ICAI clears CA of Misconduct Charges – Unauthorized legal services & demand of commission

The case involving CA Jayant Kumar Harlalka, accused of professional misconduct, reached its conclusion with the Board of Discipline under the Chartered Accountants Act, 1949, clearing him of all charges. The allegations stemmed from his involvement with M/s Sankhu Management Consultant Pvt. Ltd. and its dealings with M/s Vision India Services Private Limited.

The complainant, Mr. Balwant Prasad Singh, alleged that Harlalka, along with his wife, misrepresented their qualifications and services, claiming they could provide legal and consultancy services beyond their authorization. It was further alleged that Harlalka demanded a commission from NSDC funds disbursed to Vision India Services, which was for skill development projects.

During the hearings, the Board considered evidence and arguments from both parties. The complainant asserted that Harlalka, despite resigning as a director of Sankhu Management Consultant Pvt. Ltd., continued to influence its affairs improperly. Conversely, Harlalka contended that any involvement post-resignation was minimal and incidental, primarily due to familial obligations and not professional capacity.

The Board’s findings dismissed the charges related to unauthorized legal practice and improper commission demands, noting that Harlalka’s actions did not constitute professional misconduct under the Chartered Accountants Act. They found no evidence supporting the allegations of deceptive practices or unauthorized representation.

The Board’s decision emphasized that while Harlalka was acquitted of misconduct, he was advised to exercise caution in future dealings to avoid any perception of impropriety. The case concluded with the closure of the proceedings under Rule 15(2) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007.

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[PR/360/2018/DD/337/2018/BOD/614/2022]
CONFIDENTIAL

BOARD OF DISCIPLINE

(Constituted Under Section 21A of the Chartered Accountants Act 1949)

Findings under Rule 14 (9) read with Rule 15 (2) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007

CORAM:

CA. Rajendra Kumar P, Presiding Officer (In Person)
Ms. Dolly Chakrabarty, Government Nominee (In Person)
CA. Priti Savla, Member (Thru V.C.)

IN THE MATTER OF:

Shri Balwant Prasad Singh
Director, M/s Vision India Services Private Limited
All, Sector 67, Noida, Uttar Pradesh 201301

Complainant

Versus

CA Jayant Kumar Harlalka (M. No.0511645)
Jayant Harlalka & Associates (FRN022335N)

Respondent

Date of Final Hearing : 10th April 2024
Place of Final Hearing : New Delhi

PARTIES PRESENT (IN PERSON):

Counsel for Complainant :  Adv Ronit Ranjan
Respondent :  CA. Jayant Kumar Harlaka
Counsel for Respondent :  Adv. Peeyush Jain

FINDINGS:

CHARGES ALLEGED:

1.1 That Complainant Company was primarily engaged in skill development customized for specific industries. The Complainant came in contact with the Respondent and his wife, who claimed to be partners in M/s Sankhu Management Consultant Pvt. Ltd. (hereinafter referred to as the “Consultant Company”). It is stated that the Respondent and his wife had, with willful intention to deceive, misrepresented before the Complainant that they were qualified to render legal services and that the Respondent was also competent to provide liaison services with respect to Government officials and possessed necessary expertise to provide consultancy services and legal services. It was informed that in lieu of such services they sought commission at 4 percent of the total amount disbursed by National Skill Development Corporation (hereinafter referred to as ‘NSDC’) for project Udaan (a training program by Central Government for skill Development for Youth). The Complainant further alleged that upon signing the draft agreement the Respondent insisted the Complainant for payment of his fees. Accordingly, the Respondent took cheques amounting to Rs.80 Lakhs from the Complainant Company of which he had already encashed cheques worth Rs.5 Lakhs.

1.2 The Complainant alleged that Respondent falsely represented to him that the Respondent was competent to provide legal services despite not being authorized to practice law as per Advocates Act 1961.

1.3 The Complainant also alleged that the Respondent was charging placement fee of Rs.50,000/- per candidate for the placement of candidates. The fee for placement of the candidate was from the revenue generated by Vision India in terms of placement fee disbursed by NSDC for project Udaan.

