The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) has reprimanded and imposed a fine of ₹25,000 on CA. Jai Kumar Mansharamani for professional misconduct. The complaint was filed by the Registrar of Companies, NCT of Delhi & Haryana. The Committee found that the CA provided his office premises to a company, M/s. Meghmausam Cafe Private Limited, to be used as its registered office and concurrently served as its statutory auditor for four years, from FY 2015-16 to FY 2018-19. The Committee determined this created a clear conflict of interest and compromised the auditor’s independence, which is a violation of the Chartered Accountants Act, 1949, and Section 141(3)(e) of the Companies Act, 2013. The CA’s defense—that he did not charge rent, did not manage the company’s affairs, and had mitigated the risks—was rejected by the Committee. The Committee concluded that a professional should not provide their premises to a company and then accept an audit assignment for the same firm. As a result, the CA was found guilty and penalized.
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.
File No: [PR/G/290/2022/DD/202/2022/DC/1710/2023]
In the matter of:
Shri. Mangal Ram Meena,
Registrar of Companies;
Versus
CA. Jai Kumar Mansharamani
MEMBERS PRESENT:
1. Shri Jiwesh Nandan, I.A.S (Retd), (Presiding Officer and Government Nominee (In person)
2. Ms. Dakshita Das, I.R.A.S. (Retd.), Government Nominee (Through VC)
3. CA. Mangesh P Kinare, Member (In person)
4. CA. Abhay Chhajed, Member (In person)
DATE OF HEARING : 06th January 2025
DATE OF ORDER : 20th January 2025
1. That vide Findings dated 04/12/2024 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. Jai Kumar Mansharamani (hereinafter referred to as the Respondent”) is GUILTY of Professional and Other Misconduct falling within the meaning of Item (1) of Part II of Second Schedule and Item (2) of Part IV of First 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 06/01/2025.
3. The Committee noted that on the date of the hearing on 06/01/2025, the Respondent was present through video conferencing. During the hearing, the Respondent stated that he had already submitted his written representation dated 06/01/2025 on the Findings of the Committee in the matter. He submitted that although he had provided utility bills and No Objection Certificate to the Company for using a part of his office as registered office by the Company, however, he did not charge any rent for the same. All business operations of the Company were carried out from its office located at Noida and Respondent was not managing the affairs of the Company. He further submitted that independence of the auditor has not been compromised and self-interest threat, if any was duly mitigated. The Respondent further submitted that Conceptual Framework empowers the accounting professional to take decisions in terms of identification, evaluation and responding to threats or to apply safeguard to eliminate or reduce threat; and mitigation of risk is vested with the professional accountant. The Respondent has relied on his judgement to mitigate risks in the instant case and no evidence to the contrary is available. No irregularity or contravention had ever been pointed out by the Complainant in Audit Reports issued by the Respondent.
4. The Committee considered the reasoning as contained in Findings holding the Respondent ‘Guilty’ of Professional and Other 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, material on record including written and verbal representation of the Respondent on the Findings, the Committee noted that the Counsel for the Respondent during the hearing stage had admitted that the Respondent had given part of his premise to the Company (M/s. Meghmausam Cafe Private Limited) for use as registered office and had also accepted the Statutory Audit of same Company concurrently. The Committee was of the view that a professional is not expected to give his premises for use as registered office for registration/ formation of Company and thereafter accept statutory audit assignment of the same Company which creates conflict of interest and directly affects his independence as an auditor of the Company. Further, there was nothing on record to show that the Respondent has taken measures to mitigate risks.
6. The Committee observed that the Respondent is liable for entering into business transaction with the auditee client by providing his premises and the circumstances as existed in the instant case also indicate the fact of infringement of provisions of Section of 141(3)(e) of the Companies Act, 2013. Further, the registered office of the Company from 01.07.2015 to 01.11.2019 was the premises of the Respondent and the act of acceptance of appointment as statutory auditor of the same Company by the Respondent during the same period when the registered office of Company being his premises, created self-interest threat leading to compromising his independence and despite that, the Respondent continued to act as Statutory Auditor of the Company continuously for four years i.e., F.Y. 2015-16 to F.Y. 2018-19. Hence, the Professional and Other Misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 04/12/2024 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 and Other Misconduct.
8. Thus, the Committee ordered that the Respondent i.e. CA. Jai Kumar Mansharamani be REPRIMANDED and also imposed a fine of Rs. 25,000/- (Twenty-Five thousand rupees only) upon him, which shall be paid within a period of 60 (sixty) days from the date of receipt of the Order.
Sd/-
(SHRI JIWESH NANDAN, I.A.S. (RETD.)
(PRESIDING OFFICER AND GOVERNMENT NOMINEE)
Sd/-
(MS. DAKSHITA DAS, I.R.A.S.{RETD.})
GOVERNMENT NOMINEE
Sd/-
(CA. MANGESH P KINARE)
MEMBER
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(CA. ABHAY CHHAJED)
MEMBER
but reg of co is allowed at ca office by co law board. you have to apy rent.