A cooperative director was accused of misusing a government yarn-bank grant, and repaid it before the ruling.

A weavers' cooperative in Jaipur ran a government-funded yarn bank while a chartered accountant sat on its board as one of several directors.¹ When roughly ₹23.64 lakh of the grant went unaccounted for, the department that had funded it complained to ICAI that his conduct amounted to misconduct unbecoming of the profession.²

What happened#

One concession decided this case, and it came from the complainant's own side. At the hearing, the department's representative told the Board the grant had been sanctioned to the society and not to the director personally, that other directors held office alongside him, and that no criminal case, no complaint against the bank that had processed the withdrawals, and no evidence of personal benefit existed anywhere in the file (para 10).

What remained of the charge was a signature. The escrow required a co-signature from the project's Government Nominee³ before money moved, and it was not obtained on every withdrawal. The Board would not let that absence stand in for proof of dishonest use (para 12).

The clause#

Item (2) of Part IV of the First Schedule catches "other misconduct" — conduct that, in the Council's opinion, brings disrepute to the profession, whether or not it happened in the course of professional work.⁴ It reaches a member's role as a company or cooperative director just as much as it reaches audit or tax work.

The Board held the charge not established: nothing in the file tied the missing money to the director personally, and a procedural lapse in obtaining a co-signature does not by itself amount to disreputable conduct. It closed the case under Rule 15(2).⁵

What the respondent said#

He told the Board the same thing in his written reply and again at the hearing. He had been a member since 1999 with no earlier complaint against him, and had moved into the textile business after nearly twelve years in corporate roles. The grant, he said, had gone toward the project as intended, with the promoters contributing their own matching share (para 7).

What derailed the project, in his account, was the pandemic. COVID-19 drained the business's liquidity, damaged the cooperative's creditworthiness, and eventually shut its operations down. He denied ever intending to misappropriate or siphon the funds. A substantial part of the shortfall had already come back through the bank guarantee, and he had repaid the rest in full with interest, by demand draft, informing both the department and ICAI's Directorate as he did so. He asked the Board to weigh his good faith, the absence of dishonest intent, and the complete repayment (para 8).

What the Board held#

The Board started from what the department's own case had left standing. Its representative had already conceded the grant went to the society and not to the director, that he shared the board with other directors, and that nothing in the file connected the withdrawals to his personal benefit. What remained was that the withdrawals lacked the Government Nominee's co-signature — a procedural absence, not proof of dishonest use (para 10).

That distinction is where the case turned:

A mere procedural irregularity, without proof of dishonest conduct or misappropriation cannot by itself be sufficient to hold a Chartered Accountant guilty of professional misconduct.

(para 12)

By the hearing, the department also confirmed that the whole outstanding balance, with interest, had reached it, and that no grievance against the director survived. The Board read the delay itself as a symptom of the pandemic's toll on the cooperative's finances, not evasion, noting that the director's other institutional debts had been cleared by then too (para 11).

Taken together — no evidence of personal benefit, full repayment, no criminal case, and the department's own concession that nothing remained outstanding — the Board found the allegation unproved (para 13).

The order#

The Respondent is accordingly held Not Guilty of the alleged misconduct.

(para 14)

The Board's conclusion recorded the finding against the specific clause charged: not guilty of Other Misconduct under Item (2) of Part IV of the First Schedule (para 15). No punishment stage follows a not-guilty finding; the Board ordered the case closed under Rule 15(2) and disposed of it. It had taken a single hearing, three weeks before judgment was pronounced.⁶

Why it matters#

This section is ours, not the Board's.

A missing co-signature is not proof of misappropriation. The escrow required a sign-off that was not always obtained — a real lapse, but not evidence of where the money went. Get it every time, and keep the paper that proves you did.

Repay before the finding, not after. The demand draft went out while the case was still live, which let the Board read the delay as hardship rather than evasion. Settle an outstanding balance before the hearing.

A directorship does not make you personally liable for the entity's losses. The funds belonged to the society, and other directors held office too. Keep board minutes showing a withdrawal was a collective decision rather than yours alone.

The director who runs day-to-day affairs is the one who gets named. He held the operational role; the other directors were never complained against. Route withdrawals through the full board or the mandated co-signatory.

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