Council Of The Instt. Of Chartered ... vs Anil Kumar & Anr.
2017 Latest Caselaw 585 Del

$~R-2
*     IN THE HIGH COURT OF DELHI AT NEW DELHI
%                               Date of Decision : February 01, 2017
+                           CHAT.A.REF.2/2011
      COUNCIL OF THE INSTT. OF CHARTERED ACCOUNTANTS
      OF INDIA                                 ..... Petitioner
               Represented by: Mr.Rakesh Aggarwal, Advocate

                                      versus

      ANIL KUMAR & ANR.                                   ..... Respondents
              Represented by:         None for R-1
                                      Mr.Sandeep Kumar, Advocate for the
                                      complainant

CORAM:
HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
HON'BLE MR. JUSTICE YOGESH KHANNA

PRADEEP NANDRAJOG, J. (Oral)

1. None appeared for the respondent yesterday. The matter was retained on Board. The matter has reached for hearing today. None appears even today for the respondent.

2. We have heard learned counsel for the petitioner.

3. Avtar Vinayak, the complainant and a member of Hilansh CGHS Cooperative Group Housing Society made a complaint against M/s.Anil Garg & Co. informing in the complaint that Anil Garg & Co. were the auditors of the society and had audited the account of the society for the financial years 1999-00, 2000-01, 2001-02, and 2002-03. The audit reports for the years 1999-00 and 2000-01 certified that `6.88 lacs was deposited by the complainant and was reflected in the ledger account maintained by the

society in the name of the complainant. The amount was arbitrarily reduced to `3.88 lacs as shown in the audit report for the years 2001-02. It was alleged that the respondent had acted in collusion with the Managing Committee of the Society.

4. Copy of the complaint was sent to the respondent with a request to submit a written statement of defence, which was submitted on July 04, 2009. Complainant submitted a rejoinder on July 21, 2006. Respondent thereafter submitted his comments on the pleadings on October 31, 2006.

5. In accordance with Regulation 12(11) of the Chartered Accountants Regulations, 1988 the papers were forwarded to the Council, which at its meeting held on February, 2008 opined that prima facie case to conduct an inquiry was made out. Matter was thereafter referred to the Disciplinary Committee of the Council.

6. The Disciplinary Committee heard the parties and submitted a report on February 02, 2009. The findings are as under:-

"14. The Committee observed that it is an admitted fact that on record that the respondent has certified the balance sheets for the year 1999-2000, 2000-2001 and 2001-2002 of the Society and also issued the certificate dated 20th June, 2005. The amount deposited by the Complainant is reflected as `6.88 lakhs in the year 1999-2000 and 2000-2001 and `3.88 lakhs in 2001-2002. The Committee observed that in respect of the difference of `3 lakhs the Respondent has taken three contradictory stands (a) „Mr.Avtar Vinayak has wrongly represented his balance `6,88,000/- and to compensate this error, he issued two cheques Nos.120010 dt. 14.04.2000 for `1,00,000/- and Ch. No.581767 dt. 30.09.1999 for `2,50,000/- drawn on Punjab & Sind Bank, Anand Vihar, Delhi which were also bounced and never entered in the books of accounts during his tenure as Secretary, (b) to find out the correct position of members deposit he has gone through the members deposit

register and prepared the correct list which further shows, how Mr.Avtar Vinayak wrongly stated the members deposit be showing lesser amount in other members deposit account and increased `3,00,000/- in his account and (c) as per certificate issued by M/s. M.M.Goyal & Co. Chartered Accountants `3 lakh more shown in the name of Mr.Avtar Vinayak and `1 lakh each were shown less in the accounts of Ms.Aradhana Gupta, Mr.Ashok Kumar Jawa and Mrs. Updesh Kaur.

14.1 As regards the stand taken by the respondent mentioned in point (a) above, the Committee observed, that the ledger account relied upon by the respondent duly reflects the credits and debits in respect of the two bounced cheques of `2.5 lakhs and `1 lakh each and at no stage in the ledger account, the balance of the Complainant is reflected as `6.88 lakhs. The Committee has not been able to understand as to how the respondent certified the balance as on 31st March, 1999 and 31st March, 2000 as `6.88 lakhs. It is also noticed that difference in the two certified balances is only `3 lakhs while the two bounced cheques total to `3.50 lakhs. Therefore, this contention of the respondent does not appear to be tenable.

