Facts of the Case

A complaint was filed by Shri Vikram Singh Chopra against CA Rajesh Kumar Chandak alleging professional misconduct in relation to his involvement with multiple corporate entities while continuing to practice as a Chartered Accountant. The Respondent was associated with several companies including Kuledeep Vinayak Pvt. Ltd., Rachit Vinayak Pvt. Ltd., High Value Investments Pvt. Ltd., High Value Securities Pvt. Ltd., Sushwani Infosystems Pvt. Ltd. and High Value Management Consultants Pvt. Ltd.

The complaint alleged that although the Respondent claimed to be a “Director Simplicitor”, he actively participated in management, signed directors’ reports, financial statements, statutory forms including MGT-7 and investment application documents, and was involved in day-to-day operations of the companies. It was further alleged that the Respondent engaged in business activities and acted as arbitrator while continuing to practice as a Chartered Accountant, without obtaining prior permission of the ICAI Council, in violation of the Chartered Accountants Act, 1949 and applicable Regulations.

The Director (Discipline), after investigation, formed a prima facie opinion holding the Respondent guilty of professional misconduct. The matter was thereafter placed before the Board of Discipline. The final hearing was conducted on 25 April 2022, and the Respondent submitted written representations and appeared through counsel.

Issues Involved

Whether the Respondent, while holding himself out as Director Simplicitor, exceeded the permissible role by engaging in business and management activities, signing statutory documents and financial statements, and participating in day-to-day operations of companies, thereby contravening Regulation 190A of the Chartered Accountants Regulations, 1988 and committing professional misconduct under Section 11(1) of Part I of the First Schedule to the Chartered Accountants Act, 1949.

Petitioner’s Arguments

The complainant contended that the Respondent was not merely a passive director but was actively involved in management, compliance and operational decision-making of various companies. It was argued that the Respondent signed directors’ reports, financial statements, statutory forms, and investment documents, and engaged in activities clearly beyond the scope permitted to a Director Simplicitor. The complainant submitted that such conduct amounted to engagement in business while in practice as a Chartered Accountant, in violation of statutory and ethical norms.

Respondent’s Arguments

The Respondent submitted that he acted only as a Director Simplicitor and did not receive remuneration except sitting fees for attending board meetings. He contended that signing of documents was incidental to his role as director and that the companies were family-owned investment companies with no active business operations. The Respondent further submitted that he did not act as Managing Director, Whole-Time Director or Key Managerial Personnel and therefore did not violate the provisions of the Act or Regulations.

Court / Authority Order and Findings

The Board of Discipline examined the documentary evidence including directors’ reports, financial statements, MGT-7 forms, investment application documents and records showing the Respondent’s involvement in multiple companies. The Board noted that the Respondent signed statutory documents and financial statements as director, participated in corporate actions, and was involved in activities far exceeding the limited role of Director Simplicitor as recognised under Regulation 190A.

The Board observed that a Director Simplicitor is permitted only to attend board meetings, receive sitting fees, and devote time to board meetings and related activities, and is expressly prohibited from engaging in day-to-day management or business operations. The Board held that the Respondent’s conduct demonstrated active engagement in business and management of companies, without obtaining prior permission of the ICAI Council, thereby violating Regulation 190A and Section 11(1) of Part I of the First Schedule to the Chartered Accountants Act, 1949.

The Board rejected the defence that absence of remuneration or designation as Managing Director absolved the Respondent, holding that the nature of activities performed was determinative. The Board concluded that professional misconduct was clearly established.

Important Clarification

The Board clarified that the concept of “Director Simplicitor” is narrowly defined and does not permit Chartered Accountants in practice to engage in management, compliance or operational activities of companies. Signing of statutory documents, involvement in corporate affairs and business decision-making beyond board meetings constitutes engagement in business and amounts to professional misconduct unless prior permission of the ICAI Council is obtained.

Final Outcome

The ICAI Board of Discipline held CA Rajesh Kumar Chandak (M. No. 054637) guilty of Professional Misconduct under Section 11(1) of Part I of the First Schedule to the Chartered Accountants Act, 1949. In exercise of powers under Section 21A(3) of the Act, by order dated 21 June 2022, the Board imposed a monetary penalty of ₹1,00,000 (Rupees One Lakh only) on the Respondent, payable within 60 days from receipt of the order.

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