The Institute of Chartered Accountants of India (ICAI) Disciplinary Committee found Chartered Accountant Hemant Kumar Gupta guilty of professional misconduct. The complaint, filed by the Deputy Registrar of Companies, alleged that the CA failed to exercise due diligence while witnessing the e-MOA and e-AOA for a company’s incorporation. The CA argued that his virtual presence was sufficient and that he had verified the documents. He also raised an objection regarding the committee’s quorum. However, the committee rejected his arguments, clarifying that the quorum was properly constituted as per the rules. It found that the CA failed to produce proof that the documents were signed in his presence and that he had verified the original identity documents, a mandatory requirement under Rule 13(1) of the Companies (Incorporation) Rules, 2014. Since the CA failed to meet the due diligence requirements, his professional misconduct was established. The committee issued a reprimand and imposed a fine of Rs.25,000, to be paid within 60 days.
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 218(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.
File No.:- [PR/G/104/22/DD/131/2022/DC/1650/2022]
In the matter of:
Dr. Avais Patwegar,
Dy. ROC, Karnataka
Ministry of Corporate Affairs
….. Complainant
Versus
CA. Hemant Kumar Gupta
….. Respondent
MEMBERS PRESENT:
1.CA. Ranjeet Kumar Agarwal, Presiding Officer (In person)
2. Shri Shri Jiwesh Nandan, I.A.S (Retd.), Government Nominee (In person)
3. Ms. Dakshita Das, I.R.A.S. (Retd.), Government Nominee (Through VC)
5.CA. Mangesh P Kinare, Member (In person)
6. CA. Abhay Chhajed, Member (In person)
DATE OF HEARING : 06th January 2025
DATE OF ORDER : 20th January 2025
1.That vide Findings dated 05/11/2024 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. Hemant Kumar Gupta
(hereinafter referred to as the Respondent”) is GUILTY of Professional Misconduct falling within the meaning of Item (7) of Part I of Second Schedule to the Chartered
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 06thJanuary 2025.
3. The Committee noted that on the date of hearing on 06thJanuary 2025, the Respondent was physically preset and appeared before it. During the hearing, the Respondent submitted that he had already submitted his written representations dated 25/11/2024 and 03/01/2025 on the Findings of the Committee. The Respondent also submitted that e-MOA and e-AOA of the Company were witnessed by him and phrase ‘sign before me’ as used on MOA and AOA does not mean physical presence of the subscribers and the professional who witnessed the signatures. In the case of E-MOA and E- AOA, there is no difference between physical presence and virtual presence as both are used simultaneously. The Committee also noted the written representations of the Respondent dated 25/11/2024 and 03/01/2025 on the Findings of the Committee, which, initer alia, are given as under:-
(a) The composition of the bench on date of final hearing dated 21/08/2024 was not complete and proceedings were conducted before incomplete quorum in the absence of President or Vice – President of the ICAI.
(b) He had met the Directors personally and verified documents and identified them.
(c) DSC of Directors were downloaded on 21/04/2021.
(d) After year 2017 , e-MOA and e-AOA got digitalized and he verified documents after seeing the originals.
(e) Rule 13(1) of the Companies (Incorporation) Rule 2014 casts no difference between a physical presence or a digital or virtual presence and does not even prescribe that the presence has t be necessarily a physical presence.
(f) Presence may be physical or virtual; and Physical presence is nowhere mandated or compulsory.
4. The Committee considered the- reasoning as contained in Findings holding the Respondent ‘Guilty’ of Professional Misconduct vis-a-vis written and verbal representation of the Respondent. The Committee noted that the issues/ submissions made by the Respondent as afforested 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, material on record including written and verbal representation of the Respondent on the Findings, the Committee noted that the Respondent had raised objection that at the time of hearing, Quorum was incomplete. The Committee noted that the as per Rule 16(4) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 “in the event Presiding Officer not being able to attend a meeting of the Committee, the senior most member amongst the members nominated by the Central Government under sub-section (1) of Section 218 of the Act shall act as the Presiding Officer”. In view of this provision, the Committee noted that at the time of the final hearing of the case on 21.08.2024, the bench was presided over by the senior most Government Nominee member and thus was of the view that the said objection raised by the Respondent is not tenable.
6. Further, the Committee noted that the Respondent has contended that he had received the relevant documents for incorporation of Company through e-mail and that the digital signatures have been fixed on Memorandum of Association and Articles of Association by the Respondent as well as Directors of the Company. However, no proof was produced for receipt of other documents for identity verification. The Committee opined that having accepted the contention of the Respondent that he visited the registered office on 20/04/2021; it fails to understand that why the documents could not be verified when he was physically present. The Committee observed that e-MOA and e-AOA were witnessed by the Respondent. According to Rule 13(1) of the Companies (incorporation) Rules, 2014 – the witness shall state that “I witness to subscriber/subscriber(s), who has/have subscribed and signed in my presence (date and place to be given); further I have verified his or their Identity Details (ID) for their identification and satisfied myself of his/her/their identification particulars as filled in” Hence as per the above Rule, the witness has to confirm that the subscribers’ signatures have been affixed in the presence of the witness; whereas there is no proof brought on record to confirm this fact and to show that the Respondent had verified incorporation documents (including documents for identity verification) from original records. Thus, the Committee was of the view that the Respondent failed to exercise due diligence.
7. Hence, the Professional Misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 05/11/2024 which is to be read in consonance with the instant Order being passed in the case.
8. 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 Misconduct.
9. Thus, the Committee ordered that the Respondent i.e. CA. Hemant Kumar Gupta, New Delhi be REPRIMANDED and also imposed a fine of Rs. 25,000/- (Twenty- Five thousand rupee only) upon him, which shall be paid within a period of 60 (sixty) days from the date of receipt of the Order.
Sd/-
{CA. RANJEET KUMAR AGARWAL}
PRESIDING OFFICER
Sd/-
{SHRI JIWESH NANOAN, 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
