--- title: A company director, also a chartered accountant, faced a CBI bank-fraud case. The Board found no misconduct. description: A CBI probe accused a company director, also a chartered accountant, of forged work orders defrauding a bank of over fifty crore rupees. The Board found no professional misconduct. case_number: BOD 542/2020 file_number: PR/177/2017/DD/368/2017/BOD/542/2020 forum: board-of-discipline institute: icai decided_on: 2025-01-25 outcome: Not guilty clauses: Item (8) of Part I of the First Schedule order_pdf: https://disc.icai.org/wp-content/uploads/2025/02/32.-BOD-542-2020.pdf published: 2026-09-09 author: Jainam Shah keywords: bod 542 2020, item 8 part i first schedule, board of discipline not guilty, cbi bank fraud investigation, one time settlement, company director professional misconduct, rule 15(2) closure source: /icai/board-of-discipline/bod-542-2020 --- # A company director, also a chartered accountant, faced a CBI bank-fraud case. The Board found no misconduct. A chartered accountant sat on the board of a highway-construction company that a nationalised bank accused of helping defraud it of over fifty crore rupees, using forged work orders to draw down credit the company never repaid. The Central Bureau of Investigation brought the allegation to the Institute, seeking to hold the accountant guilty of professional misconduct.[^parties] ## What happened ```timeline A chartered accountant is a director of a highway-construction company. The company arranges a cash credit limit and a bank guarantee from a nationalised bank, and the bank later enhances that credit substantially further, on the strength of work orders submitted in the names of a cluster of associate companies connected to the company's directors. No actual work is executed against those orders. When the company later fails to service the enhanced debt and the account turns bad, the bank moves to recover the money, and the account is referred for action under the securitisation law before that process is itself dropped on a technicality. The Central Bureau of Investigation registers a case against the company, its directors and bank officials, alleging that the work orders behind the credit were fabricated and that the funds drawn on their strength were diverted rather than used for the purpose sanctioned. After investigation it files a charge sheet before a special court, where the case remains pending years later with no charges yet framed against anyone named in it. Separately, the company negotiates a settlement with the bank. An initial proposal is approved, then cancelled when the company cannot pay it in full by the deadline set; a revised proposal is approved in its place and paid off before its own deadline, after which the bank releases the mortgaged security and treats the account as closed. The founding FIR is then quashed by the High Court, expressly on the strength of that settlement rather than on any finding about what happened. An investigating officer with the CBI brings the underlying allegations before the Institute's Board of Discipline, against the accountant in his capacity as a chartered accountant. The case runs through eight hearings and adjournments over three years before it is finally heard and concluded, and the Board finds no basis to hold the accountant guilty of professional misconduct. ``` Two specifics from the CBI's case were concrete enough to test, and one point stood out for its absence. The agency told the Board that the accountant had submitted forged work orders in the names of two companies which, when the CBI asked them directly, both denied ever having issued them (para 7). It also said he had submitted a chartered accountant's certificate about capital brought into the company, purportedly issued by another firm, which the CBI itself called forged (para 9). What the Board's own findings do not record is either allegation being tested through evidence actually placed before the Board — only the parties' submissions about a criminal investigation still under way elsewhere. ## The charge - **Item (8) of Part I of the First Schedule** — the only clause the order names, and only in its closing paragraph.[^clause] Nothing earlier in the order ties the case to that clause. The charge as it was actually argued, through the whole of the hearing, was that the accountant, as a director of the company, had helped defraud the Bank of over fifty crore rupees by submitting fabricated work orders and false stock statements to obtain and then enlarge the company's credit facilities. ## What the respondent said The accountant's defence turned on what had happened to the case since the FIR was filed, more than on disputing the CBI's account of the work orders directly. He said the company had taken the credit facility in good faith and serviced it until a downturn in the real-estate market left it unable to keep up; that the bank's own securitisation notices against the company had later been found defective and were withdrawn; and that the bank subsequently negotiated a one-time settlement with the company, accepted a revised amount after the first proposal lapsed, and released the mortgaged property once it was paid (paras 11–14).