Interest Computation Based on Promoter’s Allotment Letters Proper: ICAI Holds CA Not Guilty of Misquoting Amounts [Read Order]

The Disciplinary Committee of Institute of Chartered Accountants of India ( ICAI ) has held that the CA is not guilty of misquoting amounts as the interest computation was done based on the allotment letters issued by the promoter.

The committee found that the computation was within the scope of engagement and supported by documentary records.

A complaint was filed against CA Ashish Jain by Sanjay Verma, an allottee. The issue was based on the real estate project developed by M/s Ram Raghu Buildwell. It was submitted that certain allottees, whose original bookings were in an earlier delayed project, were later allotted alternative units in another project, Ram Raghu Palazzo.

However, due to delay in the projects, the allottees approached UP RERA. In an order dated 24 January 2020, RERA directed the promoter to refund the amounts deposited with interest calculated at SBI MCLR + 1%.

After this order, the promoter engaged with the respondent-accountant to issue a certificate computing interest liability. The respondent - CA issued a certificate dated 8 July 2020, calculating interest on the booking/allotment amounts as mentioned in the allotment letters issued in October 2017.

However, a complaint was later filed by the allottees alleging that the CA had misquoted the amounts deposited by the allottees and which reduced the interest payable. Additionally, they submitted that the accountant failed to get the opinion from the allottees regarding the amount.

The ICAI Disciplinary Committee, composed of CA Charanjot Nanda (Presiding officer) considered the matter. On preliminary inquiry, the committee found that the CA member was guilty. Based on the same, they started the inquiry.

During the proceedings, the complainant asserted that the CA ought to have verified actual amounts deposited over time, as shown in bank statements, rather than depending solely on the allotment letters.

It was argued that the RERA order referred to “total amount deposited”, and by certifying interest on lower figures, the CA had acted negligently and misled the authority, facilitating a reduced recovery against the promoter.

On the other hand, the respondent-CA submitted that the engagement was limited to interest calculation, not verification of historical deposits. Additionally, the CA argued that the engagement letter and management representation clearly stated that the base figures would be as provided by the promoter and confirmed in allotment letters.

The CA asserted that the allotment letters explicitly recorded that the amounts mentioned therein were “full and final payments” for the respective units. Also, the certificate clearly disclosed its restricted scope and purpose.

The ICAI observed that the CA acted within the scope of the engagement. The interest was calculated based on the allotment letters produced by the management. The committee also concurred with submissions of the CA that the engagement was limited to interest computation and not verification or audit of deposit histories.

The committee also observed that there is no documentary evidence to show that the CA misquoted the amount. Accordingly the CA found ‘Not Guilty’ under Item (2) or Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates