A consultant to a bankrupt corporate group raised suspect invoices, then chased the fees through two courts at once.

A Bengaluru chartered accountant took on advisory work for two Indian subsidiaries of a corporate group. When the group collapsed into bankruptcy and his fees went unpaid, he pursued the money in two different courts at the same time, without telling either what he was doing in the other.¹

What happened#

Two events, two days apart, anchor the finding. On 15 February 2012 the firm's own recovery suits at the Patiala House Courts in Delhi drew an ex parte order freezing the companies' board, their articles and their assets. Two days later, on 17 February 2012, the Andhra Pradesh High Court at Hyderabad ordered the same two companies wound up, on a winding-up petition the same firm had already set in motion with statutory notices of its own a month earlier. Neither court had been told about the other case (para 7(d)-(f)).

The agreements themselves invited suspicion before any of this happened. The contracts signed in June 2011 bound the companies not to remove any director, or change their own rules on removing one, without the consultant's written consent — a condition the Board found nowhere in ordinary commercial practice:

generally such conditions are not made part of service agreements in common business parlance and the same also shows that such conditions are not reasonable and contrary to business practice and entering into such an agreement itself raises suspicion/doubt on the genuineness of the said agreements (para 7(a))

Billing added to the doubt. Of all the invoices that year carrying a stray letter "A" in their numbering, the Board found:

around 65% of the billing was in respect of the said 2 companies only which were not received by it (para 7(c))

— bills to two clients who never paid, marked apart from everybody else's. And when the Board checked what had actually become of the two companies, it found reason to doubt the whole premise of the winding-up case: years on, both were still listed "Active Compliant" on the government's company register, with no winding up ever carried through (para 7(k)).

The clause#

Item (2) of Part IV of the First Schedule is the catch-all: "Other Misconduct" that brings disrepute to the profession or the Institute, whether or not it has anything to do with a member's professional work.² It asks only whether the conduct is bad enough for the profession's own disciplinary body to say so — it needs no other rule in the Schedule to have been broken first.

The Board found the charge made out. It never conclusively decided that the agreements were forged or the invoices false — its own language throughout is "doubt is raised" and "suspicion", not a finding of forgery. What it did decide was that a member who structures his fee arrangements this way, then fights his own client in two courts at once without telling either, has behaved in a way unbecoming of a chartered accountant.

What the respondent said#

His account began with how the work came about. A business contact introduced him to the companies in April 2011; he met their management in Hyderabad, submitted a proposal, and signed a foreign-exchange advisory engagement on 4 May 2011 for fees of ₹45 lakh and ₹9 lakh from the two companies respectively. He said he did the work — examining voluminous transaction records and advising on a compounding application that was in fact filed with the Reserve Bank of India — and raised his invoices strictly under the agreed terms. A second engagement, for representation before government authorities and accounts outsourcing, followed in June 2011 and ran for two months before the companies stopped paying that too.

On the stray letter in his invoice numbers, he said there was no significance to it at all — merely his Bangalore office's own convention for keeping its numbering straight, something his Accounts Department could explain better than he could (para 7(c)).

On fighting the companies in two forums, his defence was chronology and hardship rather than denial. Both the recovery suits and the winding-up notices were sent only after repeated reminders had gone unanswered; the companies could not pay because their own ownership was in turmoil as the wider group collapsed; and by the time he gave up on recovering anything, close to a quarter of what he might have collected had already gone on his own legal costs.³ He pointed out that his engagements pre-dated the receiver's appointment altogether, that two much larger professional firms had been paid handsomely out of the same collapse while he alone was left out of pocket, and asked the Board for leniency given what the case had already cost him.

What the Board held#

The Board did not treat any one fact as decisive on its own; it read the pattern as a whole. The lock-in clauses, the invoice anomaly, the timing of the two court cases and what became of them afterwards all pointed, in the Board's reading, the same way. On the litigation itself, it held:

the Respondent in a pre-planned manner and within short span of time approached two different Forums and did not submit proper facts before the said Forums in order to create unnecessary complications for the Complainant and other stake holders of the said companies (para 7(f))

On what followed — recovery suits pursued hard enough to freeze a company's board, then said in one place to have lapsed for non-appearance and in another to have been formally withdrawn two years afterwards — the Board saw a party trying to have it both ways, taking one position and its opposite in the same dispute (para 7(g)).⁴ Taken together, the Board held:

the conduct of the Respondent in twisting the facts of the matter while trying to recover the alleged dues from his clients is clearly unbecoming of a chartered accountant (para 8)

and concluded that he had brought disrepute to the profession and was guilty of "Other Misconduct" under Item (2) of Part IV of the First Schedule, read with Section 22 of the Act (para 9).

The order#

Guilt was recorded in February 2021. The Board heard the respondent again that November on what punishment should follow, reserved its decision, and returned in December 2021 with:

the Board decided to remove the name of [the Respondent] from the Register of Members for a period of 3 (three) months and also imposed a Fine of Rs.1,00,000/- (Rs. One Lakh only) upon him payable within a period of 60 days from the date of receipt of the Order⁵

Three months' removal, on top of a fine, sits in the middle of the Board's punishment scale — well short of a permanent strike-off, but heavier than a reprimand or a fine alone.⁶ The written order recording this decision was not released for another two and a half years: it carries a note that it issues pursuant to a Delhi High Court direction in an unrelated writ petition, one of a batch of stayed Board orders cleared for release in 2024.⁷

Why it matters#

This section is ours, not the Board's.

A clause restraining a client's own board is a warning sign, not a service term. These agreements barred the companies from removing any director without the consultant's consent. Treat such a demand from a client as a reason to look harder at the deal, not to accept it.

An invoice numbering quirk can outlive the dispute that created it. Nearly two-thirds of one year's oddly numbered bills traced back to two unpaid clients alone, which alone raised doubt about when they were issued. Keep your invoice sequence unbroken and explainable.

Fighting the same client in two courts, unannounced to each other, reads as coordinated even if it wasn't. A recovery suit freezing a company's board in one city and a winding-up petition against it in another, two days apart, read as one plan. Disclose a parallel proceeding to every forum you are in.

A client's change of heart does not end a disciplinary case. The complainant tried twice to call off this complaint, and the Board carried on regardless. A settled dispute is not the same as a settled complaint.

This summarises a public order and links the primary source. It is general information, not legal or professional advice.