The Board on consideration of the Prima Facie Opinion formed by the Director (Discipline), concurred with the reasons given against the charge(s) falling within the meaning of Item (11) of Part I of the First Schedule and thus, held the Respondent Prima Facie Guilty of Professional Misconduct only with respect to Item (11) of Part I of the First Schedule to the Chartered Accountants Act 1949 and decided to proceed further under Chapter IV of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007. The Board was of the view that since the agreement dated 23^rd February 2018 had been signed by the Respondent as an authorized representative of the Sankhu Management Consultancy Pvt. Ltd. Company and not in his professional capacity as a practicing Chartered Accountant, the provisions of Item (10) of Part I of the First Schedule were not applicable to him. Accordingly, the Board did not agree with the opinion of the Director (Discipline) with respect to this charge and held the Respondent Not Guilty of Professional Misconduct falling within the meaning of Item (10) of Part I of the First Schedule to the Chartered Accountants Act 1949.

BRIEF OF PROCEEDINGS HELD:

2. The details of the hearings fixed and held in the said matter, are given as under:

SUBMISSIONS OF THE RESPSONDENT:

3. The Respondent submits that the sole reliance on Respondent’s role in M/S Sankhu Management Consultancy Pvt Ltd, the Board has drawn basis the agreement executed between M/S Vision India Services Private Limited and M/S Sankhu Management Consultancy Pvt. Limited, on the following misinterpretations:

3.1 That the communication clause in the draft agreement stipulates that all communication including that of approval, consent, demand query or request in respect of Consultant Company was required to be addressed to Respondent only. Respondent States that a plain reading of the original clause would make it clear that the address for communication between the two companies was the same as mentioned in the recitals of said agreement i.e., the Registered Office Addresses of both the companies. However, Respondent email id is given as an additional destination for the purpose and not as a ‘Sole Window’ to communicate with the said Company.

3.2 That the draft agreement was signed by the Respondent and meant to include administrator as well as legal representative of the Consultant Company. Respondent states that this interpretation suffers an error of misinterpretation as a plain reading of the original recital would make it clear that the term “which expression shall unless it be repugnant to the context or meaning thereof mean and include its administrators and legal representatives” mentioned in any recital of the agreement is meant to include the “administrators and legal representatives of such Company” to enable such Company in raising it claims through the person authorized by such Company and does not makes the signatory of that agreement as “administrators and legal representatives of such Company”. Hence it is an over interpretation of the conventional legal form of agreement’s recital that the Respondent was the beneficiary of such agreement or was the Administrator of the Company.

3.3 The Respondent was subscriber to the Articles of Association (AOA) of Consultant Company along with his wife and his occupation was stated to be ‘business’ in AOA. Respondent submits that it is an inadvertent error at the end of the Respondent and for which the Respondent seeks pardon from this Hon’ble Board. This is a mistake in filling the information made by the Respondent and since Respondent was having limited capacity as Director Simplicitor. Respondent seeks pardon for this mistake.

3.4 That it appears that he was controlling the affairs of the Consultant company. Respondent submits that to conclude the role of the Respondent in the affairs of the Company, the Board has relied only on a single aspect that the Respondent has signed one agreement on behalf of the Company wherein his wife is a director. Except this, there is not a single averment anywhere which could lead to the Ld. Director (Discipline) to conclude that the Respondent had any key role in the affairs of the Company. The concern that the agreement was signed a few months after my resignation as Director of the Company also doesn’t make any contribution to my role with the Company. The transaction in agreement is dealt by the Company only and not by the Respondent. Even if a member had signed it during his Directorship, it would have the same effect.

3.5 Respondent submits that Respondent’s wife, Ms. Prity Harlalka who undertakes her Consultancy Business activities in her individual capacity from a long time even before she got into wedlock with me, had required a support from Respondent during the times when she was suffering from a few medical issues after her second pregnancy, and required Respondent to accompany her in some of her external works only in Respondent’s capacity as her husband and to ensure the care of her. Respondent was assigned a power to sign the documents on behalf of the Company only because Respondent was the person who could be relied upon for signing those documents outside home which unfortunately my wife was unable to sign for a limited period. It is pertinent to mention that Respondent was not playing any key role in the affairs of the Company nor was playing any role as Managing Director or Whole Time Director for the Company.

