--- title: One auditor lost five audits at sister companies. Every incoming replacement met the same threats. description: An auditor removed from five sister companies met every incoming replacement with false dues, threats and demands for lost fees. Fined Rs. 10,000 on each file, after a four-year court stay. case_number: BOD 287/2017 file_number: PR/277/15-DD/285/2015-BOD/287/2017 forum: board-of-discipline institute: icai decided_on: 2021-02-11 punished_on: 2025-07-29 outcome: Fine clauses: Item (2) of Part IV of the First Schedule order_pdf: https://disc.icai.org/wp-content/uploads/2025/08/1.-BOD-287-2017.pdf published: 2026-09-07 author: Jainam Shah keywords: bod 287 2017, bod 288 2017, bod 289 2017, bod 291 2017, bod 375 2017, item 2 part iv first schedule, other misconduct, no objection certificate, opportunity cost, board of discipline fine, delhi high court stay source: /icai/board-of-discipline/bod-287-2017 --- # One auditor lost five audits at sister companies. Every incoming replacement met the same threats. One chartered accountant's firm held the statutory audit of five companies belonging to a single corporate group, all run from one office in Gurgaon, and had done so for years without incident.[^parties] Then, within a single AGM season, every one of the five voted him out, and what happened next was identical at each of them. ## What happened ```timeline A chartered accountant's firm audits five sister companies belonging to one corporate group, reappointed at every annual general meeting without dispute since the companies were young. The group's board recommends a fresh five-year term. Instead, at company after company, the shareholders vote not to reappoint him. He does not attend the adjourned meetings at which each company names a replacement, and later tells the companies by e-mail that he never received notice of them. Each incoming firm writes to him seeking the customary communication before taking up an audit. He answers with claims that large dues remain outstanding at every company, though no bill had ever been raised for the amounts; letters telling the new firms their appointment is unlawful; and a demand running into several lakh rupees for the years of work he says he has lost. One incoming firm gives up and resigns; a company has to bring in a third auditor. A director of the group complains to ICAI on behalf of each of the five companies. Years pass. Two of the five companies wind themselves up voluntarily while their complaints are still pending, and try to withdraw; the Board refuses, holding that a company's closure does not erase a question of professional misconduct. Eventually a single Board hears all five files together, on identical facts. The Board finds him guilty of misconduct on every one of the five files. He takes the findings to the Delhi High Court, which stays them for close to four years. Only once that stay is lifted does the Board pass punishment — a fine on each file, at his own request. ``` Two things ran through all five files. The first was timing. In each case, a claim of unpaid dues surfaced only after the incoming auditor wrote seeking the outgoing auditor's communication — never before, and never as an invoice raised in the ordinary course. The respondent had audited each company's accounts for the year and issued an unqualified report; no bill for any disputed amount existed until the moment a successor appeared (para 8). The second was the tone of the letters themselves. To one incoming firm he wrote: > This is to inform you that your appointment as auditors is strictly unlawful. And, in an earlier e-mail to the same firm, copied to the Registrar of Companies and to ICAI's own Disciplinary Directorate: > You are requested and suggested not to proceed. In case u do so, you will do at your own > risk and cost....... A separate e-mail, produced by the complainant, set out what he wanted for giving up the group's audits: "The above fees are only for the one year, but the opportunity costs for the 5 year is Rs. 7,85,000." (para 11). ## The charge **Item (2) of Part IV of the First Schedule** covers "Other Misconduct" — conduct by a member that does not fit any of the specific, numbered items elsewhere in the Schedule, but that the Board finds unbecoming of a chartered accountant and damaging to the profession's standing.[^item2] It is not about the quality of an audit, and it carries no fixed definition of its own; it exists precisely to catch conduct that the drafters of the numbered items did not anticipate. Three separate acts were alleged against the respondent in each of the five files: raising a false claim of outstanding dues, threatening and misleading the incoming auditors, and misrepresenting to them that he was still validly appointed. The Board found all three proved in every one of the five files and held the respondent guilty of Other Misconduct under Item (2) of Part IV. ## What the respondent said The same defence ran through all five proceedings. On the dues, his position was that the amounts had genuinely been outstanding and that, as the outgoing statutory auditor, he was duty-bound to tell the incoming firm about them. He pointed to an e-mail from the companies' own staff that began "as required by you" — proof, he argued, that the details had been sought rather than volunteered — and noted that once he set out the figures, a part of the amount was in fact paid. On the opportunity cost, he said he had been engaged as auditor of five group companies under an arrangement that also gave him a right of first refusal on fifteen more, and that losing all five in one stroke, without due process, had cost him that right. Asking to be compensated for it was not solicitation. On the removal itself, he argued that the companies' own paperwork was against them: he had never received formal notice of the meetings that dropped him, some of the letters recording his removal looked back-dated, and he had never been given a witness he could cross-examine to test any of it. The Board declined to allow that cross-examination, holding that the question before it was not whether his removal had followed the Companies Act correctly, but whether his own conduct afterwards had brought the profession into disrepute (para 6). ## What the Board held The Board treated the timing of the dues claim as decisive. Fees, it said, are raised when services are rendered, not when a client chooses to accept the work — so an invoice that surfaces only once