During proceedings before the Institute of Chartered Accountants of India, it was found that the respondent had also audited the company’s financial statements for FY 2018-19 and 2019-20, where the High Court restraint order had already been disclosed and highlighted by him in the audit report as an “Emphasis of Matter.”

Issue Before Court: Whether the Chartered Accountant committed professional misconduct by certifying that the property was free from encumbrance despite being aware of the court order restricting its transfer.

Tribunal Decided: The Disciplinary Committee of the Institute of Chartered Accountants of India held the respondent guilty of professional misconduct for failure to exercise due diligence. The Committee observed that since the respondent had audited the company’s earlier financial statements mentioning the Delhi High Court restraint order, he was already aware of the restriction but still issued a certificate stating the property was free from encumbrance.

It also noted that the certificate did not clearly disclose the scope or basis of verification, and reliance only on the Ministry of Corporate Affairs portal showed lack of proper professional care. While collusion with the company management was not proved, the respondent’s conduct was held negligent. Accordingly, he was reprimanded and directed to pay a penalty of Rs. 5 lakh.