Facts of the Case

The complainant, Mrs. Pritha Ponraj, widow and legal heir of late CA S. Ponraj, filed a complaint against the respondent, CA K. Venkatraman, partner of M/s Ponraj & Co., alleging multiple acts of professional misconduct following the death of her husband on 30.11.2020. Late CA S. Ponraj was the founder partner and Head Office In-charge of the firm, and the head office was operated from his privately owned premises.

The respondent joined the firm as a partner with effect from 01.12.2020, i.e., after the death of the complainant’s husband. The complaint primarily related to settlement of dues of the deceased partner’s practice, non-payment of alleged goodwill, non-furnishing of audited financial statements, bank reconciliation statements, alleged misuse of digital signatures, alleged unauthorised operation of bank accounts, alleged forgery in reconstituted partnership deed, and other actions arising out of internal partnership and succession disputes.

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 in relation to alleged non-payment of dues, non-furnishing of audited accounts, goodwill claims, and actions taken after the death of a senior partner.

Petitioner’s Arguments

The complainant alleged that the respondent falsely represented himself as having taken over the individual practice of her deceased husband, failed to pay her rightful share of professional income and goodwill, did not furnish full audited financial statements and bank reconciliations, misused digital signatures of the deceased partner, unauthorisedly shifted office premises, operated bank accounts without consent, usurped secretarial service fees, and initiated false criminal proceedings against her and her son. It was contended that these acts were unethical, illegal, and amounted to gross professional misconduct.

Respondent’s Arguments

The respondent denied all allegations and submitted that he was not a partner during the lifetime of the deceased partner and joined the firm only from 01.12.2020. It was contended that the complainant had been provided access to ledger extracts and inspection of books of accounts. The respondent further submitted that there was no clause in the partnership deed entitling the legal heir to goodwill or mandating audit of accounts prior to furnishing the same, and that the dispute was purely civil and contractual in nature relating to settlement of dues.

Court Order / Findings

The Board of Discipline examined the partnership deeds, records of the firm, ledger extracts, and submissions of both parties. The Board noted that the respondent was not a partner at the time of death of CA S. Ponraj and became a partner only thereafter. The Board further observed that the latest partnership deed dated 01.01.2018 did not contain any clause entitling the legal heir of a deceased partner to goodwill or sharing of profits after death.

Relying on Para 2.14.1.2(iv) of the Revised Code of Ethics, 2020, the Board held that goodwill can be claimed by a legal heir only where the partnership deed specifically provides for such entitlement, which was absent in the present case. The Board also examined Section 12(e) of the Partnership Act, 1932, and held that while a legal heir is entitled to inspect books of accounts, there is no statutory requirement obligating the remaining partners to first get the accounts audited and then furnish the same, especially when the partnership deed is silent on audit.

The Board found that the complainant had already been provided ledger extracts and inspection of accounts, and that the allegations essentially arose from a dispute over settlement of dues and goodwill, which did not constitute professional misconduct.

Important Clarification

The Board clarified that disputes relating to settlement of partnership dues, goodwill, inspection of accounts, and succession issues are civil in nature. In the absence of specific clauses in the partnership deed mandating goodwill payment or audit obligations, failure to accede to such demands does not amount to Other Misconduct under the Chartered Accountants Act, 1949.

Final Outcome

The Board of Discipline, ICAI, held that CA K. Venkatraman was NOT GUILTY of Other Misconduct under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949. The complaint was ordered to be 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 06.07.2024.

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