The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) issued an order on January 21, 2025, reprimanding CA. Bhuwan Chand Sharma for professional misconduct. The complaint was filed by the Registrar of Companies, NCT of Delhi & Haryana. The committee found that the CA was “guilty” of professional misconduct under Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949. The misconduct stemmed from certifying Form INC 32(Spice+) for the incorporation of a company, M/s Meraki Products and Services Private Limited, without exercising due diligence regarding the company’s registered office. The committee found that while the CA submitted documents like a No Objection Certificate, the specific terms of the lease agreement prohibited the premises from being used as a primary registered office, defeating the purpose of Section 12 of the Companies Act, 2013. The committee rejected the CA’s defense that the documents were valid and that he was not responsible for subsequent actions of the company’s directors. Consequently, the committee ordered that CA. Bhuwan Chand Sharma be officially reprimanded under Section 21B(3)(a) of the Chartered Accountants Act, 1949.
THE INSUTE OF CHARTERED ACCOUNTANTS OF NDIA
(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/G/298/2022-DD/207/2022-DC/1653/2022]
In the matter of:
The Registrar of Companies,
Versus
CA. Bhuwan Chand Sharma
Members Present (in Person):-
CA. Ranjeet Kumar Agarwal, Presiding Officer
Mrs. Rani S Nair I.R.S. (Retd.), Government Nominee
Shri Arun Kumar, I.A.S. (Retd.), Government Nominee
CA. Sanjay Kumar Agarwal, Member
CA. Cotha S Srinivas, Member
Date of Hearing : 16th December 2024
Date of Order : 21st January 2025
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, the Disciplinary Committee was, inter-alia, of the opinion that CA. Bhuwan Chand Sharma (hereinafter referred to as the ‘Respondent’) is 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 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 opportunity of being heard in person / through video conferencing and to make representation before the Committee on 16th December 2024.
3. Bhuwan Chand Sharma was present before the Committee on 16′ December 2024 through video conferencing and made his verbal representation on the Findings of the Disciplinary Committee, inter-alia, stating that a valid Rent Agreement and Memorandum of Understanding was executed between M/s Meraki Products and Services Private Limited and M/s Fume Infotech Private Limited on 26th February 2021. The Agreement dated 04thFebruary 2022 referred to in the Committee’s Findings states that the office was given for a virtual office purpose, which pertained to a period nearly one year after the company’s incorporation (16th March 2021), during which the Respondent had no professional engagement with the company. He requested the Committee to review the facts and evidence presented in the instant case. The Committee also noted that the Respondent in his written representation dated 20th November 2024 on the Findings of the Committee, inter-alia, stated as under:
a. Valid Rent Agreement and Memorandum of Understanding was executed between both parties on 26th February 2021. Combined reading of all the terms imply that the lessee can use the premises for commercial purposes. It also stipulates that the premises must be vacated and restored to its original condition upon Agreement expiry. Hence, if any place which needs to be vacated must be in the possession of the lessee at the very first place.
b. In the Rent Agreement, no explicit term or any condition was found which stated that the Agreement is made for a virtual office. The Agreement given to him while incorporation of the Company had no such point or term mentioned.
c. If any alteration is made in the Terms and Conditions of the Rent Agreement at the time of renewal i.e. post incorporation of the Company, the same is out of the scope of Incorporation Process/Spice+ e-Form (Part B).
d. Referring to any Agreement or any term of such Agreement which is executed after the incorporation of the Company and raising doubts/question on the validity of the documents executed while incorporation is not tenable.
e. No objection Certificate clearly states that the owner has given his consent to use the premises by other Company, it implies that the other Company i.e. Meraki Products and Services Private Limited has a clear right to the premises to be used as their registered office.
f. When a clear no objection Certificate is issued to use the premises, it is accounted as a valid acceptable proof as per Companies Act and can be used for Company incorporation,
g. In the investigation when the question was raised on the validity of ownership, he had brought on record a copy of a utility bill from Airtel.
h. There is no requirement to upload any proof of physical visit or verification to the incorporation Forms.
i. The Respondent agreed to the result of investigation that the board was not found and as per the Companies Act it should be there. Also, the company should maintain books of accounts at the said premises. However, till the stage of incorporation it is not possible for a company to place a name board or maintain books since the incorporation process was not complete. Also, the same is not a part of his physical verification because the company which is not registered yet cannot have a board and books of accounts.
j. Assurance regarding the fact that the company will remain functional/operational at the said address in future also is not in his personal or professional capacity. There can be any uncertain event which can occur in the near future and any changes can occur in the operation mode of the company.
