ICAI Reprimands CA for Misrepresenting as Managing Director Role Post-Resignation before Stakeholders and Bank Officials

The ICAI Disciplinary Board found the CA guilty of misrepresentation, as he falsely portrayed himself as the MD to stakeholders and bank officials, despite not holding the position officially, resulting in disciplinary action
ICAI - CA - Misrepresenting - Managing Director - Post Resignation - Stakeholders - Bank Officials - TAXSCAN

The Institute of Chartered Accountants of India ( ICAI ) reprimanded a Chartered Accountant ( CA ) for misrepresenting himself as the Managing Director of a company, despite having resigned from the position, to both stakeholders and bank officials. Additionally, the CA sent confusing emails to financial creditors, aiming to mislead them.

The allegations stated that the respondent-CA falsely presented himself as the Managing Director of the company after its revival, despite having previously resigned from the role. Moreover, stakeholders did not make any decisions to reinstate him.

Furthermore, the CA ignored directives from the NCLT and failed to follow established legal procedures. Despite being aware that financial creditors had rejected a new Composition Scheme, the CA attempted to mislead them by sending confusing emails.

The complainant alleged that the respondent colluded with the former promoter and director of Gujarat NRE Coke Limited ( the Corporate Debtor ) to obstruct the liquidation proceedings under the Insolvency and Bankruptcy Code, 2016.

Throughout the liquidation process, the respondent disregarded established procedures and norms mandated by the Code. Acting beyond his official role as the COO of the Corporate Debtor, he not only misrepresented facts but also engaged in misconduct by falsely presenting himself to stakeholders, which is unethical behaviour for a Chartered Accountant.

The Board noted that the respondent- CA was the Chief Operating Officer of the Company and had submitted his intent to resign on 06.07.2020, followed by his resignation after serving the notice period. However, he represented himself as the Managing Director of the Company but in the interest of the society at large, he started following up with the bankers requesting them to consider and approve the scheme and he was available for any clarification/ modifications as required on the scheme.

The proposed scheme included provisions for appointing two Independent Directors, with the possibility of appointing a Managing Director or CEO. Despite the respondent’s name being put forward for the Managing Director position, the scheme required approval from the company’s financial creditors. However, the scheme was ultimately rejected by both the financial creditors and the NCLT, observed the Disciplinary Board.

Therefore, the Board of Discipline concluded that the respondent- CA was not officially holding the position of Managing Director. However, he misrepresented himself as such to stakeholders and bank officials, despite knowing that the scheme had been rejected and he had not been formally appointed. This misrepresentation was deemed unacceptable for a Chartered Accountant, leading the Board to find the respondent guilty of the alleged charge.

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