CA Fails to Disclose Public Deposit Liabilities, Asset Ever-Greening: Delhi HC Upholds Three-Month Name Removal from ICAI Register [Read Order]

The Delhi High Court has confirmed the removal of a Chartered Accountant's name from the Council of the Institute of Chartered Accountants of India (ICAI) register of members on account of the CA’s failure in disclosing public deposit liabilities and failure to detect evergreening of assets.

The case has been preferred under Section 21(5) of the Chartered Accountants Act, 1949, seeking confirmation of the punishment that has been imposed upon the respondent, a chartered accountant.

The case arose from alleged irregularities in the statutory audit of Escorts Finance Limited for the financial year 2004–2005. The Reserve Bank of India sent a communication to ICAI informing that the audit report as furnished by the company through its statutory auditors, M/s N.M. Raiji & Co failed to disclose the company’s true liability on public deposits and did not detect “ever‑greening” of assets. The respondent S.N. Shivakumar, the CA, was a partner in M/s N.M. Raiji & Co.

Acting on this, ICAI initiated disciplinary proceedings, eventually punishing the removal of the respondent’s name from the register of members for three months. The matter was referred to the High Court for confirmation.

Three charges were framed against the respondent.

1. Failure to verify liability on public deposits — The audit did not reflect accrued unpaid interest on deposits up to 31 March 2005.

2. Failure to detect ever‑greening of assets — The company inflated assets by showing cheques worth ₹48 crore as cash in hand, though credited only later.

3. Failure to issue a mandatory auditor’s certificate under RBI directions —Non‑compliance with regulatory requirements.

ICAI issued notices in 2008 and 2009, but the respondent did not file replies or contest the matter. The Disciplinary Committee proceeded ex parte, finding him guilty of professional misconduct.

The respondent argued that since the Chartered Accountants Act had been amended, his case should be governed by the amended provisions. ICAI rejected this contention, and in its 364th meeting (April 2017), resolved to remove his name from membership for three months.

ICAI’s Counsel emphasised the seriousness of charges, particularly the failure to report ₹17.23 crore in interest liability and the inflated cash balance of ₹48 crore. These lapses misrepresented the company’s financial position.

The Division Bench of Justice Dinesh Mehta and Justice Vinod Kumar noted that the respondent had failed to contest proceedings at every stage, before the Disciplinary Committee, ICAI Council. Also, Charges 1 and 2 were particularly grave, as they involved misrepresentation of liabilities and failure to detect asset inflation.

The Court also observed that the respondent’s certificate was inactive, though technically surviving. It directed that his membership would not be revived automatically after the suspension period unless he applied afresh.