Facts of the Case

A complaint was filed by Ms. Radha Mehta against CA Sanjeev Chhabra alleging extensive professional misconduct arising from a long-standing fiduciary relationship. The Respondent had been appointed as Chartered Accountant by the complainant’s late mother, Smt. Sharda Obhrai, to manage income tax matters, investments, mutual funds and documentation. After the demise of the complainant’s mother in December 2008, the Respondent continued to assist the complainant in managing inherited investments and finances.

The complainant alleged that the Respondent abused the fiduciary position by opening and operating joint bank accounts, diverting funds meant for construction of residential property, misappropriating money through loans and withdrawals, forging documents, misusing PAN details, changing correspondence addresses, filing income tax returns without authority, purchasing property in his wife’s name, and causing financial loss. Multiple civil, criminal and tax proceedings were initiated by the complainant before various forums, including the Delhi High Court and Income Tax authorities.

Issues Involved

Whether the Respondent committed “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 by misappropriating client funds, acting in conflict of interest, forging documents, misusing PAN and bank accounts, and abusing fiduciary obligations owed to the complainant.

Petitioner’s Arguments

The complainant contended that the Respondent exercised complete control over her finances under the guise of professional assistance and systematically siphoned funds from joint accounts, mutual fund redemptions and loans. It was argued that the Respondent failed to return documents, misused digital and banking credentials, concealed transactions, and acted for personal benefit in violation of professional ethics, fiduciary duties and the Code of Conduct applicable to Chartered Accountants.

Respondent’s Arguments

The Respondent denied all allegations and submitted that the joint bank account with the complainant was opened with her full knowledge and consent for the sole purpose of supervising construction of her house while she resided abroad. He contended that all transactions were carried out on the complainant’s instructions and for her benefit, and that there was extensive documentary evidence, including emails, showing bona fide utilisation of funds. The Respondent further submitted that disputes were essentially civil and family in nature, already subject to litigation before competent courts, and that none of the allegations demonstrated professional misconduct in discharge of duties as a Chartered Accountant.

Court / Authority Order and Findings

The Board of Discipline examined the voluminous pleadings, documentary evidence and judicial records. The Board noted that many allegations stemmed from long-standing family and property disputes and were already subject to adjudication before civil courts and the Delhi High Court. The Board observed that the complainant had admittedly opened the joint bank account with the Respondent and that documentary evidence, including account opening forms and correspondence, indicated her knowledge of the account and transactions.

The Board further noted that no independent evidence was produced to conclusively establish misappropriation, forgery or unauthorised use of funds by the Respondent in his professional capacity. Allegations relating to misuse of PAN, filing of income tax returns and diversion of investments were not substantiated beyond assertions. The Board emphasised that disciplinary jurisdiction cannot be invoked to resolve disputed questions of fact arising from civil disputes, unless a clear breach of professional duty is established.

On an overall appreciation of evidence, the Board held that the charges of professional and other misconduct were not proved.

Important Clarification

The Board clarified that a fiduciary or advisory relationship arising from long association does not automatically establish professional misconduct. Allegations of misappropriation or conflict of interest must be supported by cogent and independent evidence demonstrating breach of professional duties under the Chartered Accountants Act, 1949, and disciplinary proceedings cannot substitute civil or criminal adjudication.

Final Outcome

The ICAI Board of Discipline held CA Sanjeev Chhabra (M. No. 088058) Not Guilty of Professional or Other Misconduct under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949. By order dated 28 July 2022, the Board directed 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.

Source Link - https://www.mytaxexpert.co.in/uploads/1768898895_Ms.RadhaMehtavsCA.SanjeevChhabraM.No.088058NewDelhi.pdf

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