ICAI Drops Misconduct Case Against CA Over Chinese Director’s Appointment Certification

The proceedings stemmed from a complaint filed by the Registrar of Companies, Karnataka, alleging that CA Shruti Agarwal wrongly certified Form DIR-12 for appointing Mr. Shu Kin IP, a Chinese national, as director of Mach 1 Global Supply Chain Services India Pvt. Ltd. without attaching the mandatory Ministry of Home Affairs security clearance introduced through the 1 June 2022 amendment to Rule 8 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

The Director (Discipline), after considering the Form DIR-2 declaration, the Respondent’s professional certificate in DIR-12, and the statutory requirement applicable to nationals of countries sharing a land border with India, formed a Prima Facie Opinion holding her guilty under Item (7) of Part I of the Second Schedule.

Issue Raised: Whether certifying Form DIR-12 without attaching the mandatory MHA security clearance for a Chinese national amounted to lack of due diligence or gross negligence under Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.

Committee’s Verdict: The Committee found that the lapse occurred within three months of the amendment’s introduction and arose from an omission, not due to disregard of law. It noted that the Respondent had relied on the director’s own declaration in DIR-2 stating that security clearance was not required and on supporting documents, many of which showed Singapore linkages, while the Chinese nationality indication in the passport and DIR-12 field appeared to have been missed. The Committee placed weight on the Respondent’s immediate corrective action well before the ROC lodged its complaint in April 2024. These steps, taken voluntarily, demonstrated good faith rather than intent to bypass legal safeguards.

The Committee concluded that the error was procedural and inadvertent, not deliberate, and that no evidence suggested mala fide involvement or any attempt to assist a foreign national in contravention of law. The Committee held that the conduct did not amount to gross negligence or lack of due diligence. Therefore, it found her Not Guilty of professional misconduct under Item (7) of Part I of the Second Schedule and ordered closure of the case under Rule 19(2) of the 2007 Rules.

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