C-83 to C-89) in respect of M/s. Runto Technology LLP and certified that “It is hereby certified that I have verified the above particulars (including attachment(s)) from the records of D and found them to be true and correct. I further certify that all the required attachment(s) have been completely attached to this form.”

In light of the above, the Committee viewed that the Respondent had certified the alleged Form only with respect to the correctness of particulars stated in the form and that of the attachments. Moreover, Form 8 was digitally signed by both the designated partners, so the attachment was considered to have duly been verified by them. In the absence of any evidence to the contrary, it was viewed that a non-signed attachment pertaining to the NIL amount could not be considered tantamount to gross negligence. The Committee, however, cautioned the Respondent to be more careful and cautious while performing his professional duties and carrying out certification work for his clients in his future assignments. Accordingly, the Committee viewed that the Respondent was 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 with respect to the extant allegation.

The Committee noted that the only attachment made with Form 8 (C-96 to C-101) of M/s CDISCOUNT Trading LLP was in relation to the disclosure of information under the MSME Act (C-101) which was not signed by any of the designated partners. It was further noted that the Respondent had digitally signed Form 8 and certified that “It is hereby certified that I have verified the above particulars (including attachment(s)) from the records of [] and found them to be true and correct I further certify that all the required attachment(s) have been completely attached to this form.”

In light of the above, the Committee viewed that the Respondent had certified the alleged Form only with respect to the correctness of particulars stated in the form and that of the attachments. Moreover, Form 8 was digitally signed by both the designated partners, so the attachment was considered to have duly been verified by them. In the absence of any evidence to the contrary, it was viewed that a non-signed attachment pertaining to the NIL amount could not be considered tantamount to gross negligence. The Committee, however, cautioned the Respondent to be more careful and cautious while performing his professional duties and carrying out certification work for his clients in his future assignments. Accordingly, the Committee viewed that the Respondent was 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 with respect to the extant allegation.

Thus, upon overall examination of facts and documents brought on record, the Committee viewed that the Respondent is Not Guilty under Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.

Conclusion:

Thus in conclusion, in the considered opinion of the Committee, the Respondent is held 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.

Accordingly, in terms of Rule 19(2) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, the Committee passed an Order for the closure of this case.

For Official Order Download PDF Given Below: