ICAI reprimands CA as he acted as an Executive Director of a company without obtaining the mandatory approval from the ICAI Council
Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) has reprimanded CA Sanjay Kumar Agarwal for professional and other misconduct under various provisions of the Chartered Accountants Act, 1949. The case arose from a complaint filed by Ms. Priyanka Sharma, leading to findings that Agarwal acted as an Executive Director of a company without obtaining the mandatory approval from the ICAI Council. The Committee found evidence including emails, representations before tax authorities, and participation in conventions on behalf of the company, establishing his involvement in its day-to-day affairs. Agarwal argued that he had no active role in company management and was not involved in daily operations, claiming he acted merely in a professional capacity. He further submitted that additional grounds were considered without affording him an opportunity to respond and pointed to changes in the composition of the Disciplinary Committee during proceedings. The Committee, however, held that no prejudice was caused due to the composition change and clarified there is no provision for reviewing its findings under the Act. It also found no merit in his arguments regarding meeting notices and use of his professional address as the company’s registered office. After considering written and verbal submissions, the Committee concluded that Agarwal flouted provisions of the Companies Act, 2013, particularly in convening board meetings and operating company bank accounts. The Committee observed that his actions breached professional ethics and the standards expected of a chartered accountant. Accordingly, it ordered a reprimand 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)
PR-162/2017-DD/169/2017/DC/1486/2021
[DISCIPLINARY COMMITTEE [BENCH-II (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
In the matter of:
Ms. Priyanka Sharma]
….. Complainant
Versus
CA. Sanjay Kumar Agarwal
…..Respondent
Members Present:-
CA. Ranjeet Kumar Agarwal, Presiding Officer (in person)
Mrs. Rani S. Nair, IRS (Retd.), Government Nominee (through VC)
Shri Arun Kumar, IAS (Retd.), Government Nominee (in person)
CA. Sanjay Kumar Agarwal, Member (in person)
CA. Cotha S Srinivas,IMember (in person
Date of Hearing :’28th May 2024
Date of Order • : 26th June 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 was, inter-alia, of the opinion that CA. Sanjay Kumar Agarwal , Pilibhit (hereinafter referred to as the ‘Respondent’) is GUILTY of Professional and Other Misconduct falling within the meaning of Item (11) of Part I of the First Schedule, Item (2) of Part IV of the 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 218 (3) of the Chartered Accountants (Amendment) Act, 2006 was contemplated against the Respondent and a communication was addressed to him thereby granting opportunity of being heard in person / through video conferencing and to make representation before the Committee on 28th May 2024.
3. The Committee noted that on the date of the hearing held on 28th May 2024, the Respondent was present through video conferencing and made his verbal representation on the Findings of the Disciplinary Committee, inter-alia, stating, that he had a fair record as a professional since the year 1979 when he started his practice. He further stated that he was not involved in the day-to-day activities of the Company. On behalf of the Company, he represented in the capacity as a Chartered Accountant and not as the Director of the Company and for that he did not charge any fees also.
3.1 The Committee also noted that the Respondent in his written representation on the Findings of the Committee, inter-alia, stated as under: –
(a) The Respondent requested the Committee to review its decision. He stated that while rendering the Judgment, the Committee has introduced additional grounds without affording the Respondent an opportunity to present his case.
(b) The composition of the Committee has undergone changes. The Committee responsible for adjudicating the Respondent guilty and the Committee tasked with ‘providing the final opportunity to the Respondent to be heard now consists of different members.
(c) Despite the final hearing on 10th August 2023, a subsequent judgrbent was issued on 25th August 2023. On 25th August 2023, during the proceedings, several additional grounds were discussed in the absence of the Respondent. This absence resulted in the Respondent being found guilty and the case being decided ex-parte.
(d) He had submitted all the documents asked for by the Committee in the previous hearing held on 23rdJune 2023. He had submitted copies of the Notice of AGM and copies of financials signed by two directors i.e. Mr. Aditya Prakash Bats and Mr. Ashok Khandelwal to prove that he has not signed any documents and has acted only as a Director-Simplicitor.
(e) He was the first director of the Company. Hence, no resolution was passed for his appointment.
(f) There is no documentary evidence which the Complainant can produce to prove his role as an Executive Director of the Company.
(a) The status of the Company is inactive at present.
4. The Committee considered the reasoning as contained in the Findings holding the Respondent Guilty of Professional and Other Misconduct vis-a-vis written and verbal representation of the Respondent.
