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BOD 737/2024Not guilty

A partner joined a firm a day after its senior partner died. The widow accused the new partner of withholding accounts.

8 min readJainam Shah

A widow said the partner who joined her late husband's firm the day after his death withheld its accounts. The Board cleared him of the only allegation it heard.

Held
Not guiltyThe charge was not made out
Forum
Board of Discipline (First Schedule)
Clauses
Item (2) of Part IV of the First Schedule
Decided
File no.
PR/421/2022/DD/284/2022/BOD/737/2024
Source
Original order (PDF)

A chartered accountant died, still running his firm's head office out of his own private premises. A partnership deed drawn up the very next day brought in a new partner, and his widow — the deceased's legal heir — complained to the Institute that she had never been shown the accounts of what was owed to his estate.1

What happened#

A Chennai chartered accountant builds a firm over several decades, first as a sole proprietor and then as a partnership, running its head office out of his own private premises. Several more chartered accountants join him as partners along the way.
He dies. A partnership deed drawn up the very next day brings in a new partner, one who had never held that position while the founder was alive, and the founder's affairs pass into dispute between the new partner and the founder's widow, his legal heir.
The widow takes a string of allegations to the Institute. She says the new partner falsely claimed to have taken over her husband's personal practice, that the reconstituted partnership deed was signed without her consent and carried forged signatures, and that her husband's digital signature, hard drive and personal diary were taken without permission. She also says the firm's bank account was opened to the new partner before her husband's death certificate was even issued, that a decades-old landline from his private office was later switched into the new partner's name, that a family-owned entity of his took over fee-billing work that should have been hers, and that a criminal complaint was filed against her son.
A screening opinion examines every one of those allegations and clears the new partner of all but one — that the firm never handed over audited financials, a bank reconciliation or a full ledger of fee receivables to let the widow work out her share of the practice. The Board takes up the case on that single allegation alone, against a deadline the Madras High Court set after the widow herself petitioned it over the delay.
A hearing goes ahead despite a last-minute request to adjourn it, since granting one would have breached the High Court's own deadline. The Board weighs what the partnership deed says about goodwill, what the widow was actually given to inspect, and what the law requires of a firm settling a deceased partner's affairs.

Only one of the eight allegations ever reached a hearing. A screening opinion, examining each claim on its own, found no case to answer on any of them except whether the firm had given the widow proper accounts of her husband's practice — and it was that allegation alone the Board went on to hear, under the twelve-week deadline the Madras High Court had set.2

What was actually in dispute, once the case narrowed that far, was not a missing document but a legal entitlement: whether a partner's widow has any claim to a firm's goodwill at all, and whether the law required the firm's financials to be audited before she saw them.

The charge#

  • Item (2) of Part IV, read with Section 22 — the First Schedule's general clause for "other misconduct." It has no fixed list of acts; it catches whatever conduct discredits the profession, once no more specific item fits.3

The widow's complaint had run to eight separate allegations — misrepresentation, forged signatures on the reconstituted partnership deed, misuse of her husband's digital signature, a takeover of his bank account and landline, a rival billing entity, and a criminal complaint against her son. A screening opinion cleared the new partner of all of them but the one about accounts, and it was that allegation alone the Board went on to hear.4

What the Board held#

The widow's underlying grievance was that she had never received her due share of her husband's practice, including its goodwill. The Board turned first to the Institute's own Code of Ethics, which sets out when a partner's legal heir can claim a share of a firm's goodwill at all:

When there are two or more partners and one of them dies, the widow of the deceased partner can continue to receive a share of the profit of the firm. A legal representative, say widow of a deceased partner, would be entitled to share the profits only where the partnership agreement contains a provision that on the death of the partner his widow or legal representative would be entitled to such payment for goodwill by way of sharing of fees or otherwise for some specified period. (para 8)

The firm's own partnership deed, the Board found, carried no such clause. On that ground alone, the widow had no claim to the firm's goodwill (para 8).

