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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 ..... etor of M/s Lavitha & Associates (Firm Regn. no. 011882S) Statutory Auditor and Engagement Partner (EP) for the statutory audit of Mysore Amalgamated Coffee Estates Limited (MACEL) for the FY 2018-19 & 2019-20. 2. Orders under section 132(4) of the companies Act 2013 (Act), were passed on 13.04.2023 and 25.04.2023 against CA Lavitha Shetty, Engagement Partner for Statutory Audit of MACEL for the Financial Year 2018-19 & 2019-20. In course of those proceedings CA Lavitha Shetty had, vide letter dated 28.07.2022, submitted information including details of audit and non-audit revenue earned by her proprietary audit firm and its related parties from the auditee company (MACEL) and/or its related parties. In this letter she disclosed the revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowed. Thereafter, she submitted reply to SCN vide letter dated 08.07.2024 received through email on 17.07.2024. She did not avail of the opportunity of personal hearing. 6. We have considered the reply. The reply of CA Lavitha Shetty and its evaluation are given in subsequent paras. 7. Section 2(76)of the Act states that "related party", with reference to a company, means- (i) ......; (ii) ......; (iii) .....; (iv) a private company in which a director or manager [or his relative] is a member or director; (v) ........; (vi) any body corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager" (emphasis added). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e audit of MACEL for FY 2018- 19 & 2019-20. Therefore, a new charge of professional misconduct for the same audit of MACEL for FY 2018-19 & 2019-20 amounts to "double jeopardy", hence the same was legally not tenable. We note that the issue raised in the present show cause notice pertains to submission of wrong/incomplete information about revenue earned by CA Lavitha Shetty from related parties of MACEL in the course of proceedings before NFRA. As such, this matter is distinct from the two Orders issued earlier for deficiencies in audit performance. Thus, the argument of "double jeopardy" relied upon by CA Lavitha Shetty does not hold. 11. CA Lavitha Shetty contended that H. V. Santhrupth and B. Sreedhar, two common directors of MACEL and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in MACEL. Therefore, his relationship with VGS did not fulfil the technical requirements in Section 2(76) (iv). We are not in agreement with this reply. It was seen that VGS was actually controlling all these companies, a fact admitted by CA Lavitha Shetty during earlier proceedings and also in reply to this SCN. Therefore, kccping in mind the control over MACEL and the principle of substance over matter, we find that CEPL and KEPL were related parties of MACEL. This is also as per provisions in subclause (vii) of subsection 76 of section 2 of the Act, wherein even a 'person' on whose advice, directions or instructions a director or manager is accustomed to act will qualify to be a related party. 13 CA Lavitha Shetty further con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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