Facts of the Case

The complainant, Ms. Bhavana Pundlikrao Gawali, former Member of Parliament, was the founder of M/s Mahila Utkarsh Pratishtha Trust, later converted into a Section 8 Company. Owing to her professional and public commitments, she appointed Mr. Ashok Narayan Gandole as Secretary of the Trust through a Power of Attorney, granting him authority to manage the affairs of the Trust and related group companies. Mr. Gandole appointed the respondent, CA Upendra Gunwantrao Muley, as auditor of the Trust and group entities including M/s Bhavana Agri Product and Services Private Limited, M/s Bhavana Sugar Private Limited and M/s Tirumala Agri Cultivation Private Limited.

The complainant alleged that the respondent colluded with the Trust’s Secretary and misappropriated more than ₹18 crores, failed to comply with statutory requirements, ignored notices from tax and corporate authorities, and caused severe financial and legal consequences to the Trust and companies. Multiple allegations were raised including non-response to Income Tax notices, non-filing of ROC returns, involvement in alleged cash theft of ₹7 crores, receipt of ₹1.30 crores, fabrication of audit appointment letters, issuance of a cheque of ₹3.70 crores as alleged admission of fraud, and involvement in multiple criminal complaints.

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 alleged involvement in misappropriation of Trust funds, receipt of allegedly stolen money, and issuance of a cheque purportedly acknowledging fraudulent conduct.

Petitioner’s Arguments

The complainant alleged that ₹7 crores of Trust cash was stolen by the Secretary and deposited into his bank account, out of which ₹1.30 crores was transferred to the respondent, demonstrating collusion and fraud. It was further alleged that the respondent admitted misappropriation and issued a cheque of ₹3.70 crores towards settlement of fraudulently obtained funds. The complainant relied upon FIRs, police complaints, and alleged confessions to support her case.

Respondent’s Arguments

The respondent denied all allegations and submitted that the ₹1.30 crore received was a legitimate bank transfer towards long-standing professional dues and not cash or illicit funds. He highlighted contradictions in the dates of alleged theft and transfer, noting that the transfer occurred weeks later. It was further submitted that the financial statements of the Trust for the relevant period, prepared by another Chartered Accountant and signed by the complainant herself, did not record any theft or loss of ₹7 crores.

The respondent contended that the cheque of ₹3.70 crores was issued under coercion and was never encashed, as established by bank statements and affidavit. He further pointed out that multiple FIRs filed against him were stayed, quashed or closed by the Hon’ble Bombay High Court and police authorities, which recorded findings of false, malicious and politically motivated complaints. Reliance was also placed on findings of the Enforcement Directorate and Income Tax authorities which contradicted the complainant’s allegations.

Court Order / Findings

The Board of Discipline noted that at the prima facie stage, allegations relating to non-compliances, fabricated appointment, media reports and general accusations had already been dropped. The proceedings were confined only to allegations relating to receipt of ₹1.30 crores and issuance of cheque of ₹3.70 crores.

The Board observed that the complainant failed to discharge the burden of proof. The respondent provided documentary evidence showing that the ₹1.30 crores was received through banking channels as payment of professional dues. No evidence was produced to establish that the funds were stolen or illicit. The Board further noted that the cheque of ₹3.70 crores was never encashed and no evidence existed to prove that it was issued as an admission of guilt.

The Board also took cognizance of judicial and investigative findings, including observations of the Hon’ble High Court and Enforcement Directorate, which recorded that there was no theft of ₹7 crores and that allegations were misleading and contradictory. The complainant’s multiple versions and lack of consistency further weakened her case.

Important Clarification

The Board clarified that serious allegations of fraud and misappropriation must be supported by cogent and credible evidence. Mere FIRs, inconsistent narratives or unsubstantiated accusations cannot form the basis of disciplinary action, particularly where judicial and investigative authorities have recorded contrary findings and exonerated the respondent.

Final Outcome

The Board of Discipline, ICAI, held that CA Upendra Gunwantrao Muley was NOT GUILTY of Other Misconduct under 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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