Facts of the Case

The complainant, Shri Leif Baecklund, acting as Bankruptcy Receiver of Quinn Investments Sweden AB and its group entities, filed a complaint against the respondent, CA Raghu Marwah of M/s R.N. Marwah & Co., alleging serious professional misconduct. The allegations arose from purported service agreements dated 15.06.2011 and FEMA Advisory Service agreements dated 04.05.2011 entered into by the respondent firm with Quinn Logistics India Pvt. Ltd. and Quinn Lodgings India Pvt. Ltd. It was alleged that these agreements were sham and commercially unreasonable, that no services were actually rendered, and that false invoices of unusually high value were raised.

It was further alleged that the respondent suppressed material facts and initiated parallel legal proceedings before the Hon’ble High Court of Andhra Pradesh and the Patiala House Courts, Delhi, obtaining ex-parte and winding-up orders by misrepresentation and without disclosing relevant proceedings, thereby obstructing the Bankruptcy Receiver from taking control of company assets.

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 for entering into sham agreements, raising false invoices without rendering services, and suppressing material facts before courts, thereby bringing disrepute to the profession.

Petitioner’s Arguments

The complainant contended that the respondent deliberately entered into collusive service agreements containing abnormal clauses restraining removal of directors, which were not part of normal commercial practice. It was argued that the respondent raised inflated invoices, manipulated voucher numbering, and simultaneously approached multiple courts to secure favourable orders by concealing material facts. Such conduct, according to the complainant, was intended to defeat insolvency proceedings and constituted grave misconduct unbecoming of a Chartered Accountant.

Respondent’s Arguments

The respondent denied the allegations and claimed that genuine FEMA advisory and professional services were rendered pursuant to valid engagement letters. He contended that invoices were raised in the normal course of business, that withdrawal of court proceedings was due to commercial considerations and litigation costs, and that disciplinary proceedings should not continue once the complainant sought to withdraw the complaint. The respondent also pleaded that he suffered financial loss and reputational damage and sought a lenient view.

Court Order / Findings

The Board of Discipline examined the service agreements, engagement letters, invoices, accounting records, court orders and the sequence of legal proceedings. The Board observed that the conditions incorporated in the purported service agreements were commercially unreasonable and not reflective of bona fide professional engagements. It was noted that a substantial portion of the respondent’s billing during the relevant period related only to the two companies in question, that invoices carried suspicious numbering, and that services claimed were not substantiated by evidence.

The Board further found that the respondent had approached different judicial forums within a short span of time, suppressed material facts, and adopted inconsistent stands before courts. The conduct was held to be pre-planned and aimed at creating legal complications to the detriment of the complainant and other stakeholders. The Board concluded that the respondent’s actions demonstrated lack of integrity, misuse of professional position, and conduct clearly unbecoming of a Chartered Accountant.

Important Clarification

The Board clarified that raising false or doubtful invoices, entering into sham agreements, and suppressing material facts before courts strike at the core of professional integrity. Even where civil disputes or insolvency proceedings are involved, a Chartered Accountant is expected to act transparently and ethically, failing which disciplinary action is warranted.

Final Outcome

The Board of Discipline, ICAI, held that CA Raghu Marwah was GUILTY of Other Misconduct under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 read with Section 22. In exercise of powers under Section 21A(3), the Board removed his name from the Register of Members for a period of three months and imposed a fine of ₹1,00,000, payable within 60 days from receipt of the order, by order dated 21.05.2024.

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