Facts of the Case

The respondent, CA Heetendra Kumar Jain, was the statutory auditor of M/s Bensfurt Internet Private Limited and resigned on 11.08.2020. He duly filed Form ADT-3 (Notice of resignation by auditor) on 17.08.2020. To fill the casual vacancy, the company approached M/s Vishnoi & Co. for appointment as the new statutory auditor.

In compliance with the Chartered Accountants Act, 1949 and the Code of Ethics, 2009, M/s Vishnoi & Co., prior to accepting the audit, communicated with the respondent on 17.08.2020 by email and registered post seeking professional objections, if any. Upon no response, a reminder email dated 31.08.2020 was sent, to which the respondent replied the same day seeking copies of the Board and EGM minutes, appointment letter, and statutory forms ADT-1 and MGT-14 with MCA payment proof.

The required documents were furnished on 31.08.2020. However, the respondent expressed his inability to issue NOC on the ground that the Board Resolution dated 13.08.2020 was not in accordance with the provisions of the Companies Act, 2013. Despite repeated follow-ups by the incoming auditor, the respondent maintained his objection, resulting in M/s Vishnoi & Co. refusing to accept the audit assignment.

The complaint was filed by Shri Ambuj Sharma claiming that the respondent deliberately created obstacles in issuing NOC, thereby preventing appointment of a new auditor.

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 refusing to issue No Objection Certificate to the incoming auditor, and whether the complainant had the requisite locus standi to maintain the complaint.

Petitioner’s Arguments

The complainant alleged that the respondent intentionally ignored professional ethics and acted with malafide intent by refusing to issue NOC, thereby obstructing the company from appointing a new statutory auditor and causing compliance difficulties.

Respondent’s Arguments

The respondent submitted that issuance of NOC was delayed solely due to non-payment of undisputed audit fees amounting to ₹11,800, despite multiple follow-ups. He clarified that the NOC was issued after payment of outstanding fees. The respondent further contended that the matter involved professional dealings between two Chartered Accountants and did not concern the complainant directly.

It was also submitted that the complainant was neither a Director nor an officer of the company and lacked authorization to file the complaint on behalf of the company.

Court Order / Findings

The Board of Discipline observed that the complaint was heard ex-parte against the complainant, who failed to appear despite due notice and had refused to accept service. Upon examining the records, the Board noted that Shri Ambuj Sharma was neither a Director nor an officer of the company. The authorization filed with the complaint was signed by only one Director and was unsupported by minutes of the Board meeting, thereby failing to establish proper authority or locus standi.

The Board further observed that the respondent had satisfactorily explained the reason for delay in issuing NOC, which was attributable to non-payment of audit fees, and that the NOC was eventually issued after payment. The Board held that the issue pertained to professional communication between two Chartered Accountants and did not directly affect the complainant.

In view of the absence of locus standi and lack of substantive evidence supporting the allegations, the Board found no professional or other misconduct on the part of the respondent.

Important Clarification

The Board clarified that withholding of NOC due to non-payment of undisputed audit fees does not amount to professional misconduct. Further, a complaint can be maintained only by an affected or aggrieved person with proper authorization. Absence of locus standi is fatal to disciplinary proceedings.

Final Outcome

The Board of Discipline, ICAI, held that CA Heetendra Kumar Jain was NOT GUILTY of Other Misconduct under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949. 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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