The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) has issued an order against CA. Subhash Chandra Sharma in a case brought by the Registrar of Companies (ROC), Guwahati. The committee found Sharma guilty of professional and other misconduct for his audit of a company’s financial statements for the year ended March 31, 2020. During a hearing on January 6, 2025, Sharma acknowledged clerical or human errors in the audited financial statements, citing that the audit was conducted during the COVID-19 pandemic. However, the committee noted that Sharma had issued a clean report despite significant and material discrepancies. These included a trade guarantee (FLDG) that was approximately 76% of the total balance sheet size and a major loan of Rs. 30.88 crore, about 71% of the balance sheet, which was not properly disclosed in the financial statements as required by Schedule III to the Companies Act, 2013. The committee also found that Sharma incorrectly reported that the company had not engaged in non-banking financial activities when it had. Consequently, the committee determined that Sharma’s misconduct was clearly established and ordered the removal of his name from the Register of Members for a period of one month.
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.
IPR/G/147/2022/DD/157/2022-DC/1776/20231
In the matter of:
Shri. Uttam Kumar Sahoo
Versus
CA. Subhash Chandra Sharma
MEMBERS PRESENT:
1. Shri Jiwesh Nandan, I.A.S (Retd), Presiding Officer and Government Nominee (In person)
2. Dakshita Das, I.R.A.S. (Retd.), Government Nominee (Through VC)
3. Mangesh P Kinare, Member (In person)
4. Abhay Chhajed, Member (In person)
DATE OF HEARING : 06th January 2025
DATE OF ORDER :,20th January 2025
1. That vide ‘Findings dated 26/11/2024 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 Subhash Chandra Sharma (hereinafter referred to as the Respondent”) is GUILTY of Professional and Other Misconduct falling within the meaning of Item (7) of Part-I of the 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 06th January 2025.
3. The Committee noted that on the date of the hearing on 06th January 2025, the Respondent was present in person and appeared before it. During the hearing, the Respondent stated that he had already submitted his written representation dated 06th December 2024 on the Findings of the ‘Committee. He submitted that audit of the Company was conducted during COVID period and mistakes/discrepancies pointed out in audited Financial Statements of the Company were due to clerical/human errors and he accepted these mistakes and sought leniency from the Committee in this matter. The Committee also noted the written representation of the Respondent dated 06th December 2024 on the Findings of the Committee, which, inter alia, are given as under:-
- Draft audit report of the Company was uploaded on RoC website instead of final report.
- No evidence was made available by the Complainant to substantiate the charges.
- Sought leniency on humanitarian grounds and keeping the long outstanding career and old age of the Respondent.
4. The Committee considered the reasoning as contained in the Findings holding the Respondent ‘Guilty’ of Professional and Other Misconduct vis-à-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 trade guarantee (FLDG) is 76 % (approx.) of the total balance sheet size, which clearly indicates that the amount involved was highly material when compared with total balance sheet side of the Company and it is not known as to how the Respondent could issue a clean report for the financial year ended 31st March 2020 without considering the requirements of Schedule III to the Companies Act, 2013 with regard to highly material item in the balance sheet. The Company has not disclosed to whom the major loan of Rs. 30.88 crores (i.e., 71 % approx. of total balance sheet size) has been given, which is not in line with the requirement of Schedule III to the Companies Act, 2013.
6. The Committee further observed that proper disclosure for grant of loans and advances for the amount of Rs. 30.88 crores was not given in the financial statements. Moreover, the Committee was of the view that the Company was carrying on the operations as NBFC, but the Respondent has reported that Company has not conducted any Non-Banking Financial activity during the year. Therefore, it is very clear that the Respondent has prepared the Report without taking into consideration the actual amounts in the Financial Statements. Hence, the Professional and Other Misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 26/11/2024 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 name of the Respondent i.e. CA. Subhash Chandra Sharma be removed from the Register of members for a period of 01 (One) month under Section 21B(3)(a) of the Chartered Accountants Act 1949.
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
Sd/-
(CA. ABHAY CHHAJED)
MEMBER
