The Institute of Chartered Accountants of India (ICAI) Disciplinary Committee (Bench-II) found CA. Gaurav Kumar Bedi guilty of professional misconduct under Items (6), (7), and (8) of Part I of the Second Schedule to the Chartered Accountants Act, 1949. The charges stemmed from his audit of National Spot Exchange Limited (NSEL) for the financial year 2013-14, specifically regarding non-disclosure of mandatory information as per revised Schedule VI of the Companies Act, 1956, failure to apply the Companies (Auditor’s Report) Order, 2003, and inadequate verification of significant purchase transactions. Despite Bedi’s arguments for leniency, citing a long career and minor technical deviations, the Committee determined he adopted a casual approach, failed to obtain sufficient audit evidence, and issued a clean report despite irregularities. Consequently, the Committee ordered the removal of CA. Gaurav Kumar Bedi’s name from the Register of Members for one year and imposed a fine of Rs. 1,00,000. This punishment runs concurrently with a penalty in another related case.
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
PR/PI/178/18-DD/202/18/DC/1488/2021
[DISCIPLINARY COMMITTEE [BENCH-II (2024-2025)]
[Constituted under Section 21B of the Chartered Accountants Act, 1949]
ORDER UNDER SECTION 21B (3) OF THE CHARTERED ACCOUNTANTS ACT, 1949 READ WITH RULE 19(1) OF THE CHARTERED ACCOUNTANTS (PROCEDURE OF INVESTIGATIONS OF PROFESSIONAL AND OTHER MISCONDUCT AND CONDUCT OF CASES) RULES, 2007
[PR/P1/178/18-00/202/18/DC/1488/2021]
In the matter of:
Mr. Neeraj Sharma, Sr. Vice President,
National Spot Exchange Limited (NSEL),
Versus
CA. Gaurav Kumar Bedi
M/s Arora Bedi and Associates
Members Present:-
CA. Ranjeet Kumar Agarwal, Presiding Officer (in person)
Mrs. Rani S. Nair, IRS (Retd.), Government Nominee (through VC)
Shri Arun Kumar, IAS (Retd.), Government Nominee (in person)
CA. Sanjay Kumar Agarwal, Member (in person)
CA. Cotha S Srinivas, Member (through VC)
Date of Hearing: 10th April 2024
Date of Order: 30th September, 2024
1. That vide Findings under Rule 18(17) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, the Disciplinary Committee was, inter-alia, of the opinion that CA. Gaurav Kumar Bedi (hereinafter referred to as the “Respondent”) is GUILTY of Professional Misconduct falling within the meaning of Item (6), (7) and (8) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.
2. That pursuant to the said Findings, an action under Section 21B (3) of the Chartered Accountants (Amendment) Act, 2006 was contemplated against the Respondent and a communication was addressed to him thereby granting opportunity of being heard in person / through video conferencing and to make representation before the Committee on 10th April 2024.
3. The Committee noted that on the date of the hearing held on 10′ April 2024, the Respondent was present in person and made his verbal representation on the Findings of the Disciplinary Committee, inter-alia, stating that the Company is not working right now but his client is connected with him. He had 20 years of unblemished professional career and that he had already suffered for 6 years. Thus, he requested the Committee to take a lenient view in the case. The Committee also noted that the Respondent in his written representation on the Findings of the Committee, inter-alia, stated as under:
(i) With respect to the first charge:-
a) The observations are technical in nature and there is no material effect on the financial statements so as to affect its “true and fair view”.
b) Considering the principle of substance over form, it is humbly requested that a lenient view be kindly taken for minor lapses which does not tantamount to ‘Misconduct’ as in alleged this charge.
(ii) With resect to the second charge: –
a) There is a slight deviation in compliance with the requirement, but the fact remains that the 4aid deviation is not material in nature and at the same time it neither affects the user(s) of the Financial Statements substantially nor vitiates the true and fair view of the Financial Statements.
(iii) With respect to the third charge: –
a) Evidence to substantiate missing purchases of Rs 31.41 Crores in the name of M/s. RS Nagpal Traders Pvt. Ltd. (RSNTPL) are disputed.
b) Alleged transactions of Rs 31.41 crores is disputed and not accepted by M/s. Shree Radhey Trading .Co.(SRTC) as purchases of M/s. RS Nagpal Traders Pvt. Ltd. (‘RSNTPL’). Thus, it is apparent that the Complainant on the one hand has not been able to establish, the so-called figure of Rs 31.41 crores as purchases of M/s. RS Nagpal Traders Pvt. Ltd. (RSNTPL) through M/s. Shree Radhey Trading Co (SRTC) and on the other hand denied and did not accept the figure of 54.21 Crores reflected as Purchases in the Financial Statements without any basis.
(iv) The Respondent referred to the decision of the Disciplinary Committee in .a similar complaint’ filed by the same Complainant against CA. PSC Nageswara Rao alleging that during the financial year 2013-14, SSPL (auditee company) failed to reflect transactions in the financial statements that it had allegedly traded in aggregate Rs.135.43 Crore$ turnover being Rs.77.70 Crores as BUY turnover and Rs. 57.73 Crores as1SELL.turnover on NSEL platform as client of M/s NCS Sugars Ltd (broker member of NSEL). In the .said case, the Committee held the. Respondent as Not Guilty on the ground that the broker concerned intervened in the matter and had stated that the contentious sales were disputed.
