N. Narasimhan vs Union Of India And Ors.
2019 Latest Caselaw 2507 Del

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*        IN THE HIGH COURT OF DELHI AT NEW DELHI
+        W.P.(C) 5183/2019
         N. NARASIMHAN                                        ..... Petitioner
                                Through:   Mr R. K. Singh and Ms Deepa Rai,
                                           Advocates.

                                versus

         UNION OF INDIA AND ORS.                              ..... Respondents
                                Through:   Ms Maninder Acharya, ASG with Mr
                                           Amit Mahajan, CGSC for UOI with
                                           Mr Arjun Dua, Advocates for R-1 and
                                           R-2.
                                           Mr Robin R. Davi, Mr Dhiraj A.
                                           Philip and Mr FebinM.Varghese,
                                           Advocates for R-3.

    CORAM:
    HON'BLE MR. JUSTICE VIBHU BAKHRU
                 ORDER

    %            14.05.2019
VIBHU BAKHRU, J

CM No.22920/2019

1.       Allowed, subject to all just exceptions.
W.P.(C) 5183/2019 & CM No.22919/2019

2. The petitioner has filed the present petition, inter alia, praying as under:-

"A. Issue appropriate writs/order/directions in the nature of CERTIORARI quashing and setting aside the impugned Investigation Report No.SFIO/1NV/104/RBK/2012-2013

dated 07.05.2013 of the 2nd respondent-SFlO, insofar as they pertain to the petitioner (ANNEXURE-P/2);

B. Issue appropriate writs/order/directions in the nature of CERTIORARI quashing and setting aside the impugned SFIO Complaint dated 29-04-2014 submitted to the ICAI (ANNEXURE-P/3);

C. Issue appropriate writs/order/directions in the nature of CERTIORARI quashing and setting aside the impugned SCN issued by the ICAI dated August 2017 along with copy of opinion of the Director ICAI dated 11th May 2017, and the Notice of Enquiry dated 01-05-2019 (ANNEXURES-P/ 4 & P/1)."

3. The petitioner was a statutory auditor of Reebok India Company (hereafter „RIC‟). It is alleged that affairs of the petitioner were conducted in a fraudulent manner and it is further contended that the petitioner was complicit with the Management of RIC. It is alleged in the report submitted by the Serious Fraud Investigation Office (SFIO) that the petitioner is guilty of criminal breach of trust.

4. The petitioner is, essentially, aggrieved by the said report submitted by the SFIO as well as the disciplinary proceedings commenced by the Institute of Chartered Accountants of India (ICAI) pursuant to a complaint filed by the SFIO with the ICAI based on the aforesaid report.

5. In addition to filing a complaint before the ICAI, the SFIO has also filed a criminal complaint, wherein the petitioner has been arrayed as an accused. It is the petitioner‟s case that he was not complicit with the Management but is also a victim of the fraud perpetrated by the Management of RIC.

6. It is contended by the petitioner that he was not required to carry out

investigation or conduct a forensic audit of RIC but was merely required to audit the accounts of RIC. It is stated that there was nothing on the record that would compel the petitioner to undertake a deeper scrutiny. The petitioner also contends that the role of the statutory auditor is materially different from an investigator and the petitioner, being an auditor, could not be expected to discover the deep seeded fraud by the Management of RIC.

7. The petitioner further states that the allegations made by the SFIO in a criminal case instituted against the petitioner and other persons are identical to the allegations made by the SFIO in its complaint to ICAI. In this context the petitioner prays that disciplinary proceedings before the ICAI be stayed till a final decision is rendered in a criminal case instituted by SFIO.

8. The learned counsel appearing for the petitioner also states that in another criminal case instituted on similar allegations, the petitioner has been arrayed as a witness and not an accused. He states that this clearly establishes that the petitioner is not complicit in the alleged fraud perpetrated by the Management RIC.

9. In addition to the above, learned counsel appearing for the petitioner also submits that in a similar case (Vikram Aggarwal &Anr. v. Union of India: W.P.(C) 3345/2014), this Court is examining similar allegations made against the other auditors of RIC and the said petition is pending consideration before this Court. He also states that by an order dated 28.05.2014 passed in that case, this Court has restrained any further action against the petitioners therein on the basis of the SFIO report. He submits that the petitioner‟s case be also treated at parity with the said case.

10. The contention that the disciplinary proceedings initiated by the ICAI ought to be stayed pending till a final decision is rendered in the criminal

instituted against the petitioner is unpersuasive. The scope of examination in a criminal case instituted pursuant to the complaint filed by the SFIO and the disciplinary proceedings commenced by ICAI pursuant to the SFIO‟s complaint, are materially different. The ICAI is required to examine whether the conduct of the petitioner has measured up to the professional standards as required of its members and/or whether the petitioner is guilty of „other misconduct‟.

11. The standard of proof required in the two proceedings - the criminal case filed by SFIO and the disciplinary proceedings commenced by ICAI - are also materially different.

12. In Subramani Gopalakrishnan v. Institute of Charted Accountants of India: (2011) 181 DLT 280 (DB), the Division Bench of this Court had examined the issue where the disciplinary proceedings against the auditors commenced on more or less similar allegations as made in a criminal case, should be stayed pending a final decision in the criminal case. The Court held that the scope of the two proceedings are different. The Court had also noted that the violation of accounting standards cannot be gone into a criminal trial and the same is required to be examined by the ICAI.

13. In view of the above, the petitioner‟s contention that the disciplinary proceedings before ICAI are required to be stayed pending the decision in the criminal trial is unmerited and is, accordingly, rejected.

14. The contention that the controversy involved in Vikram Aggarwal &Anr. v. Union of India: W.P.(C) 3345/2014 is erroneous. In the said case, the auditors were component auditors appointed by the parent company overseas. The case of the petitioner therein is that the scope of audit was different and their report was not required be submitted to the Indian

authorities. It is also relevant to note that the petitioners therein contended that the liability, if any, is that of the statutory auditors and not that of the component auditors. This Court is refraining from making any observations regarding the said matter as the same is pending before this Court; but suffice it to state that the petitioner‟s case is not on identical footing as the case of the petitioners in that case. Even if it is assumed that the petitioner‟s case has some similarity, the pendency of that petition does not assist the petitioner in any manner as this Court has examined the petitioner‟s contention in this regard.

15. Insofar as the challenge to the SFIO report is concerned, learned counsel appearing for the petitioner fairly states that the petitioner reserves its right to contest the same in an appropriate proceeding and this Court is not called upon to examine on the same.

16. In view of the above, no further orders are required to be passed in this petition. The same is dismissed. The pending application is also dismissed.

17. However, it is clarified that nothing stated herein should construed as an expression of opinion on the merits of the allegation made against the petitioner or be read to preclude the petitioner from raising any contention in any other fora. All contentions of the petitioner are reserved.

VIBHU BAKHRU, J MAY 14, 2019 MK