14.2 As regards the stand taken by the respondent as mentioned in point (b) & (c) above, it is observed that the list of differences in the members balances certified by the respondent on 20th June, 2005 reflects the differences on the accounts of eight members aggregating to `3,00,314/- (as against `3 lakhs) while the certificate dated 30th May, 2008 of M/s. M.M.Goyal & Co. certifies the difference of `1 lakh each in three account only. Even the names of three members in the second certificate do not tally with the names of members in the earlier certificate. Therefore, these two certificates also cannot be much credence. The Committee also observed that even if the contention of the respondent is accepted that the balances as per the Balance Sheet/annexures is different than that of the balances as per Members Register, it clearly brings out the fact that the respondent had not verified the Annexure attached with the Balance Sheet with the Members Register also.

14.3 The contention of the respondent that he has relied upon on the management‟s letter cannot be accepted as the respondent has failed in his duty to obtain the confirmation from the members with respect to their balances with the Society, especially when the balance of a member was reduced by `3 lakhs and it was in the knowledge of the respondent that there was a dispute between old and new management of the society. According to the Committee, the circumstances warranted third party confirmation, which the respondent before issuing the audit report ought to have done as a prudent Chartered Accountant.

14.4 The Committee also observed that the respondent has failed to report in his audit report with respect to such change in balances of the depositors and to draw the attention of the members to this important matter."

7. Suffice it to highlight that as indicated in the findings of the Disciplinary Committee the respondent took 3 stands to justify the audit report for the year 2001-02 in which the amount deposited by the complainant with the society was certified to be `3.88 lacs as against `6.88 lacs certified in the audit reports for the two previous years.

8. The first justification that two cheques in sum of `1 lac and `2.5 lacs had been returned dishonoured and were not entered in the books of accounts, the Committee brought out that if this be so the amount credited would have to be reduced by `3.5 lacs and not `3 lacs. The Committee highlighted that if this was so it was not understood as to how the respondent had certified the balance as of March 31, 1999 and March 31, 2000 in sum of `6.88 lacs during the audit of the earlier two years.

9. With respect to the second and third alternative defence the Committee brought out the lack of factual basis as also illogic of the stand

in para 14.2 of the report.

10. The report of the Disciplinary Committee was sent to the respondent for his comment. He did not submit any written comments on the report. The report was considered by the Council in its meetings held from May 03, 2010 to May 05, 2010. In spite of notice to appear before the Council the respondent did not appear.

11. At its meetings held in May, 2010 the Council accepted the report of the Disciplinary Committee and held that the respondent was guilty of misconduct as defined under Clauses 5, 6, 7 and 8 of Para I of the 2nd Schedule to the Chartered Accountants Act, 1949. The Council recommended to this Court that name of the respondent be removed from the Registrar of Members.

12. Notice of the reference being served upon the respondent he has filed a counter affidavit which is available at pages 680 to 689 of the record or the instant reference.

13. Having perused the reply we find not a word uttered in the reply to counter the conclusions and the reasons given by the Disciplinary Committee. In para 15 of the reply it is pleaded that while conducting the audit for the year 2001-02 it was brought to the notice of the respondent that the complainant had actually paid `3.88 lacs and not `6.88 lacs. It is pleaded that the respondent made inquiry and on going through the personal ledger of the members maintained by the society noted that the complainant had actually paid `3.88 lacs and not `6.88 lacs.

14. It has not been explained in the reply as to under what circumstances for the previous two years the respondent certified that the complainant had made a deposit totalling `6.88 lacs.

15. Under the circumstances we accept the finding returned by the Disciplinary Committee as approved by the Council. Keeping in view the gravity of the misconduct the proposed penalty is also accepted.

16. The reference is disposed of levying penalty of removal of name of the respondent from the Institute of Chartered Accountants for a period of one year.

17. No cost.

(PRADEEP NANDRAJOG) JUDGE

(YOGESH KHANNA) JUDGE FEBRUARY 01, 2017 mamta