While confirming the recommendation of the ICAI Disciplinary Committee to suspend a Chartered Accountant for three months, a division bench of the Allahabad High Court held that using the name of a Chartered Accountant in the prospectus for Public issue, even after his resignation from the Company amount to “Other Misconduct” since it may mislead the investors.
In the instant case, the disciplinary committee of the ICAI initiated enquiry against the opposite party, a Chartered Accountant on the basis of information received from the Securities Exchange Board of India (SEBI). The information contained the following allegations;
i) The Chartered Accountant described himself as having over all control of the management of Brahaspati Finance Limited in its prospectus even though he had resigned as its Director prior to opening of the public issue;
ii) He has lent his name to the prospectus issued in connection with public issue of BFL thereby misleading investors and inducing them to subscribe to its shares;
iii) He had made a mis-statement in prospectus and had mislead SEBI by providing a forged Chartered Accountant Certificate; and
iv) If any of the aforesaid charges is proved, he would be guilty of other misconduct under Section 22 read with Section 21 of the Act.
Defending himself, the opposite party contended that he had entrusted the management and control of the BFL to other persons before opening of the issue. Further, no public money was received and as such no investor was induced and deceived. He also contended that he had not supplied any forged certificate to the SEBI.
Since there were no evidence to prove the allegation on forged certificate, the disciplinary committee came to a conclusion that the opposite party is guilty for committing ‘other misconduct’ under Sections 21 read with 22 of the Chartered Accountants Act, 1949.
The bench noted that the statement of the Chartered Accountant admits that he had tendered his resignation as Director of BFL prior to opening of the aforesaid public issue though the exact date has not come on record. His resignation is alleged to have been accepted on 9.9.1997.
After analyzing all the necessary evidences, the bench came to a conclusion that the resignation of a Director would be effective from the date it was submitted. The opposite party failed to submit any evidence disproving the same.
“In view of the aforesaid facts and circumstances, we are of the opinion that the Chartered Accountant Satish Kumar Gupta had resigned as Director of BLF before opening of the public issue of BLF irrespective of the fact that his resignation was allegedly accepted on 9.9.1997, in respect whereof no material was brought on record. Having resigned before the commencement of the public issue, his name could not have appeared in the prospectus which in fact was there.”
“This was nothing but lenting his name to the prospectus to the aforesaid public issue and misleading the investors. It is immaterial whether any investor was actually mislead. However, the Act of mis-conduct gets completed. In view of the above, we find that the disciplinary Committee has rightly held him guilty for “other mis-conduct” under Section 22 read with 21 of the Act.”
Read the full text of the Order below.
