Ashok B. Nawal Vs ICWAI (Appellate Authority)
1. A complaint in Form-I was received against the Appellant filed by Shri Ashish Prakash Thatte (hereinafter referred to as complainant), alleging contravention of the provisions of CWA Act/CWA Regulations and Rules framed thereunder on account of:
(i) Accepting position as Managing Director (MD) in a company despite clearly prohibited by Cost and Works Accountants Act and Cost and Works Accountants Regulations
(ii) Accepting remuneration / fixed salary other than share in Partnership firm
(iii) Solicits clients indirectly by advertisement on Institute letterhead and material
(iv) Grossly negligent in conduct of his Professional duties.
2. On receipt of notice, the said complaint was defended by the Appellant by filing the Written Statement dated 18thDecember, 2014, wherein the Appellant submitted that the complaint was filed with malicious intention. However, on facts, the Appellant (Respondent before the DC) stated that the Respondent has been providing professional services of consultancy and advisory to a company on retainer-ship basis and charges to the company professional fees and company has not paid him any salary or remuneration other than professional fees. Further, the company, Bizsolindia Services (P) Ltd has been engaged in providing services of consultancy, audit and implementation of taxation and economic laws. Therefore, the Respondent has accepted the position as a Managing Director of the company so as to provide advisory services in a better manner.
While denying the allegations levelled against him including against the alleged violation of Clause (10) of Part-I of the First Schedule, he stated that it is only when a Cost Accountant engages himself in any business or occupation than only, he will be said to violate the aforesaid clause. However, in his reply, he admitted that he was working as a Managing Director of Bizsolindia Services (P) Ltd, which also provides the services allowed to a Cost Accountant only. Further, relying upon Section 2 (54) and 2 (94) of the Companies Act, 2013, he denied that he falls within the definition of the Managing Director as he was not a whole-time Director including that of in the company namely Bizsolindia Services (P) Ltd.
3. The Disciplinary Committee, however, did not agree with the defense put forward by the Respondent, the Appellant herein. The Committee regarding the evidence, which came on record, observed as under:-
i. It is evident from the letter dated 1st April, 2014 from the Chairman of Bizsolindia Services Private Limited that the Respondent was getting a fixed amount per annum under the guise of Professional fees. In case of any professional fees the scope of assignment is always defined. Whereas the letter issued by the Chairman of Bizsolindia Services Pvt Ltd to the Respondent is an open ended letter as regards “Scope of Work” to be performed by the Respondent.
ii. The whole structure of the letter is in the form of an employment agreement whereby the Respondent has accepted a fixed amount per annum and other restrictive conditions like not accepting any other employment, part time as otherwise etc. as per Clause (7) of other terms and conditions prescribed in the letter referred above.
iii. From the evidences already submitted, it was clear that despite knowing the fact that Managing Director (MD) was not allowed under the CWA Act, the Respondent had accepted the position of MD and also protecting the same. This clause had been inserted since 2006 and Respondent was holding this position since 14th May, 2004 which the Respondent, by a letter dated 20th April, 2014 informed the Disciplinary Directorate. This clearly shows gross negligence on his part. Knowing the fact that Practicing Cost Accountant cannot take remuneration, Respondent entered into company as Managing Director and accepted remuneration in the form of employee-employer relation and accepted executive position and was also responsible to sign executing documents which are signed by Managers or Employees of Company like executing agreements.
4. Additionally, regarding the permission sought for by the Appellant from the Institute for working as a Managing Director of the company, it came on record that the Appellant sought permission only vide his letter dated 8th Aug, 2015 for using the designation of Managing Director. In other words, before 8th August, 2015, no permission was sought for by the Appellant.
5. In these circumstances, the Director (Discipline) formed his „Prima-Facie Opinion‟holding the Appellant Prima Facie Guilty of Clause (10) of Part-I of the First Schedule and Clause (1) of Part-II of the Second Schedule of the Act.
6. The Order dated 27thJune, 2017 passed by the Disciplinary Committee of the Institute of Cost and Works Accountants of India under Para (13) also contains as hereunder: –
“13.The Director (Discipline) framed his prima facie opinion which was placed and accepted by the Disciplinary Committee at its 25th meeting held on 20th May, 2016 holding the respondent prima facie guilty on two counts:
(i) Clause (10) of Part I of First Schedule to the CWA, Act, 1959
(ii) Clause (1) of Part II of Second Schedule to the CWA, Act, 1959.”
7. Since it was a case of pleading “not guilty” by the Appellant to the allegations made against him, the Disciplinary Committee after Prima Facie Opinion formed by the Director (Discipline) thought it appropriate to call upon both sides to appear before it and to produce evidence, if any in support of their contention. While the Appellant did not use the opportunity, the complainant invited the attention of the Committee to his letter dated 13thOctober, 2015 and 24th September, 2015 wherein he has added additional charge on Shri Ashok Nawal by insertion of Clause (7) of Part I of First Schedule to the Act which included the advertisement published on Bizsol India website in addition to advertisement published by Shri Ashok Nawal every month in the magazine of Bizsol India Limited.
