Case Law Details

Case Name : Institute Of Chartered Accountants of India Vs Vivek Kapoor & Anr (Punjab & Haryana High Court)
Appeal Number : Civil Reference No. 5 Of 2012 (O&M
Date of Judgement/Order : 18/03/2016
Related Assessment Year :
Courts : All High Courts (5290) Punjab and Haryana HC (254)

Learned counsel for the petitioner submitted that disciplinary action against respondent No. 1 was initiated on the complaint dated 1.2.2006 received from the Commissioner of Income Tax-II, Amritsar. The allegations against respondent No. 1 were that he was master-mind in a scam of providing accommodation entries to various concerns  after charging commission ranging from 1% to 3%. The beneficiaries were shown partners in various exporting concerns by writing forged partnership deeds. Several bank accounts were opened using fake names, photographs and introducers. Respondent No.1 himself was operating all benami bank accounts. After receipt of the complaint, proceedings were initiated against respondent No. 1. Copy of the complaint was sent to respondent No. 1 vide letter dated 2.6.2006 for response, however, the notice was received back undelivered with postal remarks “left country”. The matter was considered in the meeting of the Disciplinary Council in its meeting held in November, 2008. Respondent No. 1 was found guilty of professional and other misconduct. The matter was referred to the Disciplinary Committee for enquiry. Even during the course of enquiry before the Disciplinary Committee, despite best efforts, respondent No. 1 could not be served. The Disciplinary Committee submitted its report on 10.6.2010, which was forwarded to respondent No. 1 as well as the complainant. They were informed that the report shall be considered by the Council in its meeting. They were at liberty to file any response thereto. After considering the submissions of the complainant, the Council accepted the report of the  Disciplinary Committee. Respondent No. 1 was held guilty of other misconduct under Section 22 read with Section 21 of the Act. The Council, vide order dated 14.7.2011, decided to recommend to this court for removal of the name of respondent No. 1 from the register of members for a period
of 10 years.

The submission of learned counsel for the petitioner is that respondent No. 1 having been found guilty of misconduct and he having failed to avail of the opportunity of hearing afforded at different stages, not only the recommendations made by the Council be accepted, but seeing the conduct of respondent No. 1, he deserves to be penalised by removing his name from the register of members for life. He being a Chartered Accountant was bound to discharge his duties strictly in accordance with law, however, he not only violated the provisions but caused loss of revenue to the State to the tune of lacs of rupees for his undue benefit. He further submitted that respondent No. 1 had, in fact, admitted his guilt before the income-tax authorities later on. After committing the fraud, he left the country.

Learned counsels appearing for Union of India and Income-tax  Department supported the case of the petitioner.

Code of Ethics was introduced for Chartered Accountants, the introduction of which reads as under:


Financial statements of an enterprise depict the wholesome financial situation of the enterprise for a particular period/ at a particular date. The information in these statements are of vital importance for a large section of the society, which deal with that enterprise. It may be suppliers of material, customers, investors, Banks, Financial Institutions, Insurers, Government, Tax Authorities, employees, collaborators and even their competitors. Keeping in view the importance of these statements and the large section of the society who use these statements for taking many vital decisions, it is necessary that these statements are attested by some person who is expert in this field so that the objectivity, integrity, reliability and credibility of the information is assured to a large extent. This function of attestation is done by professional accounts, who are Chartered Accountants in our country. It has been however observed that there have been a number of cases in banks and financial institutions wherein due to the erroneous/ ambiguous advice tendered by the respective Chartered Accountants, borrowal accounts have had to face quick mortality resulting in loss for the bank. Many a time this has also resulted in vigilance cases being initiated with the allegations of connivance/malafide/gross negligence being attributed to the concerned Bank officials.

1.1 For the succession of the profession of accountancy a self-imposed Code of Ethics is essential to command the respect and confidence of the general public. Chartered Accountants in the service of the affairs of others have responsibilities and obligations to those who rely on their work.”

International Federation of Accountants in its Code of Ethics had given great importance to public interest. It was framed with objectives of credibility, professionalism, quality of service and confidence keeping in view fundamental principles of integrity etc.

From the facts, noticed above, it is clear that respondent No. grossly violated the code of ethics for Chartered Accountants. He admitted his guilt before the Income-tax authorities, which resulted in defrauding the revenue. Thereafter, he left the country. He did not avail of the opportunity afforded to him at different stages to defend the case against him. professional, who behaves in this manner, deserves to be dealt with sternly.

In our opinion, the conduct of respondent No. 1 is wholly unworthy of Chartered Accountant, who is expected to maintain high standard of professional conduct. The punishment proposed by the Institute in these circumstances is quite lighter. Such a professional deserves to be debarred from practice for life time. Hence, in exercise of powers conferred under Section 21(6) of the Act, we deem it appropriate to direct that name of respondent No. 1 be removed from the register of members of the Institute for life. Ordered accordingly.

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  1. Arvind kumar Vaish says:

    The person indulging themselves in such illegal practices must be penalised as per law just to create fear in the minds of others. As the culprits of Satyam Scam have not been punished so far properly.

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