Facts of the Case

The disciplinary proceedings arose from a complaint filed by Shri Girdhar Viramgama, Surat, against CA Arvind Soni (M. No. 127992), Surat, Gujarat. The complaint related to M/s Balaji Embroidery Pvt. Ltd., a company incorporated in 2005 with multiple promoter-directors including the complainant and the respondent. Disputes arose between the parties concerning management, ownership and execution of an MoU dated 20.06.2013, followed by litigation before the Hon’ble NCLT and other authorities.

It was alleged that while holding a Certificate of Practice, the respondent acted as a promoter director of the company, actively participated in management, signed statutory filings on the MCA portal, and engaged in business activities without obtaining prior permission of the Council of ICAI as mandated under Regulation 190A of the Chartered Accountants Regulations, 1988. It was further alleged that the respondent misrepresented facts before banks and authorities and filed statutory forms without proper board authorisation.

Issues Involved

Whether a Chartered Accountant in practice can act as a promoter director and actively engage in management and business of a company without obtaining prior permission of the Council, and whether such conduct amounts to professional misconduct under Item (11) of Part I and Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949.

Petitioner’s Arguments

The respondent contended that the complaint was based on civil disputes and pending litigation and that he was not bound by the MoU relied upon by the complainant. He argued that his role was limited and that the company’s affairs were carried out in accordance with board decisions. It was further contended that disciplinary proceedings should not be sustained when the issues were already sub judice before judicial forums and that the business activities did not amount to engaging in another occupation.

Respondent’s Arguments

The Disciplinary Directorate relied upon documentary evidence including MCA filings, statutory forms, Board’s reports and digital signatures demonstrating that the respondent actively participated in management and statutory compliance of the company while holding Certificate of Practice. It was contended that Regulation 190A clearly prohibits a Chartered Accountant in practice from engaging in any other business or occupation without prior Council approval, and that acting as promoter director goes beyond permissible limits.

Court Order / Findings

The Board of Discipline examined the record and observed that the respondent was a promoter director of M/s Balaji Embroidery Pvt. Ltd. and actively participated in management by signing statutory forms such as MGT-7, AOC-4, DIR-12 and CHG-4 on the MCA portal. The Board noted that the respondent continued to authenticate financial statements and statutory filings over several years while holding Certificate of Practice, without obtaining prior permission of the Council.

The Board held that Regulation 190A read with the Code of Ethics permits limited roles such as director simplicitor, subject to conditions, but does not permit acting as promoter director or engaging in business management without Council approval. The Board further held that participation in management and statutory compliance of the company amounted to engaging in business other than the profession of accountancy.

Accordingly, the respondent was held 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 read with Section 22.

Important Clarification

The Board clarified that a Chartered Accountant in practice must strictly adhere to Regulation 190A and the Code of Ethics. Acting as a promoter director or participating in management of a business entity without prior Council permission is impermissible, irrespective of whether such participation arises out of internal disputes or litigation.

Final Outcome

The Board of Discipline, in exercise of powers under Section 21A(3) of the Chartered Accountants Act, 1949, imposed a fine of ₹50,000 (Rupees Fifty Thousand only) on CA Arvind Soni (M. No. 127992) for professional misconduct.

Source Link- https://www.mytaxexpert.co.in/uploads/1768898080_ShriGirdharViramgamavsCA.ArvindSoniM.No.127992Gujarat.pdf

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