Facts of the Case

The complainant, Shri Balwant Prasad Singh, Director of M/s Vision India Services Private Limited, filed a complaint against the respondent, CA Jayant Kumar Harlalka, alleging misrepresentation and professional misconduct in relation to a consultancy agreement executed between the complainant company and M/s Sankhu Management Consultancy Private Limited. It was alleged that the respondent and his wife, who were associated with the consultant company, falsely represented their competence to provide legal and liaison services in connection with Project Udaan, a skill development programme funded by the National Skill Development Corporation. The complainant further alleged that commission at the rate of 4% of the disbursed amount was demanded and that cheques aggregating ₹50 lakhs were taken, of which ₹5 lakhs were encashed. Additional allegations included charging placement fees and falsely claiming authority to provide legal services despite not being authorised under the Advocates Act, 1961.

The Director (Discipline) formed a Prima Facie Opinion holding the respondent prima facie guilty only under Item (11) of Part I of the First Schedule, while holding him not guilty under Item (10). The Board concurred and proceeded to adjudicate the matter.

Issues Involved

Whether the respondent Chartered Accountant was guilty of professional misconduct under Item (11) of Part I of the First Schedule to the Chartered Accountants Act, 1949 for allegedly acting as director and engaging in business while holding Certificate of Practice, and whether the consultancy and commission-related allegations constituted misconduct.

Petitioner’s Arguments

The complainant contended that the respondent was effectively controlling the affairs of the consultant company, misrepresented his competence to provide legal and liaison services, sought commission linked to NSDC disbursements, and charged placement fees per candidate. It was alleged that such acts amounted to engagement in other business and misuse of professional position while holding Certificate of Practice.

Respondent’s Arguments

The respondent denied the allegations and submitted that the consultancy agreement was entered after his resignation from directorship, which stood corroborated by MCA records. It was argued that he signed documents only as an authorised representative pursuant to a board resolution and not in the capacity of a director or as a practising Chartered Accountant rendering non-permissible services. The respondent further contended that raising consultancy invoices was lawful, that allegations of commission were baseless, and that the complainant had not approached the Board with clean hands, particularly in view of cheque dishonour issues.

Court Order / Findings

The Board of Discipline examined the agreement, documentary evidence, MCA records and submissions of both parties. The Board noted that the respondent had resigned from directorship in March 2017, whereas the consultancy agreement between the complainant company and the consultant company was entered in February 2018. The Board observed that although the respondent had been a director while holding Certificate of Practice prior to resignation, the complainant was not connected with that period and the cause of action did not arise then.

The Board further held that raising consultancy invoices was legally permissible, that allegations of commission were unjustified, and that there was no material to establish that the respondent was engaged in any occupation other than the profession of Chartered Accountancy at the time of the agreement. Considering the authorisation by board resolution and deduction of TDS under Section 194J of the Income-tax Act, the Board concluded that the charge under Item (11) was not sustainable.

Important Clarification

The Board clarified that professional misconduct under Item (11) of Part I requires a clear nexus between holding Certificate of Practice and engagement in other business or occupation. Where contractual arrangements arise after resignation from directorship and services rendered are within permissible professional limits, disciplinary action is not warranted. However, the Board cautioned the respondent to avoid conduct that may create suspicion in the minds of clients or the public.

Final Outcome

The Board of Discipline, ICAI, held that CA Jayant Kumar Harlalka was NOT GUILTY of Professional Misconduct under Item (11) of Part I 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 30.05.2024.

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