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BOD 704/2023Removal

A chartered accountant sat on company boards without the Institute's permission. A supplier's dues went unpaid.

9 min readJainam Shah

A chartered accountant held directorships without the Institute's permission, and a supplier's dues went unpaid. The Board found her guilty and removed her name from the Register for thirty days.

Held
RemovalGuilty of professional misconduct
Forum
Board of Discipline (First Schedule)
Clauses
Item (11) of Part I of the First Schedule · Item (2) of Part IV of the First Schedule
Decided
punished
File no.
PR/317/2021/DD/335/2021/BOD/704/2023
Source
Original order (PDF)

A distributor kept a hardware shop supplied with adhesive on credit, and struggled for years to collect what it owed her. One of the shop's three directors was a practising chartered accountant, holding the post — like several others she held at the same time — without ever asking the Institute's permission.1

What happened#

A small distributor supplies branded adhesive to a hardware shop on credit, as she has supplied other retailers before. The shop trades under one name, but is legally owned by a private company with three directors, one of them a practising chartered accountant. The GST registration for the business sits in her name.
The company pays back only a fraction of what it owes, then stops a cheque it had issued for the rest. The distributor keeps following up, without success.
The shop shuts overnight, the stock inside it gone, and the balance is never paid. The distributor goes to the police, who confirm in a preliminary enquiry that the material was in fact supplied and not fully paid for.
She complains to the Institute, naming the director as someone who holds a full-time certificate of practice while also sitting on the boards of several other companies and limited liability partnerships, without the Council's permission.
At the hearing, the director admits to holding these directorships. Asked whether the Council had approved any of them, she offers a letter from decades earlier and asks for time to produce more. The letter, once it arrives, turns out to cover something else entirely. She and her counsel then miss further hearings, and the Board goes on to find her guilty on both counts — the directorships, and the unpaid debt behind them.

Two details in that sequence did the deciding.

The first was the letter she produced as proof of permission. It was genuine, and decades old — an Additional Secretary of the Institute had written to her in 1993 permitting her "to continue her salaried employment as a 'General Manager, Opera House Exports Limited' besides the practice of the Profession of Accountancy" (para 7). It said nothing about a directorship. It was the only document of its kind she ever placed before the Board.

The second was the police's own account of the debt. A preliminary report to the Senior Superintendent of Police, Ghaziabad, recorded that "during the enquiry the material was found supplied by the Complainant to Respondent's Company and the amount towards such material was not fully paid" (para 11) — the debt, confirmed independently of anything either side had said to the Institute.

The two clauses#

Both sit in the First Schedule to the Chartered Accountants Act, 1949.

  • Item (11) of Part I — a member holding a full-time certificate of practice engaging in any other business or occupation without the Council's specific permission.2
  • Item (2) of Part IV, read with Section 22 — the general "other misconduct" clause, for conduct that discredits the profession and is not covered by a more specific item.3

The Board found her guilty under both and, at a separate hearing months later, removed her name from the Register of Members for thirty days.

What the respondent said#

In her written reply, she called the complaint baseless and unrelated to her conduct as a chartered accountant. She said she took no active part in running the company behind the hardware shop — that was left to her two co-directors — and that she had never performed any work for the complainant in her capacity as a chartered accountant, so the complaint fell outside the Institute's jurisdiction altogether. She was, she said, the managing director of a different company and had nothing to do with this one's day-to-day operations. And in any case, she argued, an unpaid trade debt was a matter for a civil recovery suit, not a disciplinary complaint (para 5).

At the hearing itself, she went further and admitted holding the directorships the complaint named. Asked whether the Council had approved any of them, she said she had written to the Institute and would produce the letter granting permission. The Board gave her ten days to do it (para 6).

What the Board held#

What she produced did not help her. The 1993 letter permitted salaried employment as a general manager — nothing more. The Board put it plainly: "The Permission granted by the Institute, which she does have, is the permission exclusively to continue her employment as a General Manager and not for Directorship in any Company" (para 9). Holding a full-time certificate of practice while also serving as a managing or whole-time director, without that specific permission, was itself the violation:

in absence of grant of the required specific permission to the Respondent by the Council of the Institute to act either as a Managing Director or a Whole Time Director while holding a full time Certificate of Practice simultaneously, is a violation within the meaning of Item (11) of Part-I of the First Schedule to the Chartered Accountants Act, 1949 and thus the Respondent is 'Guilty' of the said violation (para 10)

On the debt, the Board's reasoning was shorter: the police's own preliminary enquiry had already confirmed that the material was supplied and not paid for (para 11). It did not spell out how that default amounted to misconduct beyond stating the finding — its conclusion holds her guilty under Item (2) of Part IV alongside Item (11), without separately explaining why the unpaid debt itself discredited the profession (para 12).

