TMI Blog2019 (3) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company or the Board of Directors or promoters of a company, but the investors, both current and prospective, Securities Market, and the Courts/Tribunals too, that often rely upon the reports of independent Auditors - The role of Statutory Auditor is thus vital, and the auditor owes a fiduciary duty towards Nation. It is, therefore, necessary to take stern action against the person who has tried to diminish the credibility of the Auditor’s profession. The conduct of the Respondent no. 1, who happens to be a senior member of the ICAI, amounts to a gross violation in the form of professional misconduct and has challenged the credibility of the whole Profession. The respondent no. 1 has brought disrepute to the Institute of Chartered Accountant and the profession itself. We hope the ICAI will take necessary action against Respondent No. 1 for his professional misconduct. It is clear that the R-1 Mr Mukesh Maneklal Choksi colluded with the Director of R-2 company and has given a false Audit certificate relating to the Profit & Loss Account and Balance Sheet of the R-2 company, without even examining and verifying the books of accounts, The Statutory Auditor has not given any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, seeking permission and documents for inspection but respondent No. 2 company failed to reply to the letters. The letters issued to the respondent were returned with the remark Left by the postal department. The inspector stated that he was seeking preliminary information and documents for inspection from the Respondents, but the said letters were not replied to by the Director'sof respondent No. 2 company, ultimately letters were returned with the postal remark LEFT . 2. It is further submitted by the petitioner that as per the provision of section 207 (3) of the Companies Act 2013, the Inspecting Officer is vested with the powers of the Civil Court, for inter-alia, directing production of books of accountsetc., of the company under inspection, and further to summon and enforce attendance of persons for examination under oath. The summons were issued to all the directors of respondent No. 2 company in addition to the summons which were issued to the proprietorship firm of Respondent No. 1, who were the Statutory Auditors of Respondent No. 2 company for the financial year 2014 15 and 15 16. 3. It has been stated in the Inspection Report Dt.10th May 2018 Supple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company, using my innocence he induced me to join the company as director and he has promised me to take care of any consequences arising out of activates of the company In this regard what you want to say? Answer No 19:- They have seen the situation, and in the pretext of receiving monetary gain they become directors of the company. I have not induced them. Question No- 20:- Who is the company secretary of the company their addresses, membership/Registration No./Mobile/Tel. No? Answer No 20:- I do not know. Question No- 21:- Do you know S M Bhat Associates, Membership No 030696.3, Sweet Home, 9th Road Extension, JPVD Scheme, Mumbai- 40009 the Statutory Auditor of the company for the Financial Year 2013-14.? Answer No 21:- I know him as a Chartered Accountant. I will Submit the relevant information latest by 20.03.2018. Question No- 22:- when you are appointed as statutory auditor of the Company? Answer No 22:- for the Financial year 2014-15. Question No- 23:- How long you are a statutory auditor of the company? Answer No 23:- I was appointed as the statutory auditor, for the financial year 2014-15 2015-16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y were produced to the Inspecting Officer despite notices and summons being issued to the R2 Company, its directors and statutory auditors. 3. The Director/Managing Director at the helm of affairs failed to respond to the notices issued by the Inspecting Officer. 4. The R2 Company came out with Initial Public Officer (IPO) and issued prospectus to raised public funds on 10.10.1996. There after the team of directors has completely changed. The Initial Promoters of the Company are not involved in the affairs of the Company after 29.09.2005. The R2 company is not listed on any stock exchange despite the assurances given in the Prospectus dated 10.10.1996. 5. The date of retirement of Shri Ketan A Gaglani, Managing Director who was involved in the day to day affairs of the Respondent No 2 company since 18.12.1995( the company was incorporated on 07.03.1995) had retired on 29.09.2005. 6. The present directors, who took over the affairs of the R2 Company since 04.10.2014, are not traceable. 7. The present directors of the R2 Company are dummy/shadow directors of Mr Arvind Goyal Babulal, the Chairman of the R2 Company, who dodged his responsibilities to assist in the inspec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that R1 acted as Statuary Auditor and issued following Auditors Reportthatis reproduced below:- To, The Members of ZEN Shaving Limited Report on the Standalone Financial Statements We have audited the accompanying Standalone Financial Statement Zen Shaving Limited (the Company ) which comprises the Balance Sheet as at March 31, 2015, the statement of Profit Loss for the year then ended and a summary of significant accounting policies and other explanatory information . Management s Responsibility for the Financial Statements. Management is responsible for the matters stated in Section 134 (5) of the Companies Act, 2013 ( the Act ) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting standards specified under section 133 of the act, read with Rule 7 of the Companies (Accounts) Rules, 2014. The responsibility also includes maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding of the assets of the Company and for preventing and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent No 1, regarding the first proviso to Section 140(5) of the Companies Act, 2013 read with Explanation I to it. We further a directed R1 and R2 to file para-wise reply/counter affidavit within 15 days from the date of the order, but R1 and R2 did not file any para-wise reply. The Contents of the affidavit in reply submitted by R1 ShriMukeshManeklalChoksiis given below: That I am accepting the order passed by the Hon ble National Company Law Tribunal. That I have signed the Audit Reports of Zen Shaving Ltd in good faith and I have followed the procedures which previous Auditors have followed. The office bearers of the company are not available, and therefore I could not receive any information from them. 16. Auditor has given the affidavit that he has signed the Audit Report of Zen Shaving Ltd in good faith and have followed the procedures which previous Auditors have followed. He has certified that he has given the certificate after examining the accounts of Zen Shaving Ltd, but he has admitted that he has followed the procedure, which the previous auditors were following. Though Auditor was to file the para wise detailed reply, regarding the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No counter affidavit has been filed against the said findings. There is no denial of the allegations levied against the Auditor. In reply to the above allegations, the Statutory Auditor has stated that he has signed the auditor report of Zen Shaving Ltd in good faith and has followed the procedures which the previous auditor has followed. The reply of R -1, StatutoryAuditor is a sham and against the statutory duties of Auditor given under Sec 143 of the Companies Act. The Statutory Auditor cannot escape from his liability by saying that he has followed the practice, which was being adopted by the previous auditor. 18. On the basis of admission of Auditor R1, Mr Mukesh Maneklal Choksi, it is clear that R1 Statutory Auditor has acted fraudulently and colluded with the Directors of the company in relation to the affairs of the company and he has misused his position as Statutory Auditor of the company and certified the Profit Loss Account and Balance Sheet of the company even without examining the account books, statutory registers, papers etc., which were essential for audit purposes. It is also clear from his statement that documents were never produced before him, but he certi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Insolvency and Bankruptcy Code, 2016 and the Companies Act, 2013 has on several occasions made crucial decisions in important matters relating to Amalgamations and Merger, Oppression and Mismanagement, Voluntary Liquidation, Insolvency petitions, etc.and for such matters, it has to rely upon the reports of the Independent Auditors. Thus, it is not only the Company or the Board of Directors or promoters of a company, but the investors, both current and prospective, Securities Market, and the Courts/Tribunals too, that often rely upon the reports of independent Auditors. The role of Statutory Auditor is thus vital, and the auditor owes a fiduciary duty towards Nation. It is, therefore, necessary to take stern action against the person who has tried to diminish the credibility of the Auditor s profession. 22. The conduct of the Respondent no. 1, who happens to be a senior member of the ICAI, amounts to a gross violation in the form of professional misconduct and has challenged the credibility of the whole Profession. The respondent no. 1 has brought disrepute to the Institute of Chartered Accountant and the profession itself. We hope the ICAI will take necessary action against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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