Facts of the Case

The complainant, Shri Varadharajan S, Director of M/s Coologeex Technology Solutions Private Limited, filed a complaint against the respondent, CA K. M. Ramakrishnan, alleging that the respondent backdated his resignation as statutory auditor. It was alleged that although the respondent claimed to have resigned on 02.12.2020, no resignation letter was communicated to the company until 15.12.2021.

The complainant alleged that the respondent filed Form ADT-3 with the Registrar of Companies mentioning 02.12.2020 as the date of resignation, despite continuing to act as auditor thereafter. Due to this conduct, the company was allegedly prevented from appointing a new auditor, faced statutory non-compliances, penalties, and loss of ability to carry forward losses for the relevant assessment year.

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 backdating his resignation as statutory auditor, filing Form ADT-3 with an incorrect resignation date, and obstructing appointment of a new auditor.

Petitioner’s Arguments

The complainant contended that no resignation letter was received prior to 15.12.2021 and that the respondent continued to act as statutory auditor by seeking financial statements, bank statements and confirmations even during 2021. It was argued that the resignation letter purportedly dated 02.12.2020 had no acknowledgment or proof of delivery and was never communicated to the Board of Directors. The complainant further relied on email correspondence and testimony of the incoming auditor to show that the respondent refused to issue No Objection Certificate, thereby restricting appointment of a new auditor and causing statutory defaults.

Respondent’s Arguments

The respondent contended that he had orally communicated his intention to resign much earlier and that the resignation date mentioned in ADT-3 reflected such prior oral communication. He argued that resignation by an auditor is an independent act not requiring acceptance by the company and that service of resignation by email is legally valid. The respondent further submitted that delays in statutory filings were attributable to the complainant’s own inaction and that no malafide intent could be attributed to him.

Court Order / Findings

The Board of Discipline examined documentary evidence, email correspondence, witness testimonies and the sequence of events. The Board noted that the alleged resignation letter dated 02.12.2020 bore no acknowledgment, proof of delivery, or evidence of communication to the company. The Board further observed that emails dated 10.03.2021 and 09.06.2021 clearly showed the respondent continuing to act as statutory auditor and seeking financial information, which was inconsistent with his claim of having resigned in December 2020.

The Board also relied upon document metadata of the resignation email sent on 15.12.2021, which showed that the resignation document itself was created on that date, conclusively disproving the claim of resignation on 02.12.2020. The testimony of the incoming auditor established that the respondent did not issue No Objection Certificate, thereby restricting appointment of a new auditor.

The Board concluded that no resignation letter was sent prior to 15.12.2021 and that the respondent deliberately backdated his resignation while filing ADT-3, amounting to conduct unbecoming of a Chartered Accountant.

Important Clarification

The Board clarified that resignation by a statutory auditor must be properly communicated and evidenced. Backdating resignation, filing statutory forms with incorrect dates, and continuing to act as auditor while claiming resignation constitute serious professional misconduct. Oral communication without documentary proof cannot substitute statutory compliance.

Final Outcome

The Board of Discipline, ICAI, held that CA K. M. Ramakrishnan was GUILTY of Other Misconduct under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949. In exercise of powers under Section 21A(3), the Board ordered removal of his name from the Register of Members for a period of 15 days, by order dated 25.09.2024, pursuant to its findings dated 27.08.2024.

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