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TMI Blog2024 (12) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... ut revenue earned by her from related parties of MACEL. This professional misconduct is defined in para 7 of part I of second schedule of the Chartered Accountants Act 1949. CA Lavitha Shetty vide our Orders dated 13.04.2023 and 25.04.2023 is sanctioned. However, the misrepresentation of facts during those proceedings cannot be overlooked. CA Lavitha Shetty has misrepresented the facts relating to revenue earned by her from MACEL and its related parties and this information was crutial in evaluation of her independence in this matter. It is also found that misleading the regulator leads to interference with the statutory functions of the regulator. Having already penalised her, it is found that in these proceedings a token penalty would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roprietary firm M/s Lavitha Associates was the statutory auditor of four more related parties of Mysore Amalgamated Coffee Estates Limited (MACEL) and that she did not disclose details of revenue earned from these four companies in her letter to NFRA. Vide letter dated 27.09.2023 a clarification was sought from her regarding this non-disclosure. Vide her letter dated 04.10.2023 she stated that the said four companies do not fall within the definition of related parties as per the provisions of section 2(76) of the Act. This letter dated 04.10.2023 provided the requisite information relating to these four companies. 4. Prima facie, we found that these four companies are covered within the definition of related parties given u/s 2(76) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies i.e. Wilderness Resorts Pvt Ltd (WRPL - 99.92% shareholding by CDHRPL), and Karnataka Wildlife Resorts Pvt Ltd (KWRPL - 99.99% shareholding by WRPL). CA Lavitha Shetty was statutory auditor of all these four companies. It was stated in the SCN that by virtue of shareholding and common directorships, the directors of these subsidiarics were accustomed to act in accordance with the advice, directions or instructions of Board of Directors (BoD) of MACEL and CDHRPL. Therefore, according to the SCN these two companies were related party as per the section 2(76)(vi) of the Act. 9. Further, in Chandrapore Estates Pvt Ltd and Kurkenmutty Estates Pvt Ltd, Mr V G Sidhharth (VGS) Chairman of Coffee Day Enterprises Ltd (CDEL-holding company of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e holding of directorship in CDHRPL without any shareholding cannot help them wield powers over the BoD of WRPL and KWRPL. This reply is not accepted as these two directors of MACEL were also directors of CDHRPL, which had more than 99% shareholding in WRPL and KWRPL. By virtue of common directorships and shareholdings, the directors of these subsidiaries were accustomed to act in accordance with the advice, directions or instructions of Board of Directors (BOD) of MACEL and CDHRPL. Therefore, it is clear that these two companies were related party as per the section 2(76)(vi) of the Act. 12. In respect of Chandrapore Estates Private Ltd (CEPL) and Kurkenmutty Estates Private Ltd (KEPL), CA Lavitha Shetty contended that according to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a professional to NFRA is a part of professional duties and the information about revenue earned by her from related parties of MACEL was called from her to evaluate her professional work. Also, every Auditor has to comply with the provisions of the law. 14. In view of above, it is proved that CA Lavitha Shetty committed professional misconduct of failure to exercise due diligence in the conduct of her professional duties by not providing complete information about revenue earned by her from related parties of MACEL. This professional misconduct is defined in para 7 of part I of second schedule of the Chartered Accountants Act 1949. 15. As already pointed out, we had sanctioned CA Lavitha Shetty vide our Orders dated 13.04.2023 and 25.04 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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