Disciplinary Committee of The Institute of Chartered Accountants of India (ICAI) has ordered the removal of CA. Dhirendra Datta from the Register of Members for a period of one month. The decision, outlined in an order dated May 16, 2024, follows findings of professional misconduct against the chartered accountant in a complaint filed by Shri Muralidhar.
The Committee determined that CA. Dhirendra Datta was guilty of professional misconduct under Clause (6) and (7) Part – I of the Second Schedule to the Chartered Accountants Act, 1949. This stemmed from his role as Statutory Auditor, where he failed to exercise due diligence concerning a Rs 1.54 Crore payment made by the complainant for loan repayment. This amount was subsequently used by the company to allot equity shares to the complainant without consent and in non-compliance with the Companies Act, 2013. The Committee noted the auditor’s failure to secure evidence of the complainant’s consent for these shares. Additionally, CA. Datta improperly treated a Rs 55 Lakh payment from a guarantor as a gain, transferring it to the Capital Reserve Account, which effectively absolved the company’s liability and removed the complainant’s rightful claim from the books. The Committee concluded that CA. Datta failed to disclose this material misstatement in the financial statements. Although CA. Datta admitted his mistakes and stated an amicable financial settlement had occurred, the Committee found the professional misconduct clearly established. No judicial precedents were cited in the order.
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-323/16-DD/15/2017-DC/818/20181
In the matter of:
Shri Muralidhar…..Complainant
Versus
CA. Dhirendra Datta
M/s D. Datta & Associates……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. Ms. Dakshita Das, (Retd,), Government Nominee (Through VC)
4. CA. Mangesh P Kinare, Member (In person)
5. CA. Abhay Chhdjed, Member (In person)
DATE OF HEARING : 28th MARCH, 2024
DATE OF ORDER 16th May, 2024
1. That vide Findings dated 05.02.2024 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. Dhirendra Datta (hereinafter referred to as the Respondent”) is GUILTY of Professional Misconduct falling within the meaning of Clause (6) and (7) Part – I of Second Schedule to the Chartered Accountants Act, 1949.
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 28thMarch 2024.
3. The Committee noted that on the date of hearing on 281h March 2024, the Respondent was physically present at ICAI Bhawan, Delhi. During the hearing, the Respondent submitted that he has made written representation dated 11th March 2024 on the. Findings of the Disciplinary Committee. He further admitted that it was a mistake that occurred on his part while performing professional duties and the Complainant has amicably settled all financial matters, and further the Complainant has not suffered any financial loss on account of the mistake. The Committee also noted the written representation of the Respondent, which, inter-aka, are given as under:-
(a) The Company was in debt with SBI, which was being settled by depositing net amount of loan. All shareholders including the Complainant had contributed in the repayment of SBI loan. The Respondent was not aware that the Complainant is giving funds as loan and not as share application money. He came to know about the same through the present Complaint. It inadvertently became a mistake on his part.
(b) The matter was briefly discussed with the management of the Company and it was told to the Respondent that a large amount of money was due from the Complainant, which would be squared off on settlement of the case filed by Complainant against the Company with NCLT. Till then, the amount was being shown as a contingent liability. He accepted this mistake that the amount should not have been transferred to Capital Reserve Account and it should have been highlighted in his audit report.
(c) The Complainant has amicably settled all his financial matters with other major shareholders/ management to the best of his interest and has not suffered any financial loss on account of mistakes committed by the Respondent.
(d) The Respondent agreed with the Findings of the Disciplinary Committee and regretted the mistakes committed by him.
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 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 written and verbal representation of the Respondent on the Findings, the Committee noted that the Complainant, in capacity of one of the guarantors of the loan, had paid the amount of Rs 1.54 Crores to the Company to enable it to repay its loan taken from the Bank and the Company had utilised the same in allotment of equity shares to him without his consent and without complying with the relevant provisions of the Companies Act, 2013. The Committee held that the Respondent being the Statutory Auditor of the Company failed to exercise due diligence in respect of share capital issued by the Company during the year and failed to bring on record any evidence to show that the allotment of shares to the Complainant was made with Complainant’s consent i.e., request letter and acceptance letter by the Complainant. Hence, it is viewed that the Respondent has failed to exercise due diligence and adopted casual approach while performing his duties, as statutory auditor.
6. The Committee noted that the Respondent has failed to give any justifiable answer as to how the payment of Rs. 55 Lakhs made by the guarantor has been treated as gain and transferred to Capital Reserve Account. The Committee was of the view that the Respondent has failed to point out specified inappropriate treatment which has the effect of absolving the Company of its liability to pay to the Complainant-and In turn dissolving the rightful claim of the Complainant from the book of accounts of the company. Thus, the Committee held that the Respondent has not only failed to act diligently but has also failed to disclose a material misstatement known to him to appear in the Financial Statements of the Company with which he was concerned in the professional Capacity. Hence, the Professional Misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 05thFebruary 2024, which is to be read in consonance with the instant Order being passed in the case.
7. 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.
8. Thus, the Committee ordered that the name of the Respondent i.e. CA. Dhirendra Datta be removed from the Register of Members for a period of 01 (One) month.
Sd/-
(CA. RANJEET KUMAR AGARWAL)
PRESIDING OFFICER
Sd/-
(SHRI MESH 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
