In a significant ruling, the Calcutta High Court held that the fact that the Chartered Accountant was exonerated from the offence of professional misconduct by the disciplinary committee of the Institute Chartered Accountant of India (ICAI) cannot be a reason to acquit him from the charges under the Prevention of Money Laundering Act (PMLA).
While dismissing a petition filed by a Chartered Accountant, Justice Joymalya Bagchi clarified that the ICAI Disciplinary Committees’ findings are not binding on criminal courts while prosecuting offences under PMLA.
In the instant case, the accused, a Chartered Accountant was charged with the offences under the Prevention of Money laundering Act. The allegation raised against the petitioner (accused) was that he, with other accused persons, had extended undue financial accommodation to them by sanctioning and disbursing cash credit limit and term loan facilities much above his permissible capacity and permitted the diversion of the cash credit limits for various other purposes without ensuring requisite guarantee margin of 25% and thereby caused wrongful loss to the bank. For this purpose, it was alleged that the accused had prepared false and bogus projected financial statements and other documents to give an impression of credibility to the grant of cash credit and other facilities to the firms of the accused persons.
Before the High Court, the petitioner took a defense that the Disciplinary Committee of the ICAI had exonerated him from the allegation of professional misconduct by finding that he had not been appointed as a professional tax auditor and, therefore, his failure to report the enhanced volume of business or furnishing of requisite forms under the law could not be treated as breach of professional responsibilities.
Overruling the contentions of the petitioner, the bench opined that it is apparent from the order of the disciplinary Committee that the petitioner was specifically employed for preparation of projected financial reports for enhancement of the loan facilities to the accused borrowers and had even written the loan applications for the accused borrowers to avail of the illegitimate financial benefits in this case.
While dismissing the petition, the single Judge, noted that the instant prosecution was not initiated on the basis of the findings of the disciplinary authority which has been set aside by a superior authority.
“On the other hand, the instant prosecution and the proceeding under the Chartered Accountants Act have completely different scope and arena of enquiry and adjudication. While the former involves a prosecution into allegations of conspiracy with a public servant to misappropriate public funds of a bank, the latter is restricted to professional misconduct alone. The findings of the Disciplinary Committee by no stretch of imagination can be said to be binding on the criminal court where the accusation is to be proved on the basis of evidence adduced before it in accordance with law. Moreover, the findings do not render the substratum of accusation of conspiracy between the petitioner and the other accused persons in extending unjustified financial assistance to the borrowers in the instant case patently absurd or inherently improbable. The Committee was not at all concerned with the allegations of criminal conspiracy and/or criminal misconduct which are the material issues in the impugned prosecution.”
Read the full text of the Judgment below.
