Incorporation of 20 Companies in 18 Days with Same Address and Set of Directors: ICAI Disciplinary Committee holds CA Guilty of Professional Misconduct

The Disciplinary Committee of the Institute of Chartered Accountants of India ( ICAI ) has recently held a Chartered Accountant ( CA ) guilty of professional misconduct, owing to incorporation of 20 companies with the same address and same set of directors within a span of 18 days, removing the CA for 3 Years from the roll of CAs and imposing a fine of Rs. 20,000/-. 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 22nd December 2023, the Disciplinary Committee was, inter-alia, of the opinion that CA. Santhosh D N (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 and Item (2) of Part IV of First Schedule to the Chartered Accountants Act, 1949. That charge against the Respondent was that he had failed to exercise due diligence at the time of certifying incorporation documents of 20 Companies as the Respondent incorporated these 20 Companies within the span of 18 days with the same address and same set of directors. Further, the Respondent had declared that subscribers/ directors signed the incorporation documents before him whereas the said subscribers/ directors never met him and being involved in such an act, brings disrepute to the profession. 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 19th March 2024. The Committee noted that on the date of hearing held on 19th March 2024, the Respondent was present through Video Conferencing Mode and made his verbal submissions on the findings of the Disciplinary Committee. The Committee noted his submissions, stated as under: a. That he was professionally associated with CA. Shashi Kumar RS and during such period his Digital Signatures Certificate (DSC) were used by CA. Shashi Kumar RS for the incorporation of alleged companies. b. However, he claimed not to have received any additional amount over and above his fixed salary of Rs.30,000/- per month from CA. Shashi Kumar RS. c. Although CA. Shashi Kumar denied providing the affidavit required by the Committee, but he expressed his willingness to provide clarification before the Committee regarding the usage of DSC, but the Committee concluded the decision before taking any clarification from him. d. He admitted that as a professional, he should not have shared his DSC credentials with any other person, but he relied upon another professional, CA. Shashi Kumar RS in the due course of his engagement. e. That he had not intentionally taken any actions to do any fraudulent activities, and all his professional endeavors were carried out with utmost care and diligence. f. That he is not a Statutory auditor or Tax auditor of the alleged companies to know whether the companies were carrying out the activities which are mentioned in MOA or any other activities similar to shell companies. g. With respect to incorporation of companies, he certified only to the extent of correctness of data provided to him, and ultimately, MCA is the final approving authority. The Committee considered the reasoning as contained in the findings holding the Respondent Guilty of professional misconduct vis-à-vis written and verbal representation of the Respondent made before it. Keeping in view the facts and circumstances of the case, material on record including verbal and written representations on the findings, the Disciplinary Committee held the view that the Respondent was not able to prove that his signatures were used by another professional. “He took inconsistent positions during the course of the proceedings: initially he claimed that his DSC was used fraudulently, while at another stage, he asserted that his DSC was used by CA. Shashi Kumar RS. Even if for the sake of argument it is considered that his signatures were used by CA. Shashi Kumar RS, he was wholly responsible in terms of Information Technology Act, 2000 as brought out in findings report and is accountable for certification of documents relating to certification of twenty Companies. Further, despite being aware of the alleged conduct of CA. Shashi Kumar R S, he has not filed any complaint against him before any forum, which raises questions regarding the validity of his claims”, the committee observed. Hence, the Committee did not find any merits or consistency in defense of the Respondent. Accordingly, the Committee held the Respondent Guilty for Professional and Other Misconduct falling within the meaning of Item (7) of Part I of Second Schedule and Item (2) of Part IV of First Schedule to the Chartered Accountants Act, 1949. Hence the professional misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings, it noted. The Committee, hence, viewed that the ends of justice will be met if appropriate punishment commensurate with his professional misconduct is given to him. Accordingly, the Committee upon considering the nature of charges and the gravity of the matter ordered that the name of CA. Santhosh D N (M.No. 252502) be removed from Register of Members for a period of 3 (Three) years and a fine of Rs. 2,00,000/- (Rupees Two Lakhs 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. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Incorporation of 20 Companies in 18 Days with Same Address and Set of Directors: ICAI Disciplinary Committee holds CA Guilty of Professional Misconduct

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Incorporation of 20 Companies in 18 Days with Same Address and Set of Directors: ICAI Disciplinary Committee holds CA Guilty of Professional Misconduct

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