3.6 The several complaints by Mr. Balwant Prasad Singh, Director, M/s Vision India Services Pvt. Ltd., Noida are patently false, frivolous, and concocted as have been drawn up solely on baseless allegations and states the manipulated and misrepresented facts. The complaint which consists of various false statements is a desperate attempt to abuse the functioning of Chartered Accountants Act, 1949, and using the law in malicious ways by creating a false misconduct case for the sole purpose of malevolence, deviate Members’ attention, and actions against the fraudulent activities of the Complainant.

3.7 Respondent request to the Hon’ble Board that such misuse and abuse of Institute’s policies ought to be deprecated and discouraged. Also, Respondent requests a stringent action to be taken against Complainant for this mischievous complaint.

OBSERVATIONS OF THE BOARD:

4. The Board noted that as regards charge No 1.2 and charge No 1.3, the Director (Discipline)held Respondent ‘Not Guilty’ in the Prima Facie Opinion and the Board concur with the reasoning and the views of the Director (Discipline). The Board as discussed above, as regards 2 counts of charge, dropped the one count of charge i.e., Item (10) of Part I of the First Schedule to the Chartered Accountants Act, 1949 and thereby the Board appraised the other charge i.e., Item (11) of Part I of First Schedule to the Chartered Accountants Act, 1949.

5. The Board gave ear to the facts in question wherein complainant company (Vision India Services Pvt. Ltd.,) engages a management consultancy company namely, M/s Sankhu Management Consultant Pvt. Ltd. (hereinafter ‘Consultant Company’) for rendering certain services. Therefore, Complainant company and Consultant Company entered into an agreement dated 23^rd February 2018. Complainant alleged that Respondent along with his wife are the Directors of the Consultant Company and, with wilful intention to deceive, misrepresented before the Complainant that they were qualified to render legal services and that the Respondent was also competent to provide liaison services with respect to Government officials and possessed necessary expertise to provide consultancy services and legal services.

6. The Board observed that in the same allegation, Complainant alleged that Consultant Company sought commission from Complainant company at 4% of the total disbursed amount. Respondent raised invoices/bills through his CA firm under the head consultancy, which is legal in every aspect. The very act of alleging a professional seeking commission from his clients in respect of rendering his services is unjustified and groundless. Moreover, the cheques which were given by the Complainant company to the Consultant Company bounced off, here the Board observes that the complainant has not come with clean hands.

7. As regards the charge of Item (11) of Part I of First Schedule to the Chartered Accountants Act, 1949, whereby complainant alleged that Respondent was the Director in private limited company while holding Certificate of Practice (COP). Respondent and his wife were the only Directors of the Consultant company. The Board further noted that Complainant company and consultant company came into contractual agreement on 21st February 2018 and Respondent resigned from his directorship in March 2017 is undisputed fact and as corroborated through MCA site. There is no denying the fact that Respondent was the Director while holding the COP before March 2018 which is gross misconduct from the Respondent side even though he has been Chartered Accountant since 2015. Complainant came into contract with Respondent after the resignation of the Respondent from the directorial position and thus at the time the contract was made the Respondent was not at fault regarding Item (11) of Part I of First Schedule to the Chartered Accountants Act, 1949 and thereby Complainant is not relator to the charge alleged. The Board observed the cause of action arose when the Respondent was not the Director and not at the time when Respondent was the Director. Thereby the reasoning behind the charge alleged is not germane.

8. The Board encapsulate that the Respondent was not the Director of Sanku Management Consultancy Pvt. Ltd. when the said agreement was entered between Sanku Management and the Complainant company. The Respondent has also raised invoices on Sanku Management Consultancy and TDS has been deducted u/s 194 (j) of the Income Tax Act. There is a resolution of the Board of Directors which is authorizing Jayant Kumar Harlalka (Respondent) to sign on behalf of the company. Considering all these matters legally, the Respondent cannot be considered .as a person engaged in any other occupation other than the profession of Chartered Accountancy rendering services related to the profession. Hence, the Respondent is ‘Not Guilty’. However, the Board wish to record that the Respondent shall be careful in future and shall desist from doing acts which raise suspicion in the minds of public or the clients when they deal with him.

CONCLUSION:

9. Thus, in conclusion, in the considered opinion of the Board, the Respondent is ‘NOT GUILTY’ of Professional Misconduct falling within the meaning of Item (11) of Part I of First Schedule to the Chartered Accountants Act, 1949. Accordingly, the Board passed an Order for closure of the case in terms of the provisions of Rule 15 (2) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007.

Date: 30-05-2024