The Chartered Accountant

Facts of the case:
Shri Bharat D. Bhatia , Mumbai (hereinafter referred to as
‘Complainant’) filed a complaint against Shri Vijay R. Ashar,
Chartered Accountant (hereinafter referred to as ‘Respondent’)
under Section 21 of the Chartered Accountants Act,
1949 (the Act) to the Institute of Chartered Accountants of
India (Institute) alleging, inter alia, that in spite of the reason
that the wife of the Respondent is a Director and holding
substantial interest (more than 20% shares) in the Jamnadas
Rutonsi Pvt. Ltd. (Company), the Respondent accepted
the appointment as auditor of the Company for the period
from about 1984 to 4 th December, 1990. Further, in spite of
the clear provision in the guidelines issued by the Institute,
the Respondent wilfully and deliberately did not disclose the
interest in the aforesaid Company during the entire period
when he was the statutory auditor of the Company. It was
further alleged that the Respondent had always sought to
directly and indirectly exert influence and control over the
day-to-day workings of the Company. Soon after his appointment
as auditor of the Company, the Company made
a fresh Issue of Shares on his advice as a result of which
the percentage shareholding of his wife in the Company increased
substantially. Therefore, by acting as auditor of the
Company and failing to disclose the interest of his wife in
the same Company, the Respondent had committed grave
and serious breach of the guidelines issued by the Institute.
The Council of the Institute prima facie opined that the
Respondent was guilty of professional and/or other misconduct
and referred the case to the Disciplinary Committee
for enquiry. The Disciplinary Committee on perusal of
the documents on record, after recording of evidence and
hearing of the submissions made by the parties came to the
conclusion that the Respondent by not having disclosed his
interest in the audit report, had violated Clause (4) of Part I
of the Second Schedule of the Act in terms of Section 21
and 22 and that he was not guilty of the second charge that
he was exercising his influence over the management of the
Company to the detriment of the Complainant. The Disciplinary
Committee was also of the opinion that the said
violation under Clause (4) of Part I of the Second Schedule
was only technical in nature.
The Council on consideration of the report of the Disciplinary
Committee alongwith the written representations
and also oral submissions of the parties, accepted the Report
of the Disciplinary Committee and found that the
DECEMBER 2008 1006 THE CHARTERED ACCOUNTANT
LEGAL UPDATE
DISCIPLINARY CASE
Summary of a disciplinary case - Council of the Institute of Chartered Accountants of India vs. Shri
Vijay R. Ashar 1 (Chartered Accountant Reference No. 4 of 2001) decided on 13.08.2004 by the Bombay
High Court under Section 21(6) of the Chartered Accountants Act, 1949.
1 For full text of the Judgment please see Institute’s publication viz. Disciplinary Case Vol.VIII, Part I, p. 825
Respondent was guilty of professional misconduct within
the meaning of Clause (4) of Part I of Second Schedule
in terms of Section 21 read with Section 22. The Council
recommended to the High Court that the Respondent be
reprimanded. As required under Section 21(5), the matter
was referred to the Bombay High Court with the recommendations
of the Council.
The Judgment of the Division Bench of the Bombay High
Court comprising of Hon’ble Mr. Justice R.M. Lodha and
Hon’ble Mr. Justice J.P. Devadhar is summarized below.
Decision of the Hon’ble Court:
The Hon’ble Court observed that Smt. Dipika V. Asher,
wife of the Respondent was examined before the Committee.
She admitted that she was the director of the
company viz. Jamnadas Rutonsi Pvt. Ltd. and she held
initially 90 shares in the year 1984 and thereafter 150
further shares. The Court also observed that it appears
that the wife of the Respondent had holding of more
than 20% shares in the said company.
The Hon’ble Court further observed that Code of Conduct
for the chartered accountants framed by the Institute
of Chartered Accountants of India provides that
where the partner or relative of the member as a director
in the company holds substantial interest, the
member may desist from the undertaking audit of the
financial statements and/or expression of opinion and if
the member feels that his independence is not affected
and undertakes the audit of such company, he should
disclose such interest in his report while expressing his
opinion on the financial statement of such company.
The explanation of the Respondent before the Disciplinary
Committee was that he was ignorant of the
said guidelines. The Court was of the view that the explanation
put forth by the Respondent was hardly acceptable.
It could not be believed that as a professional
chartered accountant in practice, he was not aware of
the guidelines and the Code of Conduct framed by the
Institute of Chartered Accountants of India.
The Hon’ble Court, accordingly, concurred with the
finding recorded by the Disciplinary Committee and
accepted by the Council, that the Respondent had violated
Clause (4) of Part I of the Second Schedule of the
Act. Accordingly, the Court held that the recommendation
of the Council that the Respondent be reprimanded
is reasonable and rather lenient.