By the concluding hearing, the respondent was not there to answer for any of it. Two advocates appeared without an authorisation or a signed vakalatnama from her, and the Board declined to let them argue on her behalf (para 8).

The order#

the Board decided to remove the name of [the Respondent] from the Register of Members for a period of 30 (thirty) days (para 6, order)4

Removal from the Register is the most severe of the Board of Discipline's three punishments, ahead of a reprimand and a fine.5 Getting to that order took seven months of its own. The respondent or her counsel sought adjournments twice; a third hearing was adjourned because her counsel had appeared without her having first sought the Board's permission for a representative to attend; a fourth was adjourned when she did not appear at all and gave no word why. Only after a notice was hand-delivered to her, posted and emailed did the matter conclude — her counsel telling the Board, at that last hearing, that she was unwell and unable to speak, and asking on her behalf for leniency because she was a senior member with no other complaint against her.6

Why it matters#

This section is ours, not the Board's.

A letter permitting one thing does not permit another. The 1993 approval covered salaried employment as a general manager; it was produced as if it covered a directorship, and it did not. If you hold a certificate of practice and take up a board seat, get the Council's permission for that seat specifically, in writing, before you take it.

Being a director on paper is enough — active involvement is not the test. The defence that she was not running the company's day-to-day affairs went nowhere. Item (11) asks whether you hold the post without permission, not how hands-on you were once you held it.

An unrelated commercial dispute can still reach the Institute. The debt behind this case was between a company and its supplier, and the respondent argued it belonged in a civil court. The Board disciplined her over it anyway, once her position as a director tied her to it.

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

Footnotes#

  1. The complainant, Ms. Namika Singhal of Ghaziabad, proprietor of a distribution business trading as M/s Tirupati Marketing, was not a chartered accountant. The respondent was CA. (Ms.) Rakesh Verma (M. No. 082388), then of Noida, a director of M/s Opera Global Pvt. Ltd. and, among the businesses named in the complaint, of the company legally known as GVR Impex Private Limited, which traded as the hardware shop at the centre of the dispute. ↩

  2. Item (11) of Part I of the First Schedule to the Chartered Accountants Act, 1949, covers a member in practice engaging in any business or occupation other than the profession of chartered accountancy, unless the Council has specifically permitted it. ↩

  3. Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949, read with Section 22 of the Act, covers "other misconduct" — conduct that discredits the profession but is not captured by the more specific items listed elsewhere in the Schedule. ↩

  4. The order's operative sentence names the respondent directly: "the Board decided to remove the name of CA. (Ms.) Rakesh Verma (M. No. 082388) from the Register of Members for a period of 30 (thirty) days." This page substitutes "[the Respondent]" for the name and membership number to keep the same anonymisation used throughout; nothing else in the quotation is altered. ↩

  5. Section 21A(3) gives the Board of Discipline a graduated set of punishments — a reprimand, removal of the member's name from the Register for a period, or a fine. Check the current sub-section before relying on any figure; the amounts and periods have been amended over time. ↩

  6. Final hearing on the merits held over two dates, concluding 30th May 2024; findings signed 12th June 2024. On punishment, hearings were listed and adjourned on 15th July 2024, 27th August 2024 and 25th September 2024. A further hearing on 10th January 2025 was adjourned when the respondent did not appear and sent no word; the Board directed a last notice, delivered by hand on 15th January 2025 and acknowledged, and separately sent by speed post the same day and by email on 17th January 2025. The order was passed on 25th January 2025, the coram of the findings unchanged: CA. Rajendra Kumar P (Presiding Officer), Ms. Dolly Chakrabarty (Government Nominee) and CA. Priti Savla (Member), the last of whom sat by video conference for the findings. ↩

Written by Jainam Shah. Found guilty under Item (11) of Part I of the First Schedule and Item (2) of Part IV of the First Schedule; the Board ordered a removal. General information, not legal or professional advice — read the order itself before relying on it.

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