(v) He has exercised, reasonable care while carrying out his professional duties which may be in minor deviation to the standards of expectations of the Disciplinary Committee but, as held by Courts, mere failure to meet the expected standard of efficiency by a professional cannot be regarded as misconduct.
4. Keeping in View the facts and circumstances of the case, material on record and representation of the Respondent before it, the Committee decided to reserve the decision on the quantum of punishment to be awarded to the Respondent in the instant case.
5. Thereafter, the Committee at its meeting held on 15th July 2024, considered the reasoning as contained in the Findings holding the Respondent Guilty of Professional Misconduct vis-a-vis written and verbal representation of the Respondent. As regard the submission of the Respondent regarding comparing the instant case with an earlier decided case, the Committee is of the view that comparing two distinct disciplinary cases as ‘eye to eye’, is not warranted as each case is decided on merits on the basis of documents and submissions on record. After due consideration of all the facts, submissions and documents on record, the Committee arrived at its Findings holding the Respondent guilty in respect of the charges alleged against him in Form ‘I’. The Committee also noted that the Respondent admitted his mistake with respect to the first and the second charge during the hearing as well as in his written submissions.
6. Keeping in view the facts and circumstances of the case, material on record including verbal and written representations on the Findings, the Committee noted as under:
(i) First Charge: As per Section 227 of the Companies Act, 1956, it was the duty of the auditor to report that whether, in his opinion and to the best of his information and according to the explanations given to him, the said accounts give the information as required by the Companies Act in the manner so required and give a true and fair view of the financial statements of the Company. Despite the violation of the mandatory requirements of disclosures as per revised Schedule VI of the Companies Act 1956 as pointed out in para 16.1 of the Findings, the Respondent remained silent and did’ not point out the same in his audit report. Also, the Respondent admitted his mistake in respect of the said charge, during the hearing as well as in his written submissions.
(ii) Second Charge: Companies (Auditor’s Report) Order, 2003 [Issued in terms of Section 227(4A) of the Companies Act, 1956] was applicable to the Company for FY 2013-14. Accordingly, the Respondent was required to include a Statement on the matters, as specified in Companies (Auditor’s Report) Order, 2003 but he did not include the same by mentioning that the Companies (Auditor’s Report) Order 2003 was not applicable to the Company. Also, the Respondent in his submissions had accepted his mistake and pleaded to take lenient view on the ground that the said mistake was technical error and does not affect true and fair position of the financial statements and does not constitute professional misconduct.
(iii) Third charge: The Complainant brought on record an e-mail dated 8th July 2013 from the director of the auditee Company to NSEL wherein the said director had mentioned M/s. RS Nagpal Traders Pvt. Ltd. (RSNTPL) as client of M/s. Shree Radhey Trading Co. (SRTC) with client id RSN. Thus, it also shows that the auditee Company had made the transactions through the NSEL. Further, the Respondent was involved in filing all returns and tax audit of the Company, still he failed to obtain evidence to find the nature of transactions taking place. Hence, the contention of the Respondent that there had been nothing on record to find out about the purchase transactions that took place through NSEL platform, was not tenable. The Respondent was required to perform audit procedures to an extent to obtain sufficient audit evidence and apply professional skepticism to find out the real nature of transactions, but he failed to do so.
(iv) The Respondent adopted a casual approach while auditing the books of accounts of the Company as he failed to verify the records related to inventory and ensure comp4nce of Revised Schedule VI of the Companies Act 1956, Companies (Auditor’s Report) Order 2003 and Accounting Standards (AS 9). Despite such irregularities in the financial statements of the Company, the Respondent gave a clean report confirming that the audited financial statements for FY 2013-14 were giving a true and fair view of the state of affairs of the Company. Thus, he was grossly, negligent in performing his duties as an auditor and failed to place on records the facts that were required to be reported by him in his capacity as statutory auditor of the company.
6.1 Hence, professional misconduct on the part of the Respondent is clearly established as spelt out in :the Committee’s Findings dated 7th February 2024 which is to be read in consonance with the instant Order being passed in the case.
7. Accordingly, the Committee was of the view that ends of justice will be met if punishment is given to the Respondent in commensurate with his professional misconduct.
8. Thus, the Committee ordered that the name of CA. Gaurav Kumar Bedi be removed from the Register of Members for a period of 01(One) Year and also imposed a Fine of Rs. 1,00,000/ (Rupees One Lakh only) upon him payable within a period of 60 days from the date of receipt of the Order. The punishment in the instant case shall run concurrently with the punishment awarded in Case no. PR/PI/177/18-DD/201/18/DC/1489/2021.
Sd/-
(CA. RANJEET KUMAR AGARWAL)
PRESIDING OFFICER
Sd/-
(MRS. RANI S. NAIR, IRS RETD.)
GOVERNMENT NOMINEE
Sd/-
(SHRI ARUN KUMAR, IAS RETD.)
GOVERNMENT NOMINEE
Sd/-
(CA. SANJAY KUMAR AGARWAL)
MEMBER
Sd/-
(CA. COTHA S SRINIVAS)
MEMBER
