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TMI Blog2017 (12) TMI 1854X X X X Extracts X X X X X X X X Extracts X X X X ..... oner along with the builder and others have connived to cheat the Indian Bank by producing due diligence certificate based on fabricated documents and induced Indian Bank to sanction Housing loan of Rs. 20,00,000/- to Murugan. Based on the complaint by the Bank now he is facing trial in C.C.No.2500 of 2017 on the file of Additional Chief Metropolitan Magistrate, Egmore, Chennai for alleged offence under Section 120-B r/w 420, 468 and 471 of I.P.C. 2. The petitioner seeks quash of the criminal prosecution on the grounds that, the chartered Accountant, work in all fields of business and finance including Audit, Taxation, Finance and General Management. As a part of the work, Indian Bank has engaged him to cross verify the credential of Housing loan applicant Mr. Murugan. The questionaire was given by the Bank to be filled and submitted, based on the documents given to him. As a professional, he is expected to make preliminary enquiry to verify and comment on the financial detail provided by the loan applicant through the bank. When the housing loan application of one Murugan and Bhuvashwari along with the documents was forwarded by the bank for verification, he verified the document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk, Korattur Branch had utilised his professional service by forwarding a set of documents for verification. The documents forwarded by bank were verified and after due verification it has been returned back to the bank along with the report. The petitioner is not expected to be a Forensic Audit or engaged to find out any forgery in the document. While so, the Due Diligence Certificate is issued by him based on the documents furnished by the bank. Such act done in the course of his professional duty does not attract any penal provision. Since, the Trial Court has not properly appreciated the documents before taking cognizance of the offence against the petitioner, which per se bad in law, requires interference by the superior court under its inherent power. 5. The learned Special Public Prosecutor filed counter, wherein it is stated that the petitioner without exercising reasonable application of mind colluded with A1 and issue a false Due Diligence Certificate. Quoting the statement of LW-14 that the Kotak Mahindra Bank Statement is forged and figures are inflated he submitted that the accused/petitioner has not at all verified the Kotak Mahindra Bank Statement. The duty expected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spicion he should probe it to the bottom, but in the absence of anything of that kind he is only be and to be reasonably cautious and careful. 10. The learned Special Public Prosecutor contended that the petitioner herein who is supposed to verify the documents and given the Due Diligence Certificate has failed to show due diligence in verifying the documents. He had certified that, he verified Bank statement of MMM enterprises with Kotak Mahindra Bank, bearing Account no: 04722120003243, for the period from 01.08.2012 to 30.07.2013 and found the balance as on 30.07.2013 is Rs.32,276.80/-. Whereas, in the statement of LW-14, Mr. Sridar, branch Head of Kotak Mahindra Bank, Porur Branch, had stated that the statement of Account of MMM Enterprise between first week of August 2012 to 31st June 2013 handed over to the IO along with the Certificate u/s.2A of Banker's Books of Evidence Act. 1891 and u/s.65-B(4)(c) of the Indian Evidence Act 1872. This account started in the year 2011 and at present the account is Dormant. Further on showing the statement of Account of MMM Enterprises from the loan documents of Indian Bank, Korattur Branch, Chennai, he has categorically stated that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... document D.16, D.17 and D.39. 15. While D.39 is that statement of account maintained by Kotak Mahindra Bank and produced by the Kotak Mahindra Bank through LW.14, the statement of accounts found in D.16 and D.17 are fabricated statement of account. A close scrutiny of these documents reveals, the letter ahead