k. With respect to point 8.9 of the Findings, the Respondent stated that any modifications made were beyond his scope of involvement.
l. Reference to the agreement dated 04-02-2022 in the Committee’s observations (point 8.10 of the Findings) pertains to a period nearly one year after the company’s incorporation (16-03-2021), during which the Respondent had no professional engagement with the company.
m. Apart from the Statement of advocate of “Fume Infotech Private Limited” that his client has given a virtual space, nothing else is contrary to the fact that a valid rent agreement, no objection certificate and board resolution is already issued and signed by both the parties giving every right to use the premises by Meraki Products and Services Pvt Ltd i.e. Company
n. Merely making a statement that in the renewed agreement it is mentioned that the space allocated is virtual office does not make him liable for any wrong submission or invalid documents at the time of incorporation. The documents executed at the incorporation of the company have no point or terms which say that the office given is virtual office.
o. Any subsequent actions or decisions taken by the directors of the Company are neither directly nor indirectly connected to his professional conduct.
p. The Respondent requested the Committee to review the facts and evidence presented.
4. The Committee considered the reasoning as contained in the Findings holding the Respondent Guilty of Professional Misconduct vis-a-vis written and verbal representation of the Respondent. On consideration of the representation of the Respondent, as regard his request to review the facts and evidence presented in the case, the Committee referred to the following observations in Nara 8.8 of its Findings:
“Further, the Respondent in his written submissions stated that the Rent Agreement between the company and M/s Fume Co-work is executed on 26′n February 2021 with one year of validity. Further, point no. 13 in the rent agreement executed clearly mentioned that the Director can use the said property for commercial purpose only. Although in his written submissions, he stated that the copy of the same is part of the response, however, the same was not attached. Intact, the Respondent attached the copy of the leave and license Agreement dated e February 2022 which had been executed between the Company and the lessor M/s Fume lnfotech Pvt. Ltd.”
The Committee thus held that it was incumbent upon the Respondent to provide the alleged Rent Agreement dated 26th February 2021 in his defence during the course of hearing which he failed to do. He brought on record the same after the receipt of the Findings of the Committee which cannot be considered at this stage as the guilt of the
Respondent has already been established on the basis of the documents and submissions on record. Further, apart from the rent Agreement there are other evidence which have been taken into view by the Committee to arrive at its Findings. The Committee also held that there is no provision under the Chartered Accountants Act 1949 and/or the Rules framed thereunder to review or reconsider the Findings arrived at by the Committee.
5. Thus, keeping in view the facts and circumstances of the case, material on record including verbal and written representation on the Findings, the Committee on a combined reading of the Inquiry report together with the leave and license Agreement dated 04th February 2022 brought on record by the Respondent as a proof of registered office of the Company, noted that the terms of the usage mentioned in the said agreement prohibit the use of the said premises as primary registered office of the business with ROC or Local Government bodies. However, in the extant case, the same has been used for that purpose.
5.1 The Committee also noted that although the Company had obtained No Objection Certificate from the lessor dated 24th February 2021 to use the said premises for getting Company and GST registration, the specific terms of lease and license agreement did not allow Company to use the said premises as their primary registered office with ROC or local Government bodies. Section 12 of the Companies Act 2013 read with Rule 25 of Companies (Incorporation) Rules, 2014 provides that a company needs to have physical registered office.
5.2 The Committee was of the view that the very purpose of having a registered office as contemplated in Section 12 of the Companies Act 2013 read with Rule 25 of Companies (Incorporation) Rules, 2014 was defeated. Thus, the Committee held that the Respondent being the certifying professional of Form INC 32(Spice+) with respect to incorporation of the Company was casual in his approach and merely relied upon the documents presented before hire by the Company in respect of the said certification without any corroboration. The required diligence was not exercised by him while certifying Form INC 32(Spice+).
5.3 Hence, professional misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 12th November 2024 which is to be read in consonance with the instant Order being passed in the case.
6. Accordingly, the Committee was of the view that ends of justice will be met if punishment is given to him in commensurate with his professional misconduct.
7. Thus, the Committee ordered that CA. Bhuwan Chand Sharma be Reprimanded under Section 21B(3)(a) of the Chartered Accountants Act 1949,
Sd/-
(CA. RANJEET KUMAR AGARWAL)
PRESIDING OFFICER
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(MRS. RANI S NAIR, I.R.S. (RETD.)
GOVERNMENT NOMINEE
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(SHRI ARUN KUMAR, IAS RETD.)
GOVERNMENT NOMINEE
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(CA. SANJAY KUMAR AGARWAL)
MEMBER
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(CA. COTHA S SRINIVAS)
MEMBER
