The Institute of Chartered Accountants of India (ICAI) imposed a fine on Chartered Accountants (CA) on the act of Certification of Net Worth without Corroborative Evidence.
The Disciplinary Committee thought that CA. Prakash Pesala was guilty of Professional Misconduct falling within the meaning of Items (7) & (8) of Part I of Second Schedule to the Chartered Accountants Act, 1949 concerning the allegation that the Respondent had issued a Net-worth certificate to Shri K Srinivas Kalyan Rao certifying his net worth as on 31.03.2012 at Rs. 2,60,21,62,333/- (Rs.260.21Crore) which was incorrect.
It was found that it contained inflated figures as the said Net-worth was certified based on the huge investment in shares of the Company but subject shares were not transferred in the name of Shri K. Kalyan Srinivas Rao on the date of the said certificate.
A case was registered with CBI against Sh. Kalyan Rao, the Managing Director of M/s Best Crompton Engineering Projects Ltd based on a complaint made by the Assistant General Manager of Central Bank of India, Corporate Finance Branch, Chennai regarding fraud committed to the tune of Rs. 133.31 Crores.
It was stated that in pursuance of the said criminal conspiracy, the Managing Director induced and cheated the bank to sanction them various credit limits such as Cash Credit, Bank Guarantee and letters of credit along with ad-hoc/enhanced limits from 2010 to 2013 and due to non-repayment, the loan account became NPA on 28.05.2013 which caused wrongful loss of Rs. 133.31 crore to the Bank.
The respondent stated that the “Net worth Certificate” was issued for obtaining multiple VISA for foreign travel purposes therefore, a generalized certificate to the client with the caption “To Whom So Ever it May Concern” was issued as per the ICAI Guidance Note on Audit Reports and Certificates for Special Purpose issued in the year 1984 by ICAI.
The Coram comprises CA. Ranjeet Kumar Agarwal, Presiding Officer, Mrs Rani Nair, Shri Arun Kumar, CA. Rajendra Kumar P, CA. Cotha S Srinivas has held that “the Respondent CA. Prakash Pesala (M. No. 200805) be removed for a period of 3 (Three) months from the Register of members alongwith a fine of Rs. 25,000/- (Rupees Twenty Five Thousand Only).”
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