8. The Disciplinary Committee under Para (26) of the Order dated 27thJune, 2017 also recorded this fact and further stated that it clearly proves the charges under this section. Shri Ashok Nawal was openly using his designation as Managing Director in all places like reading material provided by Regional Council in February 2017, which was already submitted to Disciplinary Committee in previous hearing at the time of making oral submissions by the complainant. The complainant added that a seminar was to be held on 8th April, 2017 at Navi Mumbai, where the Respondent has consented to act as speaker and from the brochure that was available on the Institute website also reveals that the Respondent is Managing Director of Bizsol India Pvt. Ltd. Shri Ashok Nawal who is also speaker in these seminars to be held at Vapi dated 13th April, 2017, has again termed himself as Managing Director of Bizsol India Services Pvt. Ltd and the same is also available on the website of the Institute.
9. The Disciplinary Committee, while dealing with the matter also observed as follows:-
(i) In the various documents attached by Shri Nawal, he gives his email ID as nawal@ com. This is a clear indication about using name of another company as a practicing professional.
(ii) Shri Nawal has, in his written statement, failed to appreciate the stand taken by the Director (Discipline) about holding of substantial powers of However, Shri Nawal focused on proving his monthly retainership which he claims is not his remuneration but income from profession. The complainant stated that he would like to reply upon opinion formed by Director Discipline on Page 9 of the prima facie opinion. He also drew the attention of the learned Committee members between Bizsol India Services Private Limited and Shri Nawal which clearly compels Shri Nawal to devote full time with the company and execute decisions taken by company’s Board of Directors.
(iii) Any turnover statement, copies of TDS deducted, details of bifurcation between earnings from company or from own partnership firm etc., submitted by the Respondent are irrelevant matters in the present case.
(iv) The Respondent has completely disregarded that he was Managing Director for quite a long period of time and deriving benefit from the same. However, Respondent has provided most of the documents after this complaint has been filed and not before the date of complaint. Hence, all such documents, which are filed after the date of complaint till date by the Respondent, are to be set aside and are irrelevant for the case.
(v) The Respondent’s statement of „when advisory services are provided by the senior it is considered as authenticated and responsible‟is completely a vague statement and accepting such position does not help anyone in providing services. Being Managing Director of the company is the only reason for continuing him to render services to the company.
(vi) In case of practicing professional it is very clear that he can become director of the company but in other words he has to be Director Simplicitor and not Managing Director or Whole time Director. By drawing huge sums every month from his company by virtue of his agreement which is in nature of employee and employer relationship clearly shows that Respondent is violating basic principle of law i.e. Director Simplicitor.
10. Before finally deciding the matter, the Disciplinary Committee also took note of the submissions made by the Appellant, which are as hereunder:-
i. That the Respondent is not a salaried employee of Bizsolindia Services Ltd and therefore, not in whole time employment.
ii. That the Respondent is merely providing consultancy services. He is not filing Income Tax Return as a salaried employee.
iii. The annual return of Bizsolindia Services Pvt. Ltd shows that income of the respondent from the said company is 40% while the rest comprising 60% income is from other clients/corporate.
iv. Regarding the expression ‘Director Simplicitor’ used by the complainant in Para (10) of his submissions dated 7th April, 2017, the Respondent stated that the expression ‘Director Simplicitor’ does not appear in the CWA Act/Regulations or Code Ethics and cannot be considered.
v. Regarding Para (11) of the submissions made by the complainant that the Respondent has made a false statement about his relationship with Dr. Dhananjay Joshi, the Respondent stated that the complainant, as on date, is a partner in Joshi Apte & Associates where Ms. Priyamwada D. Joshi, wife of Dr. Dhananjay Joshi is a partner. Hence, the statement of the Respondent was not false.
11. Further, the Disciplinary Committee finally in Para (36 to 37 ) of the Order dated 27thJune, 2017 also observed –
“36. In the case Council of the Institute of Chartered Accountants of India Vs. Subodh Gupta decided by the Hon’ble Delhi High Court, the Hon’ble Court remarked “In the instant case the admitted position is that the respondent is registered with the Council to practice as a Chartered Accountant. He cannot be a director of a company without the permission of the Council. The appellant is the promoter of various companies of which he is a director as per the evidence on record. Being a Chartered Accountant the respondent cannot actively carry on business through companies, trusts and firms. There is evidence that the respondent is doing so. Affirming the verdict of guilt and keeping the gravity of the misconduct we answer the reference by imposing the penalty of removal of respondent’s name from the Register of members of the Institute of Chartered Accountants for a period of two years”.
