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2015 Supreme(Kar) 313
High Court of Karnataka
VINEET SARAN & S. SUJATHA, JJ.
Chartered Accountants of India - Petitioner
Versus
S. Giridharan, Chartered Accountant - Respondent
Civil Petition No. 191 of 2012
Decided On : 05-03-2015
For the Petitioner:S.S. Naganand Sr. Counsel A/W Vikram Unni for M/s. Just Laws, Advocates. For the Respondent:K. Kasturi Sr. Counsel for M/s. Kasturi Associates, Advocates, K.L. Shreenevasa, CGC.
Headnote:CHARTERED ACCOUNTANTS ACT, 1949 - Sections 21(5) & (6): [Vineet Saran & Mrs. S. Sujatha, JJ] Reference under Section 21(5) for consideration of recommendations made by Council for removal of name of Respondent - Finding as to guilty of Professional misconducts under Clauses (5) to (9) of Part I & II Schedule to the Act read with Sections 21 and 22 of Act - Council accepting report of disciplinary committee - Suppressions of credit facility availed from Bank.
Held, the charge of preparing the Balance Sheet without all the records having been perused by the respondent, it is certainly a very grave misconduct, which cannot be condoned. It is true that an auditor is not required to perform the functions of a detective as it has been said that an auditor is a watch-dog but not a blood hound, however, in the present case, the gravity of negligence of the respondent in not questioning the company with regard to the accounts and signing the Balance Sheet even prior to preparation of the audit report, without verifying the correctness of the same, is grave enough to hold him negligent and impose punishment. In such view of the matter, we are of the firm opinion that the findings recorded by the disciplinary committee and so accepted by the Council are perfectly justified in law and do not call for interference.
In view of lapse of 15 years time, the punishment of removal of name for one year is too harsh, the same was reduced to one month from date of notification. Petition disposed of.
1. This is a reference case filed by the Council of the Institute of Chartered Accountants of India (for short ‘the Council’) under Section 21(5) of the Chartered Accountants Act, 1949 (for short ‘the Act’) for consideration of the recommendation made by the Council for removal of the name of the respondent S. Giridharan, a practicing Chartered Accountant, from the register of members, maintained by it, for a period of one year.
2. The brief facts of this case are that with regard to the audit report and the balance sheets signed by the respondent a Statutory Auditor of M/s. Great Western Industries Ltd., (for brevity ‘M/s GWIL’), as on 30.09.98, 30.09.99 & 30.09.2000 a complaint was filed by the Superintendent of Police, CBI EOW, Chennai on 18.08.2006 before the Council alleging certain charges against the respondent. To the said complaint, the respondent submitted his written reply on 26.02.2007. TO the said reply, the complainant filed a rejoinder on 16.04.2007, to which the respondent submitted his reply on 21.06.2007. The complainant as well as the respondent were heard by the disciplinary committee of the Council. After concluding the hearing on 24.03.2010, the disciplinary committee submitted a report dated 10.06.2010 and recorded a finding that the respondent was guilty of professional misconduct within the meaning of Clauses (5), (6), (7), (8) and (9) of Part 1 of II Schedule to the Act read with Sections 21 and 22 of the Act. Vide Communication dated 11.10.2010, copies of the report of the disciplinary committee were given to the complainant and the respondent, to which the parties were required to submit their response. Adjournments were granted by the Council and finally on 11.04.2011, the respondent submitted his written representation on the report of the disciplinary committee and the complainant also filed his written representation on 26.04.2011. On 01.09.2011, the petitioner informed the respondent as well as the complainant that the report of the disciplinary committee would be considered in the meeting of the Council to be held from 19th to 21st September 2011. The respondent submitted a written representation on 12.09.2011. As per the extract taken from the minutes of the 310th meeting of the Council held from 19th to 21st September 2011, the Council decided to accept the report of the disciplinary committee holding the respondent guilty of professional misconduct and recommended to refer guilty of professional misconduct and recommended to refer the matter to the High Court for removal of the name of the respondent from the register of members maintained by the Council, for a period of one year.
3. In the complaint lodged by the Superintendent of Police, Central Bureau of Investigation on 18.08.2006, the allegation against the respondent primarily were that he, as a Chartered Accountant of the company GWIL, had connived with the Directors of the Company and for the years 1997-98, 1998-99, did not disclose in the Balance Sheet of the company that the company had availed credit facilities from the Times Bank Limited (subsequently HDFC Bank) and that the balance sheet for the period ending 30.09.2000 was signed without verifying the correct facts and without preparing the audit report , though mentioned to have been annexed. The relevant paragraphs 5, 6, 7, 8 & 9 of the said complaint are re-produced below:
“5. Investigation also revealed that the Director of GWIL and Shri. S. Giridharan had signed the audited balance sheet as at 30.09.2000 on 7.12.2000 and the same was submitted to Canara Bank, AF Branch, Bangalore. During 2001, Canara Bank came to know about the credit facilities availed by GWIL from Times Bank Ltd., and sought clarification from Shri. S. Giridharan. For the same, Shri. Giridharan had replied to Canara Bank that the audit of M/s. GWIL has not been completed and disowned the balance sheet submitted by the Director of GWIL to Canara Bank stating that it was an unaudited balance sheet. T
