Facts of the Case

Information was received by the Disciplinary Directorate of the Institute of Chartered Accountants of India in June 2018 through the Ministry of Corporate Affairs, forwarding a communication from the Central Bureau of Investigation. The information related to a Final Report dated 28.06.2007 filed before the Court of Special Judge, CBI, Patiala, arising out of FIR No. 06 of 2007 dated 26.03.2007. It was alleged that Shri A.L. Chawla, Divisional Manager of National Insurance Company Ltd., Ludhiana, along with the respondent, CA Rajesh Nakra, who was acting as a surveyor, demanded a bribe of ₹1,50,000 for settlement of a fire insurance claim of Shri Naresh Dhall, Proprietor of M/s Shally Collections, Ludhiana. The respondent was arrayed as Accused No. 2 in the charge sheet filed by CBI. Based on this information, disciplinary proceedings were initiated before the Board of Discipline.

Issues Involved

Whether disciplinary proceedings could be sustained when the alleged misconduct pertained to the year 2007 but the reference was received by ICAI only in 2018, and whether the respondent was guilty of “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949.

Petitioner’s Arguments

The information placed before the Board originated from the CBI charge sheet alleging involvement of the respondent in a bribery conspiracy under the Prevention of Corruption Act, 1988. The allegations were relied upon to contend that the respondent’s conduct was unbecoming of a Chartered Accountant and attracted disciplinary action for Other Misconduct.

Respondent’s Arguments

The respondent submitted that he had been falsely implicated in the criminal case and that the matter was sub judice before the Hon’ble Punjab and Haryana High Court, which had stayed further proceedings and sentence. It was contended that the Disciplinary Directorate proceeded only on the basis of the charge sheet without any independent or additional evidence. The respondent specifically invoked Rule 12 of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, pointing out that the alleged misconduct occurred in 2007, whereas the information was received by ICAI in 2018, i.e., after a lapse of more than 11 years, far beyond the prescribed period of seven years.

Court Order / Findings

The Board of Discipline examined the chronology of events and noted that the alleged misconduct took place in 2007 and the reference was received by the Institute only in 2018. The Board observed that a considerable period of more than 11 years had elapsed both from the date of the alleged misconduct and from the date of cause of action. Invoking Rule 12 of the 2007 Rules, the Board held that the matter was hit by limitation. Without entering into the merits of the bribery allegations or the pending criminal proceedings, the Board decided to close the case solely on the ground of delay, holding that continuation of disciplinary proceedings after such an inordinate lapse of time was not justified.

Important Clarification

The Board clarified that while disciplinary proceedings are independent of criminal proceedings, initiation of action after an inordinate and unexplained delay defeats the purpose of fair inquiry, especially where evidence becomes difficult to secure. Rule 12 of the 2007 Rules empowers the Board to decline to proceed in such time-barred matters.

Final Outcome

The Board of Discipline, ICAI, held that CA Rajesh Nakra was NOT GUILTY of Other Misconduct under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949. The case was closed 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 07.05.2024.

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