The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) has reprimanded CA. Devi Prasad Chaurasia for professional and other misconduct. The case stemmed from a complaint filed by Smt. Seema Rath, the ROC of Kanpur, regarding the incorporation of M/s Newmine Technology Private Limited. The committee found Chaurasia guilty of misconduct under the Chartered Accountants Act, 1949, after a hearing on February 3, 2025. The committee’s findings, dated October 15, 2024, concluded that Chaurasia failed to verify if the company had complied with the requirements of Section 7 of the Companies Act, 2013. Specifically, he did not ensure the attachment of the identity proof for the company’s first director, Mr. Ajay Singh, in the e-form Spice INC-32, despite a legal requirement to do so. Chaurasia’s defense, which included claims that the form’s design disabled such attachments and that he gave his premises for the company’s registered office temporarily and without charge, were rejected by the committee. The committee also questioned his decision to allow his premises to be used as a registered office for ten months without a rent agreement, noting that the company was a suspected “shell company” with no business operations. Considering these failures, the committee determined that Chaurasia had not performed his professional duties diligently and ordered that he be reprimanded.
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
[DISCIPLINARY COMMITTEE [BENCH-IV (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/G/141/22-DD/236/2022/ DC/1719/2023]
In the matter of:
Smt. Seema Rath,
Versus
CA. Devi Prasad Chaurasia
MEMBERS PRESENT:
1. CA. Ranjeet Kumar Agarwal, Presiding Officer (In person)
2. Shri Jiwesh Nandan, I.A.S (Retd.), Government Nominee (In person)
3. Ms. Dakshita pas, I.R.A.S. (Retd.), Government Nominee (In person)
4. CA. Mangesh P Kinare,Member (Through VC)
5. CA. Abhay Chliajed, Member (Through VC)
DATE OF HEARING : 03rd February 2025
DATE OF ORDER : 08th February 2025
1. That vide Findings dated 15.10.2024 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. Devi Prasad Chaurasia (hereinafter referred to as the Respondent”) is GUILTY of Professional and Other Misconduct falling within the meaning of Item (7) of Part-I of Second Schedule and Item (2) of Part-1V of First 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 an opportunity of being heard in person/ through video conferencing and to make representation before the Committee on 03rd February 2025.
3. The Committee noted that on the date of the hearing on 03rd February 2025, the Respondent was present through video conferencing. During the hearing, the Respondent reiterated his written submissions dated 08th November 2024 on the Findings of the Committee, which, inter alia, are given as under:-
(i) That the requirement of clause (f) to subsection (1) of Section 7 of the Companies Act, 2013, has to be complied with if First Directors do not have DIN.
(ii) In Spice Form iNC-32, when the DIN of the First Director is entered, Spice Form disables the requirement of attaching the identity and address proof, which may be due to the reason that KYC of the DIN holder is already in records of MCA.
(iii) In Spice Form INC-32, all the details like address, father’s name, PAN, Aadhaar, phone number, etc. are not enabled for first directors who hold valid DIN; therefore, all the details as required by clause (f) to subsection (1) of Section 7 of the Companies Act, 2013 cannot be entered in the Form.
(iv) The requirement of attaching identity and address proof and all the columns has to be filled only when the First Director has not been allotted
(v) That the premises were-given free of rent for the time being because Mr. Ajay Singh assured the Respondent that he will take another premises on lease after incorporation of the company.
(vii) Mr. Ajay Singh is known to the Respondent, and at his request, the Respondent gave his premises for some time for free of rent.
(vii) He is not the auditor of the Company involved i.e. M/s Newmine Technology Private Limited.
(viii) He does not know the Chinese director of the Company.
4. The Committee considered the reasoning as contained in Findings holding the Respondent ‘Guilty’ of Professional and Other Misconduct vis-a-vis written and verbal representation of the Respondent. The Committee noted that the issues/ submissions made by the Respondent as aforestated have been dealt with by it at the time of hearing under Rule 18.
5. Thus, keeping in view the facts and circumstances of the case and material on record including written and verbal representation of the Respondent on the Findings, the Committee observed that the Respondent before giving his declaration in the e-form that “all the requirements of Companies Act 2013 and the Rules made thereunder relating to registration of the company under section 7 of the Act and matters precedent or incidental thereto have been complied with”; was required to verify whether the Company has actually complied with the requirement of Section 7 of the Act. The Committee noted that the Respondent in his initial written submissions dated 30th May 2023, admitted his mistake of not attaching the Proof of identity of Mr. Ajay Singh in the eForm but in subsequent submissions dated 05th April 2024 and 08th November 2024, however, he submitted that there was no requirement of attaching proof of identity of Mr. Ajay Singh being the first Director of the Company in the said Form.
6. In light of the provisions of clause (f) to subsection (1) of Section 7 of the Companies Act, the Committee was of the view that the requirement of attaching a proof of identity of the first Director in e-form Spice INC-32 has to be complied with and therefore the plea of the Respondent that there was no requirement of attaching proof of identity of Mr. Ajay Singh not being first subscriber is not acceptable as he was the First Director of the Company. The ,Committee also noted that as per the submissions of the Complainant, the subject Company was fulfilling the parameters of a shell Company which was not doing any business and there was a clear omission in filing of Balance sheet(s)/ return(s) and requisite Forms by it and hence the Company could not be allowed to operate solely on the basis of a registered office. Looking into the overall aspects as aforestated, the Committee noted that the failure on the part of the Respondent for not verifying the requirements of the Companies Act, 2013, appropriately shows that the Respondent has not performed his professional duties diligently.
7. Further, the Committee noted the submissions of the Respondent that Mr. Ajay Singh, Director of the Company, was known to him, and on his request, the Respondent gave his premises to the Company free of rent. In this regard, the Committee noted that the Company has changed its registered office from Respondent’s premises to another place in the month of November 2020, i.e., after 10 months of incorporation of the Company.
8. The Committee further noted that the incorporation documents among others required to be attached with the Spice Form INC 32 included notarized copy of lease or rent agreement in the name of the Company (i.e., ownership papers of the premises) as per the provisions of Companies Act, 2013 buf the Respondent did not bring on record the copy of same to show that he had permitted the Company to use his address as the registered office address of the Company. The Committee was unable to appreciate the fact as to why a professional who was merely engaged in incorporation of a Company would allow to use his premise for the said purpose and that too without any consideration, especially when he is not knowing or having any relations with all the concerned persons. Hence, the Professional and Other Misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 15.10.2024 which is to be read in consonance with the instant Order being passed in the case.
9. Accordingly, the Committee was of the view that the ends of justice would be met if punishment is given to him in commensurate with his Professional and Other Misconduct.
10. Thus, the Committee ordered that the Respondent i.e., CA. Devi Prasad Chaurasia , be REPRIMANDED, under Section 21B(3)(a) of the Chartered Accountants Act,1949.
Sd/-
(CA. RANJEET KUMAR AGARWAL)
PRESIDING OFFICER
Sd/-
(SHRI MESH NANDAN,I.A.S.{RETD.}}
GOVERNMENT NOMINEE
Sd/-
(MS. DAKSHITA DAS, I.R.A.S.{RETD.})
GOVERNMENT NOMINEE
Sd/-
(CA. MANGESH P KINARE)
MEMBER
Sd/-
(CA. ABHAY CHHAJED)
MEMBER
