ICAI Disciplinary Committee clears CA from Professional Misconduct for alleged Connivance in Incorporation of Shell Companies

The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) has cleared a Chartered Accountant from professional misconduct for alleged incorporation of shell companies.

The allegation was that the Respondent had certified the signatures of the subscribers in relevant E-forms wherein the subscribers to the Memorandum of Association (MOA) were three individuals having the same addresses (as per Form-32) who as per the Complainant were dummy directors and thus by witnessing the signatures of such subscribers for the Company, he facilitated the Chinese individuals/Entities in appointment of dummy Directors and Subscribers in the Company.

Further, it was alleged that on physical verification of the registered office of the Company, it was found that no such address or the Company existed at such address.

It was also alleged in the complaint that the Respondent had wilfully/deliberately facilitated the Chinese nationals, connived with them, and incorporated the shell company for fraudulent activities, It was noted that after due investigation by the Director (Discipline) in the matter, the Respondent was held prima facie guilty only in respect of charges mentioned first and second as above and accordingly the extant proceedings were limited to those charges.

Based on the documents available on record and after considering the oral and/or written submissions of the parties concerned, the Committee concluded hearing in the matter.

The Committee noted that, in 2012, the alleged e-forms viz Form 18 and Form 32 were certified by the Respondent in his professional capacity under his digital signature.

It was noted that the Respondent in his submissions stated that his Digital Signature Certificate (DSC) was used without his consent to certify the alleged forms for incorporation of the Company. As per him, the DSC was obtained in his name without his permission and was misused. The Respondent claimed that someone had acquired his DSC using his credentials without his consent and knowledge and intentionally misused it.

The Respondent pointed out that the e-mail id - babysuba@mail.com was used for obtaining the DSC and the said email ID did not belong to him, even the Directors were using the email id babysuba@email.com as reflected in their particulars stated in incorporation form. He further informed that at that point of time DSC was in pfk format and it was being provided to the applicant's e-mail id.

The Respondent had further submitted that his first legitimate DSC was obtained from "emudra" using his email address that he had been using said email address since 2003. As per the Respondent, the purported DSC was obtained in June 2010 and remained valid until June 2012. He contended that he had never used any DSC for personal or professional purposes during the alleged period. The Respondent also submitted that he had filed a formal complaint with the National Cyber Crime authority regarding the unauthorized acquisition and misuse of his DSC.

The committee noted that the Respondent vehemently denied his role in the entire episode and stressed before the Committee for tracking IP address associated with Form 18 and Form 32 through which the purported filings were carried out for S.K. Trading Pvt. Ltd. Further, based on the Google search by the Respondent, it was pointed out by the Respondent before the Committee that several companies were connected to the email address of the third party indicating potential unauthorized use.

The Respondent further informed the Committee that he began certifying ROC forms with his own Digital Signature Certificate (DSC) in the FY 2011-2012. At that point of time, he had a single corporate client, M/s Shri Lakshmi Agro Foods Pvt. Ltd., while other clients were non-corporate entities.

Upon investigation regarding the IP address, it was noted that the Complainant Department's technical teams found disparity between the IP address used for the alleged fraudulent activities and the IP address associated with the Respondent.

The Committee also noted that after receipt of said information, the Respondent had indeed taken appropriate measures to curb the said misuse by filing a complaint with National Cyber Crime authority about the unauthorized acquisition and misuse of DSC in his name which showed a genuine concern for addressing the issue. He had also written to the Complainant Department to curb potential misuse.

In view of the above, the committee opined that, the respondent is not guilty of professional misconduct as alleged by the complainant, ROC, Chennai, Ministry of Corporate Affairs.

To Read the full text of the Order CLICK HERE

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