Professional misconduct under the relevant regulatory framework encompasses failure to exercise due diligence, which is a distinct offense independent of any proof of dishonesty or ill-motive. While such conduct merits sanction, the proportionality of the penalty must account for significant delays in the adjudication process.

(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)

1. This is a case reference under Section 21(5) of the Chartered Accountants Act, 1949 (hereinafter referred to as "the Act") in respect of Shri Jignesh V. Shah, Chartered Accountant, Smt. Prabha S. Prasad [General Manager (V&I), Vijaya Bank], Bangalore (hereinafter referred to as the "Complainant") made the following allegations against Shri Jignesh V. Shah of M/s. Jignesh V. Shah & Co, Chartered Accountants, Ahmedabad, (hereinafter referred to as "the respondent").

BRIEF FACTS :

2. The respondent was appointed as Concurrent Auditors for the bank's Relief Road Branch, Ahmedabad for the period 01.07.2003 to 30.06.2004. As per the appointment letter / guidelines, he was required to scrutinize the following aspects::

(a) Loans sanctioned/excess allowed beyond the delegated powers of the Branch Manager.

(b) Are all the documents correctly executed in the latest revised document formats and properly stamped wherever necessary in terms of Stamp Act and as per book on "Guidelines on the loan documents".

(c) Whether there is a shortfall in the securities/missing of securities or deterioration in the quality of chargeable current assets.

(d) Whether the excesses granted have been reported in OD reports on the same day?

(e) Whether the excess reported in the OD reports is within the delegated powers, whether approval has been obtained in such cases?

(f) Other irregularities / defects if any.

(g) Whether interest is recovered properly, if not period (no. of quarters) during which it was not recovered in detail. Whether credits in the account are sufficient to cover the interest, if not what is the amount of shortfall.

(h) Report on overdue irregular inland bills, purchased, CBP, DBP, SBP including cheques in general and PIBC/instant credit scheme (IPAP).

(i) Report on overdue inland bills discounted.

(j) Whether prior permission from the competent authority was obtained for operation in the accounts where either renewal or review is pending?

3. The Internal Inspectors of the bank during their inspection held in October, 2003 came across several serious deficiencies which the Respondent had failed to report, which are as under:

i) CCH Limit of M/s.Varsha Textiles (Prop. Paramount Polycot Pvt. Ltd.) - Against the sanctioned limit of Rs.260.00 lakhs, branch has allowed excess limit continuously with a maximum of Rs.3,38,15,730/-. Excess OD report not submitted to Controlling Office for approval. The balance amount outstanding in the account as on 30.09.2003 was Rs.2,93,690/-. Branch has purchased 9 bills of M/s.Varsha Textiles under supply bills purchased account amounting to Rs.258.04 lakh having no delegated power, of which 8 bills amounting to Rs.258.04 lakh having no delegated power, of which 8 bills amount to Rs.229.54 lakhs are overdue.

ii) CCM limit of M/s.Shree Umiya Enterprises against the sanctioned limit of Rs.10.00 lakhs, branch has allowed excess continuously with a maximum of Rs.19,74,116/- without submitting OD report to Controlling Office.

iii) Apart from the above limit Branch Manager has purchased 7 cheques under CBP amount to Rs. 6,71,006/- beyond his delegated powers which were returned unpaid and were kept pending for 6 months without reporting to Controlling Office and subsequently debited to the CCM account of the p