The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) has found CA. Muni Kumar Gubiligari guilty of professional misconduct and ordered his name to be removed from the Register of Members for 90 days, along with a fine of Rs. 20,000. The charges stemmed from his involvement in the incorporation of 15 companies and LLPs where he was found to be grossly negligent. Investigations revealed that fabricated documents were used, including non-existent registered offices and dubious contact numbers provided to circumvent “Prescrutiny” checks. Notably, in one LLP, a Chinese national was falsely represented as an Indian resident, and consent forms (DIR-2) for directors were not attached for several companies. Despite admitting unintentional lapses and requesting leniency, the Committee concluded that Gubiligari made false declarations, especially regarding personal verification of registered offices, and failed to exercise due diligence, thereby establishing professional misconduct under Item (7) of Part I of the Second Schedule of the Chartered Accountants Act, 1949.
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
[DISCIPLINARY COMMITTEE [BENCH-III (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/G/9012022/DD/92/2022 and
PR/G/171/22/DD/108/2022(clubbed)-DC/1671/2022
In the matter of:
Ms. V Annapoorna
Deputy Registrar of Companies,
Ministry of Corporate Affairs,
…..Complainant
Versus
CA. Muni Kumar Gubiligari
…..Respondent
MEMBERS PRESENT:
CA. Charanjot Singh Nanda, Presiding Officer (Present in Person)
Smt. Anita Kapur, Government Nominee (Present in Person)
Dr. K. Rajeswara Rao, Government Nominee (Present through Video Conferencing Mode)
CA. Piyush S. Chhajed, Member (Present in person)
Date of Hearing: 2nd May 2024
Date of Order: 31st July, 2024
1. That vide findings under Rule 18(17) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 dated 22ndDecember 2023, the Disciplinary Committee was, inter-alia, of the opinion that Muni Kumar Gubiligari . (hereinafter referred to as the “Respondent”). was GUILTY of Professional Misconduct falling within the meaning of Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.
2. That charge against the Respondent was that he was grossly negligent in the conduct of his professional duties as he was involved in incorporation of 15 Companies and
3. LLPs despite knowing the fact that the documents used for incorporation were fake/fabricated as there was no registered office, and that the said Companies/ LLPs were not doing any business. It is also alleged that DIR-2 (consent of directors to act as director in the Company) were not attached with these e-forms and dubious contact numbers were used in such e-forms. It is further alleged that the registered offices were the same in most of the Companies. Further in one of the LLP incorporated by the Respondent, one of the designated partners i.e. Mr. Libin Zuo who was a Chinese national was shown as Indian Resident to fulfill the statutory requirement of at-least one designated partner to be resident Indian. It is further alleged that the rent agreement was signed for the lessee without the name of signatories and the witness’ name was not given in the agreement enclosed with the e-forms. Further, the registered office LLPs were having the same address and it was not clear that as to on what basis these premises were being shared.
3. That pursuant to the said findings, an action under Section 21B(3) of the Chartered Accountants Act, 1949 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 2ndMay 2024.
4. The Committee noted that on the date of hearing held on 2nd May 2024, the Respondent was present through Video Conferencing Mode and made his verbal submissions on the findings of the Disciplinary Committee. The Committee noted that the Respondent in his submissions stated that the lapses were unintentional. He while accepting the negligence had requested for lenient view as the assignment was undertaken in initial years of his practice.
5. The Committee considered the reasoning as contained in the findings holding the Respondent Guilty of professional misconduct vis-à-vis representation of the Respondent made before it.
6. Keeping in view the facts and circumstances of the case, along with the material on record including representations on the findings, the Committee viewed that the Respondent while certifying e-form SPICE+ of Companies had specifically declared that he had personally verified the registered office of all the Companies whereas the Respondent in his submissions had admitted that in respect of eight companies he had not physically verified the registered offices. It was viewed that the Respondent had given a false declaration while certifying the incorporation documents of the subject companies which reflected casual approach on his part.
7. The Committee further noted that although the Respondent had certified details of directors stated in SPICe Form, however DIR-2 (consent to act as director) was not attached in the case of the eight companies. The Committee viewed that certifying the details of the directorwithout ensuring that DIR-2 had been filed by them indicated that the Respondent was grossly negligent while verifying the relevant documents which were essential for incorporation of the company.
8. With respect to dubious contact numbers in e-forms, the Respondent admitted that he filled fake/ wrong contact numbers in order to circumvent the “Prescrutiny” checks inculcated in the e-form. It was viewed that the said checks were incorporated in the e-form to draw attention of the professional to fill complete details correctly and that the Respondent, being an independent professional, was responsible to certify the correct details of the Company being incorporated rather than providing random numbers to circumvent the checks incorporated in e-forms.
9. With respect to residential status Mr. Libin Zuo, the Committee noted that the requirement of the said partner to be a resident in India by staying in India for a period of not less than 182 days during the immediately preceding as mandated by Section 7(1) of the Limited Liability Partnership Act 2008 was not met and hence the Respondent failed to exercise requisite diligence in conduct of his professional duties.
10. With respect of lacuna in rental agreements and common address of the LLPs, the Committee noted that professional misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 22nd December 2023 which is to be read in conjunction with the instant Order being passed in the case.
11. The Committee, hence, viewed that the ends of justice will be met if appropriate punishment commensurate with his professional misconduct is given to him.
12. Accordingly, the Committee, upon considering the nature of charge and the gravity of the matter ordered that the name of Muni Kumar Gubiligari be removed from Register of Members for a period of 90 (ninety) days and a fine of Rs. 20,000/- (Rupees Twenty Thousand only) be imposed upon him, to be paid within 90 days of the receipt of the order and in case of failure in payment of fine as stipulated, the name of the Respondent be removed for a further period of 30 days from the Register of Members. The Committee further directed that punishment of removal of name in this case shall run concurrently with the punishment given is Case no. PR/G/260/2022/DD/159/2022/ DC/1733/2023.
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(CA. CHARANJOT SINGH NANDA)
PRESIDING OFFICER
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(SMT. ANITA KAPUR)
GOVERNMENT NOMINEE
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(DR. K. RAJESWARA RAO)
GOVERNMENT NOMINEE
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(CA. PIYUSH S CHHAJED)
MEMBER
DATE: 31st JULY, 2024
PLACE: NEW DELHI