[^ots] On the criminal case itself, he pointed out that no charges had yet been framed against anyone named in the charge sheet, years after it was filed, and that the High Court of Punjab and Haryana had quashed the founding FIR outright, on the basis of the settlement with the bank. He relied on two Supreme Court judgments for the proposition that continuing a criminal case loses its purpose once the complainant and the accused have genuinely settled their differences, and argued that with the loan repaid in full and the FIR itself quashed, the disciplinary proceedings before the Board should be closed as well (paras 15–18). ## What the Board held The Board did not find the CBI's specific allegations proved, but it did not treat them as disproved either. It noted discrepancies in the registered addresses of some of the associate companies on the government's own company database, with one of them, Savera Contractors Builders Limited, not registered at all, and that the accountant's professional address had been used to incorporate some of these companies and that he was a director of two of them (para 19). None of that, by itself, was treated as established wrongdoing. What moved the Board was the settlement, and the limits of what a disciplinary board can decide. It read the bank's acceptance of the settlement, and its release of the accountant's mortgaged property, as the bank's own acknowledgment that the matter stood resolved (para 20), and it drew a jurisdictional line around the rest: > No evidence or findings have been presented before this Board to conclusively establish the > Respondent's criminal intent or direct complicity in fraudulent activities (para 21) The Board also considered the one point that told against the accountant procedurally — that he had filed no written statement disputing the CBI's allegations — and declined to hold it against him: > this omission alone cannot be construed as an admission of guilt, particularly considering the > settlement with the Bank and the absence of conclusive evidence against the Respondent (para 22) It closed its reasoning with an instruction that sits oddly beside a full acquittal: the Board "advises the Respondent to exercise diligence and professional care in his future conduct to avoid any similar controversies and to uphold the highest standards of professionalism" (para 22). ## The order > in the considered opinion of the Board the Respondent is Not Guilty of Professional Misconduct > falling within the meaning of Clause (8) of Part I of First Schedule to the Chartered > Accountants Act, 1949 (para 23) No punishment stage follows a not-guilty finding. The Board closed the case under Rule 15(2).[^rule] The final hearing was held nearly ten years after the CBI first registered its case against the company, and just over three years after the Institute's own hearings began.[^coram] ## Why it matters *This section is ours, not the Board's.* **A pending criminal case does not by itself prove professional misconduct.** The Board said so directly: establishing criminal intent is for a criminal court, and nobody had placed evidence of it before the Board itself. A live FIR or charge sheet, on its own, proves nothing here. **A settlement with the complainant carries real weight before the Board, even outside the proceeding it settled.** The bank's acceptance of the one-time settlement, and its release of the mortgaged property, read to the Board as the bank's own view that the matter was over. **Staying silent is a risk, not a shield.** The accountant filed no written statement answering the specific allegations against him, and the Board only spared him because the rest of the record, particularly the settlement, stood in his favour. Answer a complaint in writing, whatever else is happening around it. **A closure on today's facts is not a certificate for tomorrow.** The Board's own last line was advice, not praise — to be more careful going forward. Treat a favourable outcome as a floor, not a standard already met. This summarises a public order and links the primary source. It is general information, not legal or professional advice. [^parties]: The complainant was Shri Sandeep Kumar Sharma, Additional Superintendent of Police, CBI (Banking Securities and Fraud Cell), New Delhi. The respondent was *CA. Gurinder Kumar Garg (M. No. 084159)*, a director of M/s Sarvodaya Highways Limited, Sangrur, Punjab. [^clause]: Item (8) of Part I of the First Schedule requires a chartered accountant to communicate with the retiring auditor, in writing, before taking over an audit assignment previously held by another member. This is the only clause the order names, and it appears only in the closing paragraph — nothing earlier in the order, including the charge as framed, the parties' submissions, or the Board's own reasoning, discusses an auditor being replaced or any failure to communicate with one. The case throughout concerns an alleged bank fraud through the respondent's directorship of a company, not his conduct as an auditor, and the order does not explain the mismatch. [^ots]: A one-time settlement is a bank's negotiated closure of a loan account for an agreed lump sum paid by a set date, in exchange for which the bank releases whatever security it was holding against the loan. [^rule]: Rule 15(2) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 — where the Board finds a member not guilty, it records that finding and orders the complaint closed. There is no punishment hearing. [^coram]: CA. Rajendra Kumar P (Presiding Officer) and Ms. Dolly Chakrabarty, IAAS (Retd.) (Government Nominee) signed the findings; no third member is recorded. The final hearing was held at ICAI Bhawan, Chandigarh, on 27 December 2024, after eight earlier hearings and adjournments stretching back to 15 December 2021, and the findings are dated 25 January 2025. The CBI had registered its FIR against the company and its directors on 3 February 2015.