The Institute of Chartered Accountants of India ( ICAI ) removed a Chartered Accountant’s name from the register for one month due to holding the position of Managing Director without ICAI’s approval.
The case arose from a newspaper article titled “CA with 15 high-end properties arrested,” published in ‘The Times of India,’ New Delhi, on December 3, 2016, which contained allegations against the CA, referred to as the ‘Respondent.’
The Directorate General of Central Excise Intelligence ( DGCEI ) took action against the Respondent for possessing extensive real estate assets in upscale locations of Delhi, Haryana, Canada, and Tanzania, with no clear source of income. The report indicated that the Respondent’s strategy involved establishing companies, purchasing properties in their names, and then declaring the companies financially unstable.
The Respondent had a history, including arrest in 2006 for tax evasion in a textile business case in Madhya Pradesh, after which he fled to Canada. He was accused of setting up multiple companies, declaring them financially distressed, purchasing properties through these entities, and allegedly manipulating directorships to sell properties while evading taxes.
According to the Respondent, he obtained specific approval from the ICAI when assuming the role of Managing Director at Ws. Dewan Industries Limited (later renamed A-V. Cottex Ltd.) while still holding his Certificate of Practice in 1995. He continued in this position until 2001. Following his resignation from A-V. Cottex Ltd., he became the Managing Director of M/s CT Cotton Yarn Limited without obtaining specific permission.
The Disciplinary Board noted that the Respondent, while holding a Certificate of Practice, served as the managing director of a company without seeking prior approval from the ICAI, thus violating professional guidelines.
The Board referenced the Code of Ethics, which aims to prevent members from engaging in business activities not in line with the dignity of the profession without prior approval. As the Respondent failed to seek such approval before assuming the role of Managing Director in M/s. CT Cotton Yarn Limited, the Board deemed the Respondent guilty of the alleged charge.
The Board also noted from Order issued by the Commissioner, CCE, Indore, that the Respondent, a Chartered Accountant, assumed control as Managing Director of the Company from September 28, 2001. He delegated various responsibilities to Mahendra Sharma.
During a search operation at M/s. C. T. Cotton notebooks maintained by the Respondent were found, detailing evasion of duty with Mahendra Sharma’s assistance. The investigation uncovered the creation of two firms owned and managed solely by the Respondent, through which sale proceeds from clandestinely cleared goods were funnelled.
The company also procured duty-free imported material, which was sold in the open market without customs duties, invoices, or proper accounting, all under the direction of the Respondent.
The ICAI-Disciplinary Board found the Respondent guilty of breaching the Code of Ethics, which prohibited members from engaging in certain business activities without prior approval from the Council. The respondent is also guilty of committing financial frauds by not issuing invoices while selling the duty-free imported materials.
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