--- title: An auditor took charge of a founder's dormant trust. Its funds later moved out through the auditor's own peon. description: An accountant took charge of a trust's finances after its founder died, opened accounts without consent, and had a peon withdraw its cash. Found guilty, he was removed for a month and fined. case_number: BOD 547/2020 file_number: PR-373/17/DD/08/2018/BOD/547/2020 forum: board-of-discipline institute: icai decided_on: 2021-02-11 punished_on: 2024-05-23 outcome: Removal clauses: Item (2) of Part IV of the First Schedule order_pdf: https://disc.icai.org/wp-content/uploads/2024/05/7.-BOD-547-2020.pdf published: 2026-09-09 author: Jainam Shah keywords: bod 547 2020, item 2 part iv first schedule, other misconduct section 22, chartered accountant trust fund diversion, forged bank account signatures, board of discipline removal source: /icai/board-of-discipline/bod-547-2020 --- # An auditor took charge of a founder's dormant trust. Its funds later moved out through the auditor's own peon. An Ahmedabad chartered accountant had audited a small charitable trust since it was founded, and after the founder died the accountant told his two surviving daughters they could not manage its money themselves. He then ran the trust's bank account as though it were his own.[^parties] ## What happened ```timeline An Ahmedabad chartered accountant, already known to the family through its founder, helps set up a small environmental trust and audits it from the start. The trust takes a government lease of land for its work but is otherwise dormant, and its own audit reports for its early years record that it has not started any activity at all. After the founder dies, his two daughters are left as the trust's only trustees. The accountant tells them that, as women, they will not be able to run its finances, and takes over the trust's bank account and paperwork himself. Without telling either trustee, the accountant opens a personal savings account in the name of one trustee's husband, listing his own mobile number as the account's contact number. He later moves the trust's registered address to his own office, and years afterward a document surfaces recording that he and his son have become trustees in their own right. An Income Tax raid on the accountant's premises turns up forged donation receipts and signed blank cheques belonging to the trust. He responds with an affidavit admitting that he alone operated the trust's cheques, and tax assessments later trace lakhs of rupees in cash withdrawn from its account, collected by his own office peon and handed to him. The trustee's husband, whose own account had been opened without his knowledge, complains to the Institute. A Board of Discipline hears the accountant in person twice and finds him guilty of conduct bringing disrepute to the profession. Punishment is not decided for years afterward, and when it finally comes, the Board removes his name from the Register for a month and fines him. ``` Three documents did most of the damage. The first was a bank account opening form. The account belonged to the founder's son-in-law, but the mobile number entered against it was not his — it was the accountant's, the very number the Institute itself had on record for him (para 8a). The second was the accountant's own affidavit, sworn after the Income Tax raid recovered forged donation receipts and blank signed cheques bearing the trust's name. In it he admitted that he alone had signed all the cheques on the trust's account and cleared both trustees of any role in its affairs (para 7j). The third was what the tax department did with that admission. Assessment orders for three years added the missing cash — ₹49.54 lakh, ₹5.45 lakh and ₹42.5 lakh — not to the trust's income, but to the accountant's own, as unexplained money in his hands (para 8g). The Board did not have to work out where the trust's money had gone; the tax department had already decided. ## The charge - **Item (2) of Part IV of the First Schedule** — the Act's catch-all for other misconduct: conduct that, whether or not connected with a member's professional work, in the Council's opinion brings disrepute to the profession or the Institute.[^item2] Nothing here turns on how an audit was performed. Item (2) reaches conduct with no engagement behind it at all, which mattered here because most of what was alleged — opening an account in a client's name without his knowledge, forging signatures on its papers, and withdrawing a trust's money without its trustees' knowledge — was criminal in character rather than a failure at professional work (paras 2–2.3). The Board found the whole course of conduct guilty under this one item: > the Respondent is GUILTY of Other Misconduct falling within the meaning of Item (2) of Part IV > of the First Schedule to the Chartered Accountants Act, 1949 read with Section 22 of the said > Act (para 11) There was no second clause and no allegation left undecided. ## What the respondent said The accountant answered on the facts before the Board reached its findings, and separately, on procedure, once punishment came up for decision. On the facts, his case was that the 2016 affidavit had been extracted from him rather than volunteered: the two trustees asked him to take the blame with the Income Tax Department, and he signed a document put before him at the last moment, after which they began demanding money from him (para 5a). He pointed to a forensic report on the disputed signatures that reached no finding against him, and read that as clearing him rather than as inconclusive (para 5b). The bank account, he said, had a mundane explanation: the founder's son-in-law and his wife wanted to show a balance before travelling abroad, and the accountant had simply helped them open one (para 5f). A memorandum of understanding making him and his son trustees was not fabricated, he argued, because a copy of it had turned up in his own office during the Income Tax search — its presence there, he said, proved it was genuine and old rather than invented for the case (para 5c). He also pointed to assessment orders in which the trustees themselves had appeared before the tax department and, on his reading, been found to be fully aware of the trust's affairs (para 5d), and to a special auditor's report that he said gave him a clean chit (para 5g). At the punishment stage, three years before any punishment was actually passed, he raised a different set of objections. He said a Government Nominee on the Board had an undisclosed interest through an unrelated income-tax matter of one of his own clients, and should not have sat on the case (order, ground a). He argued the Board lacked jurisdiction because the Council had never itself formed an opinion on the complaint (ground b). He said the complaint was barred by a seven-year time limit on how old a complaint against a member could be (ground f).