High Court Upholds One-Year Suspension of Chartered Accountant for “Other Misconduct” in Public Issue Manipulation:

High Court Upholds One-Year Suspension of Chartered Accountant for “Other Misconduct” in Public Issue Manipulation The Council of the Institute of Chartered Accountants of India (ICAI) made a reference under Section 21(5) of the Chartered Accountants Act, 1949 (pre-amended), seeking removal of the name of Shri Kishan Gupta, a Chartered Accountant, from the Register of Members for one year. The reference arose from directions issued by SEBI in relation to irregularities in the public issue of Bharthari Financial Services Limited (BFSL), where Shri Gupta was Chairman and Whole-time Director. SEBI alleged irregular allotment of shares through ante-dated stock-invests issued after closure of the public issue, false disclosures regarding encashment of stock-invests, and connivance with another Chartered Accountant, Ashok Chawla, to artificially oversubscribe the issue. Despite repeated notices, Shri Gupta failed to respond initially. A disciplinary enquiry was conducted by the ICAI Disciplinary Committee, which found him guilty of “other misconduct” under Section 22 read with Section 21 of the Act. The Council accepted the findings and recommended a one-year removal, leading to the present reference before the Delhi High Court. Issue Raised: Whether the respondent Chartered Accountant was guilty of “other misconduct” under Section 22 read with Section 21 of the Chartered Accountants Act, 1949, warranting suspension from ICAI membership. HC's Rulling: The Delhi High Court accepted the reference. It held that the findings of the Disciplinary Committee, duly approved by the ICAI Council, conclusively established that the respondent had conspired in arranging ante-dated stock-invests, knowingly accepted applications after closure of the public issue, failed to prevent irregular allotment of shares despite withdrawals, and acted in a manner detrimental to investors and the integrity of the securities market. Such conduct was held to be unbecoming of a Chartered Accountant and squarely covered “other misconduct” under the Act. The Court exercising powers under Section 21(6) directed suspension of the respondent from ICAI membership for one year, restrained him from rendering services as a Chartered Accountant during this period, and imposed costs of Rs. 10,000 payable to ICAI. To Read Full Judgment, Download PDF Given Below