Defending a CA before ICAI

Legal issues raised in response to a prima facie opinion concerning alleged professional misconduct by a Chartered Accountant (CA).

Focused on challenging the basis of the misconduct allegations against a Chartered Accountant by raising several legal and procedural arguments:

• Issue of Double Jeopardy/Res Judicata: It is argued that the complainant, having already imposed a fine and penalty for the same alleged omission, which is currently under appeal, is engaging in double jeopardy or res judicata by initiating further disciplinary proceedings with the professional certifying body before the first appeal outcome.

• Lack of Corroboration for Retracted Statements:

  • A central contention is that uncorroborated admissions, especially those subsequently retracted, should not form the basis of adverse findings. This aligns with the legal principle that retracted confessions must be substantially corroborated by independent and cogent evidence to be relied upon.

  • Several court judgments are cited to support this, including Vinod Solanki v. U.O.I and Sudhir Sharma vs. The Commissioner Of Customs, emphasising the need for corroboration.

  • Further precedents, such as State of Maharashtra V/s. Harshad Vaherbhai Patel & Ors. and Gauri Gaekwad and Shri Malki Singh V/s. Suresh Kumar Himatlal Parmar, underscore that a statement recorded under Section 108, if isolated, cannot be relied upon without independent corroboration. The court must examine if a confessional statement is perfectly voluntary, true, and trustworthy.

  • The burden of proof rests on the prosecution to prove that a statement was made voluntarily, even if not retracted.

  • The argument also extends to the unreliability of an accomplice's testimony to corroborate another, citing Rameshwar s/o Kalyan Singh v. The State of Rajasthan and State (Delhi Admn.) v. V. C. Shukla.

  • The complainant's reliance on another Section 108 statement from a co-accused for corroboration is questioned, as it is argued to be unreliable due to its source and potential for discrimination.

• Unsubstantiated Assumption of Alterations: The assertion that the respondent made the alleged alterations to an Appendix 5B Certificate is deemed baseless and unsubstantiated by any independent corroboration. It is suggested that such changes could be erroneous or accidental, a possibility overlooked by the complainant.

• Irrelevance and Superfluous Nature of the Certificate: The respondent argues that the CA Certificate in Appendix 5B was totally superfluous and irrelevant in the specific circumstances, as it is only required for EPCG licenses or Advance Authorization for Annual Requirement, neither of which was involved in the majority of applications mentioned. Many licenses were issued based on self-declaration or SION.

• Lack of Direct Causal Link to Revenue Loss: It is highlighted that the mere signing of an Appendix 5B Certificate does not directly cause revenue loss. The application must be scrutinised, accepted, vetted, and processed by empowered authorities before any benefits accrue or loss occurs, implying that multiple authorities are involved in the process.

• Distinction Between Intentional Misconduct and Error/Oversight: The defence stresses the importance of differentiating between intentional misconduct and an oversight or error, particularly when assessing "due diligence" in a professional context.

• Routine Practice and Plausible Delegation: Relying on a reputed consultancy for validating content prior to certification is presented as routine practice and not unusually careless, suggesting that such plausible delegation of verification does not amount to gross negligence. This distinction is crucial to avoid equating a "lay error" with "systemic fraud".

• Proportionality of Sanctions: The penalties already imposed under the Customs Act and those sought under the instant complaint are argued to fail the test of proportionality of alleged misconduct and sanctions.

• Absence of Mens Rea: It is asserted that there is no evidence to suggest the respondent was aware that the Advance Authorizations would be misused, indicating a lack of mens rea (guilty intent). The respondent is stated to have acted in good faith and in the normal course of professional practice.

• Judicial Precedents Challenging Disciplinary Actions: Several court decisions are cited where disciplinary actions against Chartered Accountants were overturned or significantly challenged:

  • ICAI vs M S Rathi AIR 2017 SUPREME COURT 4471: The Supreme Court upheld the Bombay High Court's rejection of ICAI's appeal, even when the CA issued certificates without verifying records.

  • AIR1968DELHI283: The Supreme Court found no conclusive evidence of professional misconduct.

  • K.K. Sindwani: The Punjab & Haryana High Court found disciplinary proceedings unjustified as the complaint had been resolved.

  • Council Of The Institute Of Chartered Accountants Of India v. G. Pattabhi Rama Charya: The Andhra High Court overturned the Council’s decision, noting the respondent's actions did not amount to gross negligence or misconduct.

  • DRI vs Moni & Kanchan Agarwal: The Delhi High Court observed that when two views are possible, the view favouring the accused should be adopted.

  • Institute of Chartered Accountants of India v. Naresh Singla & Anr: The Delhi High Court dismissed ICAI's petition, ruling that an omission regarding a provisional balance sheet was a technical error and not professional misconduct.