Facts of the Case

The complainant, Ms. Namika Singhal, proprietor of M/s Tirupati Marketing, Ghaziabad, engaged in distribution of products of Bajaj Electricals and Pidilite Industries (Fevicol). In 2019, the complainant supplied Fevicol material worth ₹1,98,523 to M/s HP Hardware, legally known as GVR Impex Private Limited, in which the respondent, CA (Ms.) Rakesh Verma, was one of the Directors along with two other individuals. Against the supplies made, only ₹60,000 was paid and the balance amount of ₹1,38,523 remained unpaid.

It was alleged that the GST registration of the respondent company stood in the respondent’s name, while business was conducted under the trade name “HP Hardware”. Despite repeated assurances, the outstanding amount was not cleared and a cheque issued on behalf of the company was stopped. It was further alleged that the respondent closed the business premises overnight without settling the complainant’s dues and was involved in multiple business entities while holding a full-time Certificate of Practice as a Chartered Accountant.

Issues Involved

Whether the respondent Chartered Accountant was guilty of professional misconduct under Item (11) of Part I and “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 for acting as a Whole-Time Director in companies without obtaining specific permission from ICAI while holding a Certificate of Practice, and for conduct unbecoming of the profession in relation to unpaid commercial dues.

Petitioner’s Arguments

The complainant alleged that the respondent, while being a practising Chartered Accountant, was simultaneously acting as Director in several companies and LLPs, including M/s Opera Global Pvt. Ltd., M/s PPR Trading and Investment Pvt. Ltd., AAA Insolvency Professionals LLP and AAAG & Co., without requisite permission from ICAI. It was further contended that the respondent failed to clear the balance amount payable for goods supplied, stopped payment of cheques, and absconded with stock, thereby causing financial loss and hardship to the complainant.

Respondent’s Arguments

The respondent denied the allegations and contended that the dispute was purely commercial in nature and unrelated to her conduct as a Chartered Accountant. It was submitted that she was not actively involved in the operations of GVR Impex Private Limited and that the appropriate remedy for the complainant was to file a civil recovery suit. The respondent further submitted that she had written to ICAI seeking permission and relied upon an old permission letter dated 11.10.1993 issued by the Institute allowing her to continue salaried employment as General Manager of Opera House Exports Limited alongside practice.

Court Order / Findings

The Board of Discipline examined the records, submissions and evidence on file. The Board noted that the respondent admittedly held a full-time Certificate of Practice and was acting as a Director in multiple companies. The Board observed that the permission letter produced by the respondent permitted her only to continue salaried employment as a General Manager and did not grant any permission to act as a Director, Managing Director or Whole-Time Director of any company.

The Board further noted that the respondent failed to produce any specific permission from ICAI allowing her to act as a Director while holding a Certificate of Practice. Acting as a Whole-Time Director without such permission was held to be a clear violation of Item (11) of Part I of the First Schedule.

With regard to unpaid dues, the Board took note of the preliminary police report dated 19.07.2021, which confirmed that goods were supplied by the complainant to the respondent’s company and that payment for the same was not fully made. The Board held that such conduct, when viewed in conjunction with the respondent’s professional status, amounted to conduct unbecoming of a Chartered Accountant.

Important Clarification

The Board clarified that a practising Chartered Accountant holding a Certificate of Practice cannot act as a Managing Director or Whole-Time Director of a company without obtaining specific prior permission from the Council of ICAI. Permissions granted for salaried employment cannot be extended or interpreted to cover directorships. Further, persistent non-payment of legitimate commercial dues reflects adversely on the dignity and integrity of the profession and constitutes Other Misconduct.

Final Outcome

The Board of Discipline, ICAI, held that CA (Ms.) Rakesh Verma was GUILTY of Professional and Other Misconduct under Item (11) of Part I and Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949. In exercise of powers under Section 21A(3), the Board ordered removal of her name from the Register of Members for a period of 30 days, by order dated 25.01.2025, pursuant to its findings dated 12.06.2024.

Source Link - https://www.mytaxexpert.co.in/uploads/1768894603_Ms.NamikaSinghalvs.CAMs.RakeshVermaBoardofDisciplineICAI.pdf

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