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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
A.S. Supehia, Pranav Trivedi, JJ.
Council Of Institute Of Chartered Accountants Of India – Applicant
Versus
S.N. Valera, Fca M/S. S.N. Valera & Co. – Respondent
R/Chartered Accountant Reference No. 3 of 2006
Decided On : 19-11-2025
| Table of Content |
|---|
| 1. introduction to disciplinary proceedings against respondent. (Para 1 , 2 , 3 , 4) |
| 2. arguments in favor of council's recommendation. (Para 5 , 6 , 7 , 8) |
| 3. respondent's counterarguments against council's report. (Para 10 , 11 , 12) |
| 4. court's analysis of the council's powers and procedures. (Para 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20) |
| 5. court's elaboration on the necessity of independent findings. (Para 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28) |
| 6. critique of council's findings and application of mind. (Para 29 , 30 , 31 , 32 , 33 , 34) |
| 7. conclusion directing council for reconsideration. (Para 35 , 36) |
JUDGMENT :
A.S. SUPEHIA, J.
1. Present reference under section 21(5)of the Chartered Accountants Act, 1949 (for short “the Act”) in respect of the respondent viz. Shri S.N.Valera, Chartered Accountant, has been made by the Council of Institute of Chartered Accountants of India(herein after referred as Council).
BRIEF FACTS
2. The respondent was empaneled by the Central Registrar of the Madhavpura Mercantile Cooperative Bank Ltd., Ahmedabad (for short “the Bank”), which is registered under the Multi State Cooperative Societies Act, 1984. There was a huge scam, which is well known as MMCB scam in the year 2001. The Registrar of Cooperative Societies, Gujarat State upon instructions from the Central Registrar had allotted re-audit of the bank for the year 1999-2000. During the re- audit, it was found that the respondent had not disclosed and reported serious irregularities in the accounts of the Bank and he failed to disclose the material misstatements known to him in the financial statement. It was alleged that the respondent failed to report material misstatements known to him to appear in the financial statements of the Bank, with which he is concerned in his professional capacity, and thus, had shown gross negligence in performing his professional duties. The charges levelled against the respondent, as per the complaint were very serious in nature. The relevant dates in the present reference are as under:
| Date | Event |
| 19.09.1999 Early 2001 | Respondent was appointed as Auditor of Madavpura Mercantile Cooperative Bank (MMCB) for FY 1999-00 u/s 67 of the Multi state Co- operative Societies Act and order of Registrar Re-audit of MMCB was carried out under the order of Registrar dated 20.04.2001 which revealed severe irregularities. |
| 06.03.2002 | Jt. registrar Co-operative Societies made complaint against the Respondent |
| 08.04.2002 | Complaint was sent by the Council to the Respondent for his response |
| 06.07.2002 | Respondent filed written statement and submission |
| 17.08.2002 | Complainant submitted rejoinder |
| 06.01.2003 | Respondent submitted his comments |
| 2-5.02.2003 | ICAI framed prima facie opinion finding the Respondent as guilty |
| 07.05.2003 to 25.10.2004 | Proceedings took place before the Disciplinary Committee Questions put to parties and their replies thereto |
| 16.11.2004 | Disciplinary Committee submitted its report to the Council |
| 31.12.2004 | report of the Committee forwarded to both parties |
| 17.01.2005 20.01.2005 | Submission by the Complainant |
| 17.03.2005 | Respondent submitted written representation |
| 24.03.2005 | Council arrived at the finding and made recommendation to the Hon’ble High Court for removal of name of the respondent for a period of 5 years |
3. There were 16 charges framed against the respondent and out of them, the disciplinary committee submitted its report on 16.11.2004 holding the respondent guilty in 08 charges. The details of which are as under:
| Sr. No. | Charge | Verdict by the Council | Second Schedule Part 1 Clause |
| 1 | Bank did not maintain CRR and SLR ratio | Not Guilty | |
| 2 | Bank did not invest 15% of SLR funds into Govt. Securities as per RBI circular | Not Guilty | |
| 3 | Irregularities in advances against hypothecation | Not Guilty | |
| 4 | Necessary documents not obtained by the bank while issuing loans | Guilty | (5),(6), (7),(8), (9) |
| 5 | Bank has advanced in excess of Rs.10 lakhs against security of shares in violation of RBI circular | Guilty | (5),(6), (7),(8), (9) |
| 6 | Margin Money of loanee against shares were | ||
The Council must independently assess findings from a Disciplinary Committee regarding professional misconduct, ensuring proper application of mind and consideration of all representations before mak....
Chartered Accountants must exercise due diligence and integrity in their professional duties, and failure to do so constitutes professional misconduct under the Chartered Accountants Act, 1949.
The main legal point established is that the Court found the respondent guilty of professional and other misconduct under the Chartered Accountants Act and recommended reprimand as the appropriate pu....
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Professional misconduct under the Chartered Accountants Act includes gross negligence in duties, requiring due diligence in verification of financial documents.
The final decision on the action against the petitioner is appealable to the Authority under Section 22G, and the court provided interim protection for the petitioner to approach the Appellate Author....
The court upheld the disciplinary action against a Chartered Accountant for misconduct, emphasizing the need for integrity and professional standards in the profession.
A Disciplinary Committee under Section 220 of the Insolvency and Bankruptcy Code can be constituted with a single whole-time member without violating statutory provisions.
A person who is sought to be removed due to a conviction of an offence involving ‘moral turpitude’ under Section 8(v) of Act. It is only when there are allegations of professional or other misconduct....
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