Facts of the Case

The proceedings arose on the basis of press releases issued by the Central Bureau of Investigation dated 02.04.2011 and 25.04.2011 and news reports published in The Times of India alleging involvement of the respondent, CA Hari Sethumadhavan Nair, in structuring and funding arrangements relating to M/s Swan Telecom Private Limited and M/s Tiger Traders Private Limited in connection with grant of Unified Access Service Licences in the 2G Spectrum matter.

It was alleged that the respondent, while being Company Secretary of Swan Telecom Private Limited, Director on the Boards of various companies and authorised bank signatory, acted in collusion with CA Gautam Doshi and others to structure companies and transfer funds of ₹95.51 crores and ₹3 crores to Tiger Traders Private Limited and Swan Telecom Private Limited respectively, and dishonestly submitted false information to the Department of Telecommunications to conceal material facts relating to shareholding and eligibility for grant of UAS licences.

Issues Involved

Whether the respondent Chartered Accountant was guilty of “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 for allegedly playing an active role in structuring and funding companies to circumvent telecom licensing guidelines, as alleged in the 2G Spectrum case.

Allegations Considered

The allegations, based on the CBI charge sheet and media reports, asserted that the respondent structured companies, facilitated transfer of funds, acted as authorised signatory, and submitted false information to DoT regarding shareholding of Swan Telecom Private Limited so as to conceal its alleged association with the Reliance ADA Group and enable the company to obtain UAS licences.

Respondent’s Submissions

The respondent submitted that the matter was sub judice before the Special CBI Court and that he had contested the allegations at every stage of the criminal proceedings. He stated that he acted as an employee of the Reliance ADA Group and always followed instructions given after consulting professionals and advisors, maintaining due diligence and professional standards. He pleaded innocence and contended that mere filing of a charge sheet could not form the basis of disciplinary action.

Reliance was placed on the judgment of the Hon’ble Supreme Court in SBI vs. Neelam Nag, contending that continuation of disciplinary proceedings prior to adjudication by the Trial Court would undermine the presumption of innocence.

Court Order / Findings

The Board of Discipline examined the charge sheet, submissions of the respondent and, most importantly, the detailed judgment dated 21.12.2017 passed by the Special CBI Court in CC No. 01/11 (2G Spectrum case). The Board noted that the Trial Court categorically held that Swan Telecom Private Limited stood transferred to the DB Group by 03.03.2007 and that Reliance ADA Group held only a minority shareholding of 9.9%, rendering the company fully eligible to apply for fresh licences.

The Board further noted that the Trial Court held that Clause 8 of the UASL Guidelines restricted only equity investment beyond 10% and did not prohibit funding through debt instruments, preference shares or other financial instruments. The Trial Court found that the prosecution’s case was based on misreading, selective reading, non-reading and out-of-context reading of official records and that no evidence of conspiracy, illegality or criminality was established against any accused.

In view of the acquittal of all accused, including the respondent, and the clear findings of the Special CBI Court, the Board held that the respondent had substantially proved his defence and that no professional or other misconduct was made out.

Important Clarification

The Board clarified that disciplinary proceedings cannot be sustained merely on the basis of allegations, press releases or charge sheets when the competent criminal court, after detailed appreciation of evidence, has acquitted the respondent and found no illegality or criminal intent. Acts performed in an executive or employment capacity, without evidence of unethical conduct as a Chartered Accountant, do not constitute other misconduct.

Final Outcome

The Board of Discipline, ICAI, held that CA Hari Sethumadhavan Nair was NOT GUILTY of Other Misconduct falling within the meaning of Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 read with Section 22. Accordingly, the Board ordered closure of the case under Rule 15(2) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, by order dated 10.02.2025.

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