ICAI Disciplinary Committee Holds Chartered Accountant Guilty of Professional Misconduct

The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) conducted proceedings against CA Mohit Kumar (the Respondent) following a complaint by the Deputy Registrar of Companies (ROC), Delhi & Haryana. The ROC alleged that the Respondent had certified various statutory e-forms for several companies that were later found to be non-existent or “shell” entities.

These companies typically shared common registered addresses where no business activity was conducted. The investigation revealed that the Respondent failed to physically verify the registered offices or to perform due diligence on the identities of the directors and the authenticity of the documents before affixing his digital signature and certifying the forms as “true and correct.”

Issue Before Committee: Whether the Chartered Accountant failed to exercise “due diligence” and was “grossly negligent” in the conduct of his professional duties under the Chartered Accountants Act, 1949, by certifying statutory forms for companies without verifying their physical presence or the legitimacy of their operations.

Committee’s Decision: The Disciplinary Committee held the Respondent GUILTY of Professional Misconduct. The Committee found him liable under Clause (7) of Part I of the Second Schedule (for gross negligence) and Clause (1) of Part II of the Second Schedule (for contravening provisions of the Act/Rules).

The Committee observed that a Chartered Accountant’s certification is a solemn act that stakeholders and regulators rely upon. By certifying that companies were functioning from specific addresses when they were not, and by failing to verify the credentials of the management, the Respondent facilitated the operations of suspicious entities. The Committee emphasized that “blind reliance” on documents provided by clients without independent verification constitutes professional misconduct.

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