4.1 On consideration of the representation of the Respondent, the Committee informed the Respondent during the meeting that the final hearing in the case took place on 10th August 2023 wherein he along with his Counsel was present. The Committee, on consideration of the submissions made by the Respondent, concluded the hearing in the case on the said date and directed the Respondent to submit the documents regarding the present status of the Company. Accordingly, the decision on the conduct of the Respondent was kept reserved. Thereafter, the Respondent vide letter dated 16’h August 2023 submitted his response. Subsequently, the Committee at its meeting held on 25th August 2023, on the basis of submissions and documents on record, decided on the conduct of the Respondent. Thus, no hearing in the case took place on 25th August 2023.
4.2 Further, the Committee was of the view that the request of the Respondent to review the decision of the Discipl nary Committee is not maintainable as there is no provision under the Chartered Accountants Act 1949 and the Rules framed thereunder to review or recall the Order/Findings of the Disciplinary Committee. Also, the Committee arrived at its Findings only in respect of the charges alleged against the Respondent and no additional grounds/charges were alleged against him.
4.3 As regard the submission of the Respondent that there has been a change in the composition of the Committee, keeping in view the following observations of the Honorable Appellate Authority in para 8 of its Order dated 14th June 2021 passed in Appeal no. OS/ICAI/2020 in the matter of Devki Nandan Gupta —vs- ICAI and others on the same issue, the Committee was of the view that there is no merit in the contention of the Respondent:
“We find no substance in the appellant’s plea that due to change in the composition of DC who had passed the order dated 08.02.2018 the new DC with changed members could not have passpd the final order dated 07.11.2019
We are of the view) that no prejudice whatsoever was caused to the appellant due to change in the conipbsition of the DC who had held him guilty of ‘professional misconduct’
under Clause 7 of Part — I of the Second Schedule and the one who had finally awarded punishment vide order dated 07.11.2019. In fact, the changed DC was not expected or required to hear arguments afresh on merits to find if the appellant was guilty of ‘professional misconduct’. The said findings had already been recorded by the previous DC in its order dated 08.02.2019 and attained finality qua the changed DC. The changed DC was required only to hear the appellant on the quantum of puni hment/penalty and for that, the appellant was afforded reasonable opportunity of being he rd.”
5. Keeping in view the facts and circumstances of the case, material on1record including verbal and written representation on the Findings, the Committee with respect to the first charge was of the view that the documents brought on record by the Complainant such as emails written by the Respondent to the accountant of the Company, representation by Respondent before Income Tax Authorities on behalf of the Company, the copy of tickets to Manila for attending convention on behalf of the Company, etc. prove beyond doubt that the Respondent was involved in day to day affairs of the Company as Executive Director without obtaining permission from the Council of ICA!.
5.1 As regard the use of professional address of Respondent by the Company as its Registered Office, the Committee noted that the Respondent merely submitted that operational activities were consistently carried out from the Corporate Office address situated at Bareilly but failed to provide any evidence for the same.
5.2 With respect to the second charge, the Committee noted that as per Section 173(3) of t Companies Act, 2013, the Notice of the meeting shall be given to every irector of the Company at his address registered with the Company. However, in the present ca e, the Respondent did not give Notice to all the Directors as required under the provisions of the Companies Act 2013.
5.3 In this regard, the Respondent submitted that since neither the accounts of the Company were presented by the Executive Director of the Company nor any formal meetings were convened till 2016 due to which, he initiated dialogues with the Managing Director of the Company aggressively in April 2016 to have the past accounts of the Company. He held a meeting amongst three Directors of the Company on 3rd August 2016 with an intent to prevent the single signatory operation of the Company’s Bank Account. However, the Respondent failed to bring on record any evidence that Notice of the said meeting was served on all the Directors of the Company. Thus, the Respondent flouted the provisions of the Companies Act 2013 with the intention of gaining control over the banking operation of the Company.
5.4 Hence, Professiohal and Other misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 7th February 2024 which is to be read in consonance with thel instant Order being passed in the case.
6. Accordingly, the Committee was of the view that ends of justice will be met if punishment is given to him in commerisurate with his Professional and Other misconduct.
7. Thus, the Committee ordered that CA. Sanjay Kumar Agarwal, Pilibhit be Reprimanded under Section 21B(3)(a) of the Chartered Accountants Act 1949.
Sd/-
(CA. RANJEET KUMAR AGARWAL)
PRESIDING OFFICER
Sd/-
(MRS. RANI S. NAIR IRS RETD.)
GOVERNMENT NOMINEE
Sd/-
(SHRI ARUN KUMAR, IAS RETD.)
GOVERNMENT NOMINEE
Sd/-
(CA. SANJAY KUMAR AGARWAL)
MEMBER
Sd/-
(CA. COTHA S SRINIVAS)
MEMBER
