ICAI Clears CA in High-Profile ROC Complaint Linked to Chinese Director Appointment Case:

ICAI Clears CA in High-Profile ROC Complaint Linked to Chinese Director Appointment Case The present complaint (Ref. No. PR/G/113/2024/DD/187 /2024/DC/1913/2024) has been filed by the Ms. Seema Rath, Registrar of Companies (ROC), Ministry of Corporate Affairs (MCA) before the Institute of Chartered Accountants of India (ICAI) Disciplinary Committee (Bench-II 2025-26), against an Chartered Accountant (CA) Mayank Garg (M. No. 547848). The bench hearing the case was constituted under Section 21 B of the Chartered Accountants Act, 1949. The final hearing took place on August 19, 2025, and the final order was issued on September 21, 2025.

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Background of Case: The registered complaint is the conclusion of a larger government investigation. The Central Government had discovered that some Chinese nationals and entities had used fake Indian identities, false addresses, and forged documents to register companies in India. These bogus companies were allegedly linked to money laundering, tax evasion, and other suspicious activities, considered threats to national security. Some of the professionals are accused of helping these authorities by facilitating their operations, and certifying e-forms on the MCA portal with fraudulent information, hidden facts and others. In the present case, the ROC alleged that CA Mayank Garg wrongly certified Form DIR-12 for Fuhong Tech India Private Limited, appointing Mr Dawei Qian, a Chinese national, as a Director. According to ROC, Mr Dawei Qian, being a Chinese national, was required to get a Security Clearance from the Ministry of Home Affairs (MHA) before being appointed to the role of Director under Rule 10(1) of the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022. However, the e-form DIR-12 cleared that Mr Qian did not need such clearance, which was certified by CA Mayank Garg. Therefore, the ROC claimed that CA Garg failed to perform due diligence, hence was guilty of professional misconduct under Item (7), Part I, Second Schedule of the Chartered Accountants Act, 1949.

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On August 20, 2024, the Director (Discipline) at ICAI initially gave a prima facie opinion stating that CA Garg appeared “Guilty” of misconduct. Details from the Prima Facie Opinion The e-form DIR-12 showed that Mr Qian’s nationality was Chinese, and he was appointed Director on August 28, 2023. In specified form, he said, "I am not required to obtain the Security Clearance from the Ministry of Home Affairs." Mr Qian was required to get clearance under the Amendment 2022 Rules, as China shares its land border with India. The director said, although CA Garg was not responsible for issuing Mr Qian's Director Identification Number (DIN), he should have checked it the process had been followed under Rule 8 of the Companies Rules. Additionally, the form does not include any attachment or declaration indicating that security clearance was obtained. Thus, the Director (Discipline) ruled CA Garg prima facie guilty for not exercising due diligence before certifying Form DIR-12 under Item (7). CA Garg said that according to Rule 9, it is the director’s duty, not the CA’s, to provide security clearance along with consent (Form DIR-2). He further admitted, he relied on the company’s clarification and assured the Committee that such oversight, if any, would not happen again.

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Committee’s Detailed Findings After analysing all the key documents and both sides of the arguments, the committee noted that CA Garg allegedly failed to ensure that Mr Qian obtained security clearance before being appointed as director. The company was incorporated on May 19, 2023, and the appointment of Mr Qian was made on August 28, 2023. Mr Qian already possessed a DIN (09428363), issued on December 07, 2021, before the 2022 Rules were made effective. On September 1, 2023, CA Garg asked the company about security clearance in writing. On this, the company replied that Mr Qian had already been working in the role of director since 2021, was a resident, and also had Indian documents like PAN and Aadhaar. Therefore, security clearance was not needed. CA Garg had written to the company on September 01, 2023, asking about security clearance. The company replied that Mr Qian had already been a director in India since 2021, was a resident, and had Indian documents (PAN, Aadhaar, Visa). So, security clearance was not needed. The Committee compared the relevant rules:

• Rule 8 (Consent to act as Director) requires security clearance only for new appointments after June 2022.
• Rule 10 (Allotment of DIN) applies only at the time of getting a DIN, not while using an old one.

The Form DIR-12 in question had a standard declaration, “I am not required to obtain security clearance under sub-rule (1) of Rule 10.” Since Mr Qian already had a DIN, this declaration was correct. There was no false information, and the Respondent had verified documents like a passport, PAN, Aadhaar, and a visa. The Respondent had exercised due diligence by verifying facts and writing to the company for clarification. Therefore, the Committee concluded that Rule 10(1) did not apply in this situation, and no misconduct occurred. ICAI Disciplinary Committee's Final Decision: After completely analysing the case, the ICAI Disciplinary Committee found CA Mayank Garg NOT GUILTY of professional misconduct under Item (7), Part I, Second Schedule of the Chartered Accountants Act, 1949, hence closed the case under Rule 19(2) of the ICAI (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007.