CA issuing fake certificate-invoice to bank guilty of misconduct. Bank on the strength of certificate-proforma invoice released loan fund-Delhi HC

CA issuing fake certificate-invoice to bank guilty of misconduct. Bank on the strength of false certificate and fake proforma invoice had released loan fund-Delhi HC 

ABCAUS Case Law Citation:
1027 (2016) (10) HC

Brief Facts of the Case:
The present disciplinary proceedings for professional misconduct were initiated by the ICAI on a complaint made by the Deputy General Manager of a nationalised bank against a chartered accountant (respondent).

According to the bank the respondent was the chartered accountant of a private limited company which had obtained a term loan from the bank and as per the loan agreement the company had to raise equity and unsecured loans of Rs. 88.58 lacs.

The respondent chartered accountant certified the balance sheet of the said company as on June 24, 1996 confirming that long term funds were credited to the account of the company and relying on the strength thereof the bank released the funds.

However, neither equity nor unsecured loans as required were actually raised by the company,. Further, on the strength of a proforma invoice issued by another limited company, the bank issued a pay order in sum of  Rs. 7.84 lakh to the said limited company but no machinery was purchased as a matter of fact.

The Disciplinary Committee (DC) and the Council of the Institute of Chartered Accountants of India found that the address of the limited company was the same place wherefrom the respondent chartered accountant carried on his profession. In fact, the chartered accountant had himself signed various cheques and letters on behalf of the said limited company.  

Also a letter issued by the sales tax authorities for said limited company mentioned the name of the chartered accountant, Director of limited company as the dealer under the sales tax act. From the letter it appeared as if registration was granted to the dealer is in the capacity of the dealer being a sole proprietor.

Thus the ICAI report brought out that as a Chartered Accountant the respondent was carrying on the business directly and his claim that he was merely a Director in his professional capacity was incorrect.

Accordingly, ICAI made a reference to the Delhi High Court under Section 21(5) of the Chartered Accountants Act, 1949. However, the chartered accountant did not contest the proceedings.

Held:
The Delhi High Court upheld the chartered accountant as guilty of misconduct under clauses 5, 6, 7 and 8 of Part I of the 2nd Schedule and imposed a penalty of removing his name from the membership register of the Council for a period of three years.