Back
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
Ram Surat Ram Maurya, Presiding Member and Bharatkumar Pandya, Member
Trinity Arcade Pvt. Ltd. – Complainant
versus
S.R. Mohan & Co. and Ors. – Opp. Party
Consumer Case No.215 of 2012
Decided on 30.1.2024
For the Complainant:Ms. Asmita Singh, Advocate
For the Opp. Party-1:Mr. A.D.N. Rao, Sr. Advocate, Mr. Rahul Mishra, Mr. Amit P. Shahi and Mr. D. Shiva Shankar, Advocates
For the Opp. Party-2 and 3: Dr. K.S. Ravichandran, A.R.
Headnote:
Consumer Protection Act, 1986 – Sections 21(1)(a)(i) and 2(1)(o) [Consumer Protection Act, 2019 – Section 58(1)(a)(i)] – Services – Professional – Charted Accountancy – Non- impleadment of necessary and proper parties – The definition of ‘service’ is an inclusive definition and except the service ‘rendered free of charge’ or ‘under a contract of personal service’ all other services fall within this definition – Filing of complaint in administrative side before Regional Director for removal of the OPs from auditor ship of the company or a complaint before Institute of Chartered Accountants of India for disciplinary action against the OPs do not bar filing of the complaint for judicial remedy as it is well settled that if an act attract criminal and civil liability then the both the proceeding can go on simultaneously. All the necessary procedure for trial has been provided under the Consumer Protection Act, 1986 and the complaint cannot be thrown only on the ground that complicated issues of the fact is involved – K.J. Paul is not impleaded in this complaint. After settlement of dispute with K.J. Paul, who allegedly diverted fund of the company, it is not open for the company claim the amount from the auditors – K.J. Paul gave a letter dated 29.09.2010, against the company and its other directors, alleging misappropriation of Rs.4.5 crores of the fund of the company after March, 2010. K.J. Paul also filed a complaint in this respect before the Registrar of Company and Company Law Board, Chennai. Sensing collusion between K.J. Paul and OP-2 & 3 who are relations, the company, vide letter dated 29.10.2010, advised the OPs to resign from the auditor ship of the company and filed a complaint dated 17.01.2012 before Regional Director, Ministry of Corporate Affair, seeking removal of the OPs from Auditor ship of the company. In such circumstances, audit report was not submitted on time and submitted on 06.12.2012. Although the company denied service of letter dated 06.09.2010 but admit service of letter dated 25.10.2010 written by OP-1. But the explanations/queries were not answered as such, audit report was delayed. In such circumstances deficiency in service on the part of the OPs alone cannot be attributed – Compliant dismissed. [Paras 8 to 15].
Result: Compliant dismissed.
ORDER
Heard Ms. Asmita Singh, Advocate, for the complainant, Mr. A.D.N. Rao, Sr. Advocate assisted by Mr. Rahul Mishra, Advocate, for opposite party-1 and Dr. K.S. Ravichandran, AR for opposite party-2 &3.
2. Trinity Arcade Private Limited has filed above complaint for directing S.R. Mohan & Company Chartered Accountants (OP-1) to pay (i) Rs.133993738/- as compensation for the loss suffered due to giving incorrect audit report and negligence in not filing Income tax return on time; (ii) Rs.two crores, as compensation for mental agony and harassment; (iii) litigation costs; and (iv) any other relief, which is deemed fit and proper, in the facts and circumstance of the case.
3. The complainant stated as follows:—
(a) Trinity Arcade Private Limited (for short the company) was a private company, registered under the Companies Act, 1956 and engaged in the business of development, construction and sale of villas and apartments. Initially Board of Director of the company consisted K.J. Kuriakose, Chairman, Roy Joseph, Managing Director, K.J. Paul, Director and M.J. Luiz, Director. After retirement of K.J Kuriakose on 7.4.2009, C.J. Mathew was appointed as the Chairman on 10.8.2009. S.R. Mohan & Company (OP-1) was a Chartered Accountants Partnership Firm, registered under Partnership Act, 1932 and had a branch office at Kochi. Tinu Anto and K.J. Anto (the auditors) (OP-2 & 3) were partners in Abraham and Jose, who later on became signing partner in S.R. Mohan & Company. K.J. Kuriakose and K.J. Paul were brothers and Tinu Anto was their nephew. Tinu Anto was also relation of M.J. Luiz. Tinu Anto and K.J. Anto are son and father.
(b) Board of Director of the company, in its annual general meetings (for short AGM) dated 30.09.2008, 25.09.2009 and 14.09.2010 appointed OP-1 as statutory auditor as per Section 224 of the Companies Act, 1956, for audit of the accounts for the year 2008-09, 2009-10 and 2010-11, respectively. Tino Anto and K.J. Anto (OP-2 & 3), being local auditors performed all the works of audit on behalf OP-1. The company also availed services of the OPs for filing sales tax and income tax returns during this period. Tino Anto (OP-2), being nephew of K.J. Paul, the director, colluded with and helped him, in misappropriating the fund of the company. The OPs by their act and omission in filing sales tax return and income tax return also caused heavy loss to the company; details of which are as follows:—
(i) The company availed services of the OPs for preparing Audit Report dated 15.12.2008 in Form No.13 and 13A of Kerala Value Added Tax Rules, 2005 and for filing periodical return. In the audit report, the OPs wrongly shown the figure of ‘balance cost of the work contract’ as Rs.724715473.39 in place of correct figure of Rs.236508013/-. This mistake resulted into huge liability of VAT and interest of Rs.129200000/- in Sales Tax Assessment orders dated 02.11.2009, 05.12.2009 and 05.12.2009. The company challenged the assessment order. Finally Kerala High Court ordered for payment of 25% of tax and interest as assessed. The company had to pay Rs.30679510/-. This act of the OPs not only caused huge financial burden upon the company but also damaged reputation of the company.
(ii) K.J. Paul diverted more than Rs.18/- crores from account of the company in his personal account i.e. “K.J. Paul Ledger Account” during 01.04.2005 to 31.03.2009 through transfer of fund. This amount was transferred in the guise to purchase land for the company but K.J. Paul acquired the land in his name from this amount. Tino Anto (OP-2) opened a second ledger in the name of “K.J. Paul Land Purchase A/c” in connivance K.J. Paul and made an adjustment entry of Rs.56000000/- on 31.03.2007 to wipe out debit balance. He further showed a credit entry of Rs.31250000/- dated 31.03.2009 transferring from the regular ledger account of K.J. Paul. To cover the amount misappropriated by K.J. Paul, the company had to borrow huge amount, on which the company pai