The Board also noted what was not in dispute: the new partner had never held that position while the founder was alive. He became a partner only from the day after the founder's death (para 9).

On the accounts themselves, the Board found the widow had already been given more than the complaint acknowledged — extracts of her husband's ledger account and of the Legal Executor's, and an opportunity to inspect the firm's books herself (para 10).

What she wanted beyond that, the Board held, the law did not require. Section 12(e) of the Partnership Act, 1932 gives a legal heir the right to inspect and copy a firm's books, but it does not oblige the remaining partners to get those books audited first, and the partnership deed here was itself silent on any duty to audit. On that reading, the Board held:

the Board is of the view that the Respondent cannot be held responsible and thus is 'Not Guilty' of Other Misconduct falling within the meaning of Item (2) of Part-IV of First Schedule to the Chartered Accountants Act, 1949 in respect of this allegation (para 11)

The order#

Thus, in conclusion in the considered opinion of the Board, the Respondent is held 'NOT GUILTY' of Other Misconduct falling within the meaning of Item (2) of Part-IV of First Schedule to the Chartered Accountants Act, 1949. Accordingly, the Board passed an Order for closure of the case in terms of the provisions of Rule 15 (2) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007. (para 12)

No punishment stage follows a not-guilty finding.5 The final hearing was held in person at ICAI Bhawan, Chennai, and the findings were signed by the same Board that heard it.6

Why it matters#

This section is ours, not the Board's.

A right to inspect accounts is not a right to demand an audit. The widow could see the books and get copies of the ledger; the law did not additionally require the firm to have them audited before handing them over. Know the difference between the two before you frame a complaint around either.

Goodwill for a deceased partner's heir depends on what the partnership deed actually says. The Code of Ethics ties any claim to a specific clause in the deed, not to the relationship. Check the deed itself before assuming an entitlement follows automatically from being a legal heir.

A screening stage can settle most of a complaint before anyone argues it. Seven of the widow's eight allegations never reached a hearing at all. Build a complaint around the allegation that survives screening, and expect the rest to be tested at that earlier stage, not the one you plead for.

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

Footnotes#

  1. The complainant was Mrs. Pritha Ponraj, Chennai, widow and legal heir of CA. S. Ponraj, who founded and ran M/s Ponraj & Co., Chartered Accountants until his death. The respondent was CA. K Venkatraman (M. No. 237034), who joined the firm as a partner the day after CA. Ponraj's death. ↩

  2. The complainant had petitioned the Madras High Court over delay in the investigation. The High Court disposed of that petition on 22nd April 2024, directing the Director (Discipline) to complete the process and pass final orders within twelve weeks. Hearing notices went out on 28th May 2024; the complainant's request on 6th June 2024 to adjourn the 12th June 2024 hearing by six weeks — which would have breached the High Court's deadline — was rejected. The final hearing was held on 12th June 2024 and the findings were signed on 6th July 2024. ↩

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

  4. The eight allegations were: misrepresenting a takeover of the deceased partner's personal practice; failing to account for the widow's share of profits and fees; taking the reconstituted partnership deed without her consent and with forged signatures; misusing the deceased partner's digital signature and removing his hard drive and personal diary; taking over the firm's bank account and its authorised phone number before the death certificate issued; switching a decades-old landline into the respondent's name; diverting secretarial fee income to a firm owned by the respondent's family member; and filing a criminal complaint against the complainant's son. The Director (Discipline)'s Prima Facie Opinion, dated 19th April 2024, found a case to answer only on the second of these, and the Board's hearing proceeded on that basis alone. ↩

  5. 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 the finding and orders the complaint closed. There is no punishment hearing under Section 21A(3). ↩

  6. CA. Rajendra Kumar P (Presiding Officer), Ms. Dolly Chakrabarty, IAAS (Retd.) (Government Nominee) and CA. Priti Savla (Member), all present in person at ICAI Bhawan, Chennai. ↩

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

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