The Institute of Chartered Accountants of India imposed a fine of Rupees 25,000 on a Chartered Accountant on the ground of gross negligence in treating work in progress received as capital.
The allegation against the Respondent was regarding a certificate issued by the Respondent stating that P.N.P. Lakshmanan and G. Rajkumar had introduced a sum of Rs. 2 Crores as additional capital to meet capital expenditure and other obligations in M/s Svyantra Automation Pvt Ltd whereas as per the Complainant, the said amount was not reflected in the bank statement/ book of records of the said entity.
It was noted that the Respondent in his defence inter-alia stated that M/s Urappaa Food Park Pvt Ltd. had been given a huge order for automation and interiors. Since the order was large and running into crores, to have better accountability and legal standing, the proprietor of M/s Urappaa Food Park Pvt Ltd had asked to the promoters of M/s 15 Interiors and Svyantra Automation Pvt Ltd. to form a corporate entity and bill the work in the new entity.
Hence, their work in progress with their various entities at the time of formation of the company was billed after the company got incorporated. Thus, the Respondent contended that the amount spent by them for their clients’ works on raw material and labour were taken as their capital contribution.
The Committee comprising CA. Aniket Sunil Talati, Presiding Officer, Anita Kapur, Member (Govt. Nominee), Dr. K Rajeswara Rao, Member (Govt. Nominee), CA. Sushil Kumar Goyal, Member and CA. Piyush S Chhajed, Member was of the view that the Respondent had failed to exercise due diligence and showed gross negligence while performing his Professional duties by treating work in progress/orders/leads received as capital introduced though there existed uncertainty about such work in progress/orders leads turning into actual funds and also demonstrated conduct as to unbecoming of a Chartered Accountant.
The Committee viewed that the said conduct of the Respondent makes him Guilty as he malafidely provided platform to the management of the Company because based on certificates issued by him containing misleading information, the Company could procure funds from sources not otherwise available to it.
The Committee thus viewed that the misconduct on the part of the Respondent has been held and established within the meaning of Clause (7) of Part I of Second Schedule as well as Clause (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 read with Section 22 of the Chartered Accountants Act, 1949 and ordered that the name of the Respondent CA. Narasimhan TRL be removed for a period of 4 (Four) months from the Register of members along with a fine of Rs. 25,000/- (Rupees Twenty- Five Thousand Only) be levied upon him.
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