[^rule12] And he asked that the case be kept pending until a criminal case on the same facts was decided, so that he would not be found guilty twice over on the same evidence (ground g). ## What the Board held The Board treated the account-opening form as decisive on its own: nobody but the accountant had reason to put his number on someone else's account (para 8a). It also declined to treat the forensic report as helpful to him — the report reached "no definite opinion" on the disputed signatures, and the Board called that "a weak piece of evidence" rather than a finding in his favour (para 8c). On the memorandum of understanding, the Board did not accept that its being found in the accountant's own office proved anything beyond his possession of it. The clearest evidence, in the Board's own words, was what the tax authorities had separately established: > it is observed that the Respondent has abused his professional relationship for personal gains > from the initial period of creation of Trust itself and for the said wrongful benefits he created > various documents, opened bank accounts, forged signature of trustees, misused the documents > entrusted with him during his professional engagement with the Trust and has illegally withdrawn > the amount from the bank account of the Trust through his peon (para 9) On the procedural objections raised at the punishment stage, the Board rejected each one. It found no material connecting the Government Nominee to the accountant's affairs at all — the alleged conflict came from a scheme the Nominee had administered years earlier, in an official capacity, with no personal link shown (response i). It held that a Director (Discipline)'s prima facie opinion, not a fresh opinion of the Council itself, was already sufficient in law to start the case (response ii), and that the seven-year rule did not bar a complaint merely because time had passed, only where a respondent could show real difficulty gathering evidence — something the accountant had never raised while the hearings were actually going on (response iv). On the request to wait for the criminal case, the Board held that disciplinary proceedings are not automatically stayed by a pending criminal trial, and that the standard of proof in the two is different in any case (response v). The Board also noted, more than once, that every one of these procedural objections was raised only after the accountant had already been found guilty, despite his having appeared in person at the hearings where he could have raised them (paras 4d, 4h). ## The order > the Board decided to remove the name of [the Respondent] from the Register of Members for a > period of 01 (one) month 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 order.[^order-bracket] Removal from the Register sits above a reprimand or a fine alone on the Board's punishment scale.[^scale] Here the Board imposed both together — a month's removal and a fine of ₹1 lakh — for conduct it had already found brought disrepute to the profession. Guilt was decided in 2021; punishment did not follow for three more years.[^timeline] ## Why it matters *This section is ours, not the Board's.* - **An affidavit signed to help someone else still binds you.** He said the trustees asked him to take the blame; the Board treated his own admissions as the clearest evidence against him. Never sign a document as a favour — you alone answer for every word in it. - **An inconclusive forensic report is not a clean chit.** The handwriting report he relied on reached no finding either way, and the Board read that as a weak defence, not an acquittal. Cite an expert report for what it found, never for what it left open. - **Your own tax assessment can hand a complainant their case.** Cash the trust could not account for turned up as unexplained income in the accountant's own returns, made for a different purpose but decisive here. Keep your filings clean regardless of who is asking. - **A bias objection raised only after losing reads as delay, not bias.** He challenged a Board member's independence eight months after losing, having said nothing during the hearings themselves. Raise an objection the moment you have grounds for it. This summarises a public order and links the primary source. It is general information, not legal or professional advice. [^parties]: *Shri Amit M. Panchal*, Ahmedabad, was the complainant. The respondent was *CA. Tehmul B. Sethna (M.No. 035476)*, of *M/s. Apaji Amin & Co. LLP*, Chartered Accountants, Ahmedabad. The trust at the centre of the case was the Environment Research and Development Centre, Ahmedabad, founded by the complainant's father-in-law; the complainant's wife and her sister were its trustees. [^item2]: Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 covers "other misconduct": any act or omission, connected with professional work or not, that in the opinion of the Council brings disrepute to the profession or to the Institute. It is read with Section 22 of the Act, which defines "professional or other misconduct" for the Act's purposes. [^rule12]: Rule 12 of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 sets a time limit on how old a complaint against a member can be before the Institute will act on it. The seven-year figure comes from the respondent's own submission; the Board's response addressed the rule's purpose rather than disputing the number. [^order-bracket]: The order's operative line names the respondent in full; the quotation above substitutes "[the Respondent]" for that name. Nothing else in the quoted text was altered. [^scale]: Section 21A(3) gives the Board a graduated set of punishments — a reprimand, a fine, or removal of the member's name from the Register for a period it fixes. [^timeline]: The Director (Discipline)'s prima facie opinion is dated 22 November 2019; the Board referred the case for enquiry at its meeting of 3–4 March 2020. Hearings were held on 29 January and 8 February 2021, and the Board arrived at its findings on 11 February 2021 — the date the later punishment order itself cites as the findings' date (para 1). The findings document carries a later signature date of 20 May 2024, and both the findings and the punishment order state that they are "issued pursuant to" an order dated 29 April 2024 of the Delhi High Court in *ICAI vs. R. Vinod Kumar & others* (W.P.(C) 5247/2024); the PDF gives no further detail on that litigation or why it delayed issuance. The respondent was given a fresh opportunity to be heard on punishment and made written and oral representations dated 28 September 2021 and 5 October 2021; the punishment order itself is dated 23 May 2024.