The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) has barred Chartered Accountant Vishnu Bhagat from practice for three years and imposed a fine of ₹2 lakh for professional and other misconduct under the Chartered Accountants Act, 1949. The complaint was filed by the Serious Fraud Investigation Office (SFIO) in connection with alleged falsification of accounts at a company where Bhagat was serving as Chief Financial Officer and Chief Operating Officer.
The Committee found Bhagat guilty of manipulating financial statements through practices such as booking fictitious sales, maintaining secret warehouses to hide unaccounted sales returns, and engaging in “Billed but Not Dispatched” (BBND) transactions to inflate sales figures. It observed that these actions led to significant misrepresentation in the company’s financial statements and caused loss to stakeholders. Despite being granted an opportunity to present his case during the hearing held on 19 March 2024, Bhagat failed to participate effectively and did not submit any written representation.
The Committee noted that as a senior officer and signatory to the company’s financial statements for 2009-10 and 2010-11, Bhagat had a responsibility to ensure accuracy and integrity in financial reporting. His failure to do so brought disrepute to the profession. The order, dated 16 May 2024, requires Bhagat to pay the fine within 60 days and removes his name from ICAI’s register of members for three years.
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
[DISCIPLINARY COMMITTEE [BENCH-IV (2024-2025)] [Constituted under Section 218 of the Chartered Accountants Act, 1949]
ORDER UNDER SECTION 2113(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.
[PPR/10/N/12/DD/9/N/INF/12/DC/385/2014]
In the matter of:
The Joint Director (CL)
Versus
CA.Vishnu Bhagat..Respondent
MEMBERS PRESENT:
1. Ranjeet Kumar Agarwal, Presiding Officer (In person)
2. Shri Jiwesh Nandan, I.A.S (Retd.), Government Nominee (In person)
3. Dakshita Das, I.R.A.S. (Retd.), Government Nominee (Through VC)
4. Abhay Chhajed, Member (In person)
DATE OF HEARING : 19th MARCH, 2024
DATE OF ORDER : 16th May, 2024
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. Vishnu Bhagat (hereinafter referred to as the Respondent”) is GUILTY of Professional and Other Misconduct falling within the meaning of Clause (2) of Part-IV of the First Schedule and Clause (4) 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 an opportunity of being heard in person/ through video conferencing and to make representation before the Committee on 19th March 2024.
3. The Committee noted that on the date of hearing on 19th March 2024, the Respondent was seen in the virtual waiting room to attend the hearing through video conferencing, However, when he was admitted to the virtual meeting room at the time of taking up of the matter and was called upon to make his submissions before the Committee, the Respondent remained silent and did not turn on his video/ camera. The Committee then waited for some time to enable the Respondent to join the proceedings and hence passed over the matter for taking up later.
4. The Respondent then sent an email to DC Bench-IV at 05:46 PM stating that “No meeting has started. I have been logged in since 3.30 pm. I am logging off now since there is no response from you till now.” Then again, the Respondent sent another email to DC Bench-IV at 0536 PM stating that “On correction: The log off happened from ICAI side and I tried logging In again but failed.” The Secretariat, during the hearing, replied to the above-mentioned details of the Respondent at 06.15 PM while intimating/ informing him that “Your matter will be taken up shortly. Kindly connect as soon as possible.” Besides this, the Respondent was also called by the Secretariat over telephone to request him to attend the proceedings, however, the Respondent did not answer the telephonic call. Resultantly, when the subject matter came up again for hearing before the Committee, it was noted that the Respondent still remained absent, and accordingly, the matter was proceeded with by the Committee. Further, it was noted that the Respondent did not file any written representation on the Findings of the Committee.
5. The Committee considered the reasoning as contained in Findings holding the Respondent ‘Guilty’ of Professional and Other Misconduct.
6. Thus, keeping in view the facts and circumstances of the case and material on record, the Committee was of the view that the Respondent being CFO/C00 of the Company in connivance with Mr. Subhinder Singh Prem, the then MD of the Company, hired the secret warehouses to secretly keep the goods of the Company in the form of unaccounted sales return and goods tinder the category ‘Billed but not dispatched’ and thereby made the loss to the Company. The Committee held that the Respondent being the then CFO/C00 of the Company approved the rent of such warehouses in a clandestine manner by booking fictitious expenses in Company’s account and thereby made loss to the Company. The Committee held that the practice of BBND (Billed but not dispatched) prevailing in the Company was formulated by him only to recognize the sales in such a manner where the goods were being invoiced without the consent of the customers and he hid such BBND goods and the unaccounted sales return in secret warehouses. The Committee held that the intent of invoicing to ‘K.K. Enterprises’ without any intent of transferring the title of goods to it, was to inflate the sales; and the Respondent misused his position and resorted to falsification of accounts by booking fictitious sales in the financial year 2010, in the month of December,2011 and thereafter, the reversal of such sales in the next financial year i.e. in the month of February, 2012.
7. The Committee was of the view that the Respondent cannot escape from his liability as he was a part of the decision making process and the Franchise Referral Program scheme is evidently formulated for wrongful intention which led to falsification of the books of accounts of the Company and clear window dressing done to cover the violation of Companies Act provisions, because of which the financial statements did not give true and fair view of the state of affairs. The Committee was of the view that practices of ‘In and Out’ transactions was a tactic to falsify the accounts of the Company leading to misrepresentations of facts about ageing of debtors to mislead stakeholders and the Respondent being at the helm of affair of the Company himself foster that malpractice in the Company. The Committee held that the Respondent being the then CFO/C00 of the Company was responsible to maintain true and transparent position of receivables; and omission of such system from ERP system and failure on part of the Respondent to bring in any official document to justify the action of local management to maintain ROR signified that the local management of the Company fraudulently overstated the Accounts Receivables with a malafide intention of managing earnings over the years. Thus, the Committee was of the opinion that the Respondent being one of the top most official/Key managerial personnel of the Company was required to show a true and fair view of its Financials, which however, he knowingly failed to do so.
8. The Committee held that the Respondent being a Key Managerial Personnel (Chief Operating Officer/Chief Financial Officer) of the Company, part of decision making authority in the Company and also signatory to its Financial Statements for the financial years ended 2009-10 and 2010-11, was involved in the manipulations and falsification of accounts of the Company. In the Investigation Report of SFIO too, the name of the Respondent is specifically referred at many places for certain violations and irregularities in the affairs of the Company. Therefore, in the context of the investigation report of SFIO, the Committee held that the role of the Respondent in falsification of accounts of the Company is evident, which caused wrongful loss to the Company and stakeholders.
9. The Committee was of the view that a Chartered Accountant in capacity of employee of Company (that too as Key Managerial Person) Is expected to render his services in utmost professional manner with complete integrity and is supposed to protect the interest of all stakeholders of his employer Company failing which, would lead to bringing disrepute to the profession. Hence, the Professional and Other Misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 05th February 2024, which is to be read in consonance with the instant Order being passed in the case.
10. 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 and Other Misconduct.
11. Thus, the Committee ordered that the name of the Respondent i.e., CA. Vishnu Bhagat be removed from the register of members for a period of 03 (Three) years and also imposed a fine of Rs. 2,00,000/-(Rupees Two Lakhs) 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 NANDAN, I.A.S. {RETD.})
GOVERNMENT NOMINEE
Sd/-
(MS. DAKSHITA DAS, I.R.A.S.{RETD.})
GOVERNMENT NOMINEE
Sd/-
(CA. ABHAY CHHAJED)
MEMBER
