ICAI Debars CA for 2 Months with Fine for Negligence in Certifying SPICe Form for Fintech Company  and Rental Agreement [Read Order]

Committee Stresses CA's Duty to Verify Documents Pre-Incorporation
Institute of Chartered Accountants of India - Chartered Accountant - Fintech Company - tax news - taxscan

The Institute of Chartered Accountants of India ( ICAI ) recently imposed disciplinary action against a Chartered Accountant ( CA ), citing negligence in certifying crucial documents for a Fintech company. The CA’s name was removed from the registry for a two-month period and was fined Rs. 20,000. The fine is required to be settled within 90 days.

The complaint against the CA was lodged by the Registrar of Companies, Karnataka, alleging discrepancies in the certification of SPICe Form for Tencent Fintech Private Limited. The complaint highlighted concerns regarding the registered office address provided in the documents and the authenticity of the rental agreement submitted.

The investigation found the CA guilty prima facie only concerning the registered office allegation. The complaint pointed out that the address mentioned in the SPICe Form did not correspond to an existing company upon physical verification. Additionally, the rental agreement was executed with a different entity, raising doubts about its validity.

In response, the CA admitted to the errors but argued they were inconsequential procedural mistakes. He contended that any subsequent misconduct by the company’s promoters was beyond his control and not indicative of his certification’s accuracy.

However, the disciplinary committee noted significant lapses on the CA’s part. Despite undertaking to certify the accuracy of the documents, he failed to physically verify the registered office or authenticate the rental agreement. The committee deemed these actions as gross negligence, constituting professional misconduct as per the Chartered Accountants Act, 1949.

Despite arguments from the CA regarding the validity of the lease agreement and the company’s subsequent actions, the committee emphasised the CA’s responsibility to ensure the accuracy of the certified documents before incorporation.

The Committee found that despite the purported lease agreement granting M/s Bricespaces Pvt. Ltd. the right to sub-lease the property, the Respondent-CA failed to verify the original agreements between the property owner and M/s Bricspaces Pvt. Ltd. Furthermore, he admitted to not knowing about the agreement between the subject Company and M/s Bricspaces Private Limited.

This failure to verify agreements or visit the registered office before certifying the SPICe Form was considered a gross negligence and a violation of professional standards. The Committee concluded that the Respondent’s actions constituted professional misconduct under the Chartered Accountants Act, 1949.

Accordingly, in the considered opinion of the Committee, the CA was guilty of Professional Misconduct falling within the meaning of Item (7) of Part-I of Second Schedule to the Chartered Accountants Act, 1949.

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