a successor is in the picture cannot be explained away as ordinary business practice. Raising it at that moment, the Board held, was "clearly unbecoming of a Chartered Accountant" (para 8). The letters to the incoming firms were read the same way. The Board found their "tone and tenor... clearly with an intent to threaten the incoming auditor", and held that if the respondent believed his removal was improper, the answer was to pursue a legal remedy of his own — not to copy the Registrar of Companies and ICAI's Disciplinary Directorate on threatening correspondence to a fellow member, which it read as pressure rather than grievance (para 10). The claim for opportunity cost was treated as part of the same pattern, raised "only to create unnecessary pressure on the Client" (para 11). On the third charge, the Board went to the company's own filings. The respondent had told an incoming firm that he held a valid appointment running to 2018-19; the company's own director's report, filed with the Registrar of Companies, showed no such appointment had ever been made (para 12). The Board also noted that a complaint the respondent had separately filed against one incoming auditor, alleging non-communication, had already been examined and rejected (para 13) — an indication that his own dealings had been tested and had not held up before. ## The order The Board of Discipline found the respondent guilty on all three charges in each of the five files, and its findings — reproduced identically in every one of the five orders — record: > the Respondent had created unwarranted issues of pendency of previous dues, > misrepresentation in previous year audits, NOC, removal of Respondent Firm, raising claim > for opportunity costs etc. to create hurdles for management of the Company... and misused > the legal machinery by marking a copy of his communication with the incoming auditor to the > regulatory authorities instead of writing directly to them raising their grievance (para 15) That finding was recorded in February 2021. Punishment did not follow for more than four years. The respondent took the findings to the Delhi High Court, which granted an interim stay within weeks and did not vacate it until a final order dated 5 December 2024 — directing the Board to pass its final order in the disciplinary proceedings.[^delay] When the Board finally reconvened, it asked the respondent whether he wished to press the High Court's observations before it decided his punishment. He said he did not, and asked the Board to conclude the matter and impose whatever penalty it thought fit, citing his loss of professional work and his economic and medical circumstances. The Board that passed punishment was not the Board that had found him guilty four years earlier.[^coram] It imposed a monetary penalty of Rs. 10,000 in each of the five files — a fine on every one of the five case numbers this incident carries, Rs. 50,000 in total.[^files] ## Why it matters *This section is ours, not the Board's.* **Raise your bill when you do the work, not when someone asks about it.** A dues claim that appears only after an incoming auditor writes for communication looks exactly like what the Board called it here — pressure, not accounting. Invoice as you go, so the paper trail predates any dispute. **A regulator copied on your commercial correspondence is not evidence of your grievance — it looks like a threat.** If you believe your removal was improper, take that dispute to the forum built for it. Marking ICAI or the Registrar of Companies on a letter to a fellow member reads as intimidation, not process. **Losing an audit does not entitle you to be paid for the years you might have had.** The Board gave no weight to "opportunity cost" as a category of claim. If a contract or engagement letter promises compensation for early termination, rely on that instrument — not on a demand invented after the fact. This summarises a public order and links the primary source. It is general information, not legal or professional advice. [^parties]: The respondent was *CA. Munish Mehta (M. No. 098142)*, a partner of *M/s GMR & Co., Chartered Accountants*, New Delhi. The complaints were filed by *Shri Vinod K. Kala*, director of four of the five companies — *M/s VSS Clean Technologies Pvt. Ltd.*, *M/s Highwind Energy Pvt. Ltd.*, *M/s Anahita Clean Technologies Pvt. Ltd.* and *M/s Windforce Management Services Pvt. Ltd.* — and by *Shri Atul Sanghal*, director of the fifth, *M/s Green Indus Bio Energy Pvt. Ltd.* All five companies shared a registered address at Vatika Professional Point, Gurgaon. [^files]: Five companies, five directors' complaints, five case numbers — because punishment under Section 21A(3) is assessed file by file. This page follows the findings and cites **BOD 287/2017** (file PR/277/15-DD/285/2015), the file listed first among them. The other four are **BOD 288/2017** (file PR/278/15-DD/286/2015), **BOD 289/2017** (file PR/279/15-DD/287/2015), **BOD 291/2017** (file PR/276/15-DD/284/2015) and **BOD 375/2017** (file PR/294/15-DD/36/2016). The findings are reproduced in full, in near-identical language, in each of the five orders, and the complainant said as much in one of them: "the facts of the disciplinary complaints are the same as for our other companies... the matter may be decided as in other cases." All five carry the same finding, the same clause and the same fine, passed on the same day. [^item2]: Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 covers a member found guilty of "Other Misconduct" — conduct not otherwise specified in the Schedule, but which the Board considers renders the member unfit to practise or brings disrepute to the profession, read with Section 22 of the Act. [^delay]: The Delhi High Court's interim stay was granted on 17 March 2021 in *CA Munish Mehta v. Board of Discipline of the Institute of Chartered Accountants of India*, W.P.(C) No. 3365/2021. The final order vacating that stay and directing the Board to conclude the proceedings was passed on 5 December 2024. The findings in all five files are dated 11 February 2021; the punishment orders are dated 29 July 2025. [^coram]: The findings were signed by CA. Prasanna Kumar D. (Presiding Officer) and Mrs. Rani Nair, IRS (Retd.) (Government Nominee). Punishment, more than four years later, was passed by a differently constituted Board: CA. Rajendra Kumar P (Presiding Officer), Ms. Dolly Chakrabarty, IAAS (Retd.) (Government Nominee) and CA. Priti Savla (Member).