The Disciplinary Committee (Bench-I) of the Institute of Chartered Accountants of India (ICAI) has found Chartered Accountant Anand Kumar Jhunjhunwala guilty of professional misconduct. The committee’s order, dated June 26, 2024, mandates the removal of his name from the Register of Members for a period of three years and imposes a fine of ₹5,00,000. This decision follows a complaint filed by Shri Subhendu Bhattacharyya, DGM, Reserve Bank of India, alleging multiple instances of audit failures.
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Extensive Audit Lapses Uncovered
The allegations against Mr. Jhunjhunwala, partner at M/s Haribhakti & Co. LLP, centered on short provisioning and incorrect asset classification across several entities. A prominent case involved Deccan Chronicle Holdings Limited (DCHL), where the auditor failed to ensure adequate provisioning for a ₹240 crore exposure by SREI, despite a significant portion being unsecured. The committee noted a lapse in reporting the required 100% provision for the unsecured amount and 30% for the secured portion, a direct violation of RBI norms.
Misclassification of Standard Assets and Evergreening Practices
Further scrutiny revealed widespread misclassification of loans. For Mahakaleshwar Tollways Pvt Ltd (MTPL), Kurukshetra Expressway Pvt Ltd (KEPL), and Solapur Tollways Pvt Ltd (STPL), the auditor maintained “Standard Asset” status despite prolonged non-servicing of interest, attributing it to loan agreements linking payments to “free cash flows.” The committee deemed this an intentional circumvention of asset classification norms, finding the auditor guilty for not classifying these as Non-Performing Assets (NPAs).
Instances of “evergreening” were also a significant concern. For Punj Lloyd Limited and Resurgent Infratel Pvt. Ltd. (RIPL), it was alleged that fresh loans were utilized to repay existing dues, preventing accounts from turning into NPAs. Despite the auditor’s defense regarding cash fungibility and the scope of his audit, the committee found him culpable for failing to provide evidence to counter these claims. Similar issues arose with Environ Energy Corporation India Pvt. Ltd. (EECIPL) and EMTA Coal Ltd (EMTA), where the auditor failed to provide adequate documentation or refute allegations of fresh loan proceeds being used to service older debts and incorrect asset classification.
Project Delays and Valuation Discrepancies
The committee also addressed the case of Transtel Infrastructure Limited (TIL). Here, the auditor classified the account as a “Standard Asset” even as the project experienced multiple delays, extending its Date of Commercial Operation (DCCO) beyond RBI’s four-year limit for such classification. The auditor’s defense citing restructuring and additional finance was deemed insufficient due to a lack of precise dates and repayment schedules, leading to another guilty verdict.
Finally, the committee investigated discrepancies in the valuation of Non-Current Investments, specifically in unquoted shares of subsidiaries and associates. These investments were carried at cost despite accumulated losses eroding their net worth. The auditor’s claim of a “temporary” decline in value, in line with Accounting Standard-13, was not supported by evidence, resulting in a finding of professional misconduct on this count as well.
Disciplinary Action Imposed
During the hearing on April 2, 2024, Mr. Jhunjhunwala pleaded for leniency, citing potential professional and personal difficulties. However, after reviewing the findings and the respondent’s submissions, the committee concluded that professional misconduct was unequivocally established. The imposed penalty underscores the ICAI’s commitment to maintaining audit standards and accountability within the profession.
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Setup by an Act of Parliament)
[DISCIPLINARY COMMITTEE (BENCH-I (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/29/2018/DDI7812018/DC11532/2022]
In the matter of: –
Shri Subhendu Bhattacharyya
…..Complainant
-Vs-
CA. Anand Kumar Jhunjhunwala,
Partners, M/s Haribhakti & Co. LLP, Chartered Accountants,
…..Respondent
MEMBERS PRESENT: –
CA. Charanjot Singh Nanda, Presiding Officer
Shri Jugal Kishore Mohapatra, IAS (Retd.) (Government Nominee)
CA. Chandrashekhar Vasant Chitale, Member
Date of Hearing : 2nd April 2024
Date of Order : 26.06.2024
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 noted that Anand Kumar Jhunjhunwala, (hereinafter referred to as the Respondent”) was held GUILTY of professional misconduct falling within the meaning of Item (5) & (7) of Part I of 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 communication was addressed to him thereby granting opportunity of being heard in person / through video conferencing and to make written & verbal representation before the Committee on 2nd April 2024.
3. The Committee noted that on the date of the hearing held on 2nd April 2024, the Respondent was present through video conferencing, and he made his verbal submission on the findings of the Disciplinary Committee.
4. In his verbal submission the Respondent inter alia stated at this stage of his career he is left with a job and if anything impinges on that he will be in a grave difficulty because supporting his family and parents would become that much more challenging and begged for some leniency on that count.
5. The Committee considered the reasoning as contained in the findings holding the Respondent Guilty of professional misconduct vis-a-vis verbal submissions of the Respondent.
6. Keeping in view the facts and circumstances of the case, material on record including verbal submissions of the Respondent on the findings of the Committee, the Committee id of the view that the professional misconduct on the part of the Respondent is established. Accordingly, the Committee ordered that the name of the Respondent i.e., CA. Anand Kumar Jhunjhunwala be removed from the Register of Members for a period of three years and a fine of Rs. 5,00,000/- (Rupees Five Lakhs only) be imposed upon the Respondent to be paid within 90 days of receipt of the Order. If the Respondent fails to pay the fine within the stipulated period, his name be removed from the Register of Member for an additional period of one
Sd/-
(CA. CHARANJOT SINGH NANDA)
(PRESIDING OFFICER)
Sd/-
(SHRI JUGAL KISHORE MOHAPATARA),
I.A.S. (RETD.), (GOVERNMENT NOMINEE)
Sd/-
CA. CHANDRASHEKHAR VASANT CHITALE
(MEMBER)
Place : 26.06.2024
Date : New Delhi
