Institute of Chartered Accountants of India’s Disciplinary Committee found CA. Rahul Singh guilty of professional misconduct. The case stemmed from a complaint by CA. Sumeet Khanna, regarding Singh’s acceptance of a statutory auditor position. The Committee determined that Singh violated Items (8) and (9) of Part I of the First Schedule and Item (1) of Part II of the Second Schedule to the Chartered Accountants Act, 1949. Specifically, Singh failed to obtain a No Objection Certificate from the previous auditor (the complainant) before accepting the engagement and accepted the audit while undisputed audit fees of the previous auditor remained unpaid until June 2023, long after the complaint was filed. Furthermore, the Committee noted that the removal of the complainant and the appointment of Singh did not adhere to the procedures prescribed under Sections 139 and 140 of the Companies Act, 2013, including the requirement for a special resolution and Central Government approval for auditor removal. As a result of these findings and the established professional misconduct, the Disciplinary Committee ordered that CA. Rahul Singh be REPRIMANDED under Section 21B(3)(a) of the Chartered Accountants Act, 1949.
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/237/2017/DD/258/2017/DC/1337/2020]
In the matter of:
CA. Sumeet Khanna ……Complainant
Versus
CA. Rahul Singh …..Respondent
MEMBERS PRESENT:
1. CA. Ranjeet Kumar Agarwal, Presiding Officer (In person)
2. Shri Jiwesh Nandan, I.A.S (Retd.), Government Nominee (In person)
3. Mr. Dakshita Das, I.R.A.S. (Retd.), Government Nominee (Through VC)
4. CA. Mangesh P Kinare, Member (In person)
5. CA. Abhay Chhajed, Member (In person)
DATE OF HEARING : 26th MARCH, 2024
DATE OF ORDER: 16th May, 2024
1.That vide Findings dated 16.01.2024 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. Rahul Singh (hereinafter referred to as the Respondent”) is GUILTY of Professional Misconduct falling within the meaning of Items (8) and (9) of Part I of. First Schedule and Item (1) of Part II of the Second Schedule to the Chartered Accountants Act, 1949.
2. That pursuant to the said Findings, an action under Section 21E3(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 28th March 2024.
3. The Committee noted that on the date of hearing on 28th March 2024, the Respondent was physically present at ICAI Bhawan, Delhi and he verbally submitted that he had sought No Objection from the Complainant, but no response was received. Further, the outstanding audit fees were also later on paid to the Complainant.
4. The Committee considered the reasoning as contained in Findings holding the Respondent ‘Guilty’ of Professional Misconduct vis-à-vis 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 verbal representation of the Respondent on the Findings, the Committee noted that the Respondent could not produce any documentary evidence of communication made by him with the Complainant (i.e. previous auditor) before accepting the position of Statutory Auditor of the Company. In view of admissions of said charge, the Committee held that the Respondent failed to ascertain the provisions of Code of Ethics. In view of the provisions of the Code of Ethics, the Committee held that the incoming auditor has to ensure before accepting the audit that undisputed audit fees of the previous auditor should have been paid by the audile. In this case, the Respondent accepted the audit on 25th September, 2016 and outstanding undisputed audit fees of the Complainant was paid in June 2023 after filing of this complaint with the ‘CAI.
6. The Committee observed that there are no documents/evidences placed on record by the Respondent to establish that proper procedure as prescribed under Section 140 of Companies Act, 2013 was followed before removal of the Complainant from the auditor ship of the Company i.e., whether the Complainant was removed by passing a special resolution by the Company after obtaining the approval of the Central Government in the prescribed manner or an opportunity of being heard was given to the Complainant or the procedure of special notice for appointment of the Respondent was complied with at AGM held on 30th September 2016.
7. Moreover, on perusal of the notice of AGM dated 30.09.2016 brought on record by the Complainant, it is evident that neither special notice for appointment of Respondent has been given nor any special resolution has been made part of the said notice for removal of Complainant. On the basis of provisions of Companies Act, 2013, the Committee held that the appointment of the Respondent was in violation of Section 139 of Companies Act and removal of the Complainant was not as per Section 140 of Companies Act, 2013 and Respondent failed to adhere to the said provisions of the Companies Act. Hence, the Professional Misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 16th January 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. Rahul Singh , be REPRIMANDED, under Section 218(3)(a} of the Chartered Accountants Act,1949.
Sd/-
(CA. RANJEET KUMAR AGARWAL)
PRESIDING OFFICER
Sd/-
(SHRI JIWESH 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
