MSME Dues Disclosure Was Not Required in FY 2016-17: ICAI Clears Auditor

The complainant, Mr Gagan Parasher, Managing Director of Shanivi Construction Pvt Ltd, filed a complaint against CA Neeraj Goel, the partner of Walker Chandiok & Co. LLP, for alleged audit failure in the financial statements of Indraprashta Gas Limited for the financial year 2016-17.

Shanivi Construction Pvt. Ltd, is an MSME supplying services to Indraprashta Gas Limited, where the respondent was a statutory auditor. The complainant claimed that Rs 2.52 crore principal and Rs 5.64 crore interest amount were due on IGL. But, this amount was not properly disclosed in IGL’s accounts of financial statements as required under the MSMED Act 2006. The complainant alleged that the respondent auditor failed to disclose the same in his audit report just to avoid the questions from investors, bankers and shareholders.

The respondent on the other side argued that the amount was never accepted as a liability by IGL, and it was under dispute. IGL also filed a writ petition challenging the small enterprise status of the complainant company. He further submitted that there was no such requirement to disclose the disputed unpaid dues to MSMEs for the financial year 2016-17.

The ICAI Disciplinary Board agreed with the respondent’s submission that for the financial year 2016-17, there was no legal requirement to disclose the disputed dues. These requirements came into effect only from April 1, 2021.

The committee noted that the respondent has provided all the detailed submissions and proofs against the allegations. Since the alleged amount was not material and was a remote liability, the committee concluded that CA Neeraj Goel was NOT GUILTY of professional misconduct under Clause (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.