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TMI Blog2018 (7) TMI 923X X X X Extracts X X X X X X X X Extracts X X X X ..... gramme was found in the working papers. We drew the attention of the Appellant towards the complaint that the financial statements certified by him were found to be fraudulent later on and huge losses were suffered by financial institutions/NBFC, therefore, there is more need on his part to establish that he carried out his duties diligently as per the Auditing Standards in vogue at that time. However, no convincing reply was given by the Appellant thereto. Based on the facts involved in both these Appeals in addition to pursuing all records and evidence besides hearing of the arguments of the parties, we are of the considered view that the Appellant undoubtedly has failed to prove that he had obtained all the information which was necessary for expressing the opinion and had exercised due diligence in the performance of his professional duties. Accordingly, we find no merit in both these Appeals and thus, both the Appeals are hereby dismissed. We find no reason to interfere with the punishment awarded by the Disciplinary Committee of the Institute of Chartered Accountants of India to the Appellant. Appeal dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ishment awarded to the Respondent in other Disciplinary Case against him bearing reference No. PR / P / 6 / S / 12/DD/5/S/INF/12/DC/296/13 and decided on even date. In effect, the committee Orders that in respect of both the cases, the name of the Respondent stands removed for a period of one year and he shall remit a consolidated penalty of ₹ 50,000/- (Rupees Fifty Thousand Only) within a period of 30 days from the date of receipt of the Order." 4. Therefore, considering as both the aforesaid appeals have the same parties and almost same facts except the name of auditees, besides that the punishment awarded to the Appellant is also concurrent, hence, we thought it appropriate to dispose of both these Appeals by this common order. 5. The brief facts of the First appeal number 01/ICAI/2017, as narrated in the Report of the Disciplinary Committee and which we have noted are as under: 5.1 That as per the 'information' letter dated 30th November, 2011 read with letter of the CBI dated 22nd September, 2011, to the Institute of Chartered Accountants of India, CBI made various allegations against the appellant alleging that during the course of investigation by CBI, it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Report of the Disciplinary Committee, which we have also noted are as under: 6.1 That as per the information letter dated 1st June 2012 read with letter of CBI dated 13th December, 2011, the CBI alleged that during investigation, it has been revealed that Shri R. Selvakumar, Managing Director, M/s Paranthaman Spinning & Weaving Mills Private Limited (hereinafter referred as the Company) engaged in the business of manufacturing and trading of cotton yarn, polyester yarn etc. have availed of Domestic Factoring Limit (Trade Finance) of ₹ 10 Crore from M/s Global Trade Finance Limited (now known as M/s SBI Global Factors Limited) during January, 2008 against the trade receivables from 6 debtors viz. M/s Shri Sri Agencies, M/s Sri Venkateshwara Cottons, M/s Harsha Cottons, M/s Sri Sri Agencies India Pvt Ltd, M/s Sri Venkateshwara Cottons Pvt Ltd and M/s Harsha Cottons Private Limited. 6.2 That investigation has revealed that the Company has submitted a request to M/s Global Trade Finance Limited (hereinafter referred as GTFL) during February, 2008 for enhancing the trade finance limit to ₹ 20 Crore by including 4 more debtors viz. M/s East West Fabrics, M/s P.V. Enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent has enabled Shri R. Selvakumar, Managing Director of the Company to secure Trade Finance Limit from GTFL by dishonestly certifying the false and bogus audited financial statements in respect of the Company certifying huge turnover and net profits, whereas the Company had no such business transactions and thus facilitated Shri R. Selvakumar, Managing Director of the Company in perpetrating the fraud. 7. In both these matters, pursuant to preliminary examination, Prima Facie Opinions were formed by the Director (Discipline) of the Institute of Chartered Accountants of India, whereby, he found the Appellant as Prima Facie Guilty under various Clauses of the Chartered Accountants Act, 1949. These matters were then placed by him before the Disciplinary Committee in accordance with the applicable provisions of the Chartered Accountants Act, 1949 read with rules of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 for further detailed examination thereof by the Disciplinary Committee, which in turn examined both the cases in detail. 8. The Disciplinary Committee in both these matters directed the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Chartered Accountants Act, 1949. 9.5 The CBI had alleged about certification of false turnover. The Respondent failed to defend this allegation in absence of his working papers. Further, the Trial Balance submitted by him did not carry any signatures to establish its authenticity. It is also observed that the appointment letter submitted by the Respondent bore different type of stamping and bore different address. Hence, the documents submitted by the Respondent cannot be accepted and accordingly, in the view of the Committee, the Respondent has failed to bring any new evidences to defend himself. 9.6 The Committee noted without pain that the Respondent not only acted negligently but also was very causal in his approach during the hearings. A Chartered Accountant should exercise extreme caution before signing any document and check the necessary supporting papers as the authentication by a Chartered Accountant carries immense value in the eyes of the law and the general public, alike. More so, when the end user of the said statement is financial institutions. 10. Similarly, in second appeal number 02/ICAI/2017, the Disciplinary Committee has observed hereunder: 10.1 That l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statements of the Respondent that he had gone through the Trial Balance and merely placed reliance on the statements of Shri E. Mathan before certifying the accounts of the company. Thus, the Respondent not only performed his duties negligently but also failed to obtain sufficient information for expressing an opinion. Accordingly, the Committee holds him guilty of Professional Misconduct falling within the meaning of Clauses (7) & (8) of Part-I of Second Schedule to the Chartered Accountants Act, 1949. 10.6 It was also noted by the Committee that the Respondent had given the Report on Form 3CB. To a specific question by the Committee to the Respondent as to why he had certified on Form 3CB and not Form 3CA, the Respondent failed to give a satisfactory reply and just mentioned that this was done in his initial year of practice. It was further noticed by the Committee that the Respondent has also made modification in Form 3CB and had also not mentioned date on Audit Report. 10.7 The Committee views with serious concerned that the Respondent not only appeared to have acted negligently but also seemed to take a very casual approach during the hearings….." 11. Based on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken up as "information" only thereafter the matter was proceeded in accordance with the provisions of Rule 8 (1) (a) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 and therefore, these matters were accordingly proceeded with, which are within limitation. However, no convincing response or reply was given by the Appellant to the same. Accordingly, we find no merit in this ground taken by the Appellant and therefore, the same is hereby rejected. 16. Another ground of Appeal in Appeal Number 01/ICAI/2017 taken by the Appellant is that the complaint is with reference to M/s Kantha Spinning Mills Private Limited, which is no entity and never audited by the Appellant. In fact, Appellant had audited M/s Kantha Spinning Mills, Proprietor Shri P. Venkatachalapathy. We find that this is only a typing mistake at one place in a CBI letter but at all other places and examination, the CBI has mentioned only M/s Kantha Spinning Mills, Proprietor Shri P. Venkatachalapathy. The said typing mistake at one place does not vitiate the proceedings. Para 8.2 of 'Prima-Facie Opinion' formed by Director (Discipline) dated 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant made various submissions before the Disciplinary Committee as well as before us. In this regard, it is notable here that one of his main defences was that he had all the working papers which have been taken away by Mr. E Mathan and the Disciplinary Committee did not examine Mr. E Mathan as one of his witness. The Appellant had taken this plea before the Disciplinary Committee as well as before us. We have noted that the Appellant wanted to produce him as his witness. We find that the Disciplinary Committee had given many opportunities to the Appellant to produce him as his witness but the Appellant failed to produce him. The findings given vide Para 15 and 16 in the Report of the Disciplinary Committee are relevant in this regard. 21. Furthermore, before us also, the same request was made on behalf of the Appellant and we have given him many chances to produce Mr. E. Mathan as his witness. Yet, the Appellant failed to do so even before us in spite of summons sent to Mr. E. Mathan by us. The said witness, despite service of notice of summons, has not appeared before us by taking excuse on medical grounds. Since, it was a responsibility of the Appellant to produce the records w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one through the Trial balance and statements prepared by Shri Mathan. " When we asked him as to whether this would be sufficient examination, the Appellant again reiterated that proper examination and due diligence was done by him but the records were taken away by the said Mr. E. Mathan. Why records were taken by him, why no FIR was filed by the Appellant against him for records, was also not answered. The examination of the working papers produced before us do not prove that the Appellant had taken proper care and did due diligence before giving his opinion on the financial statements in both these matters. 26. Therefore, based on the facts involved in both these Appeals in addition to pursuing all records and evidence besides hearing of the arguments of the parties, we are of the considered view that the Appellant undoubtedly has failed to prove that he had obtained all the information which was necessary for expressing the opinion and had exercised due diligence in the performance of his professional duties. Accordingly, we find no merit in both these Appeals and thus, both the Appeals are hereby dismissed. 27. In addition, on the ground of quantum of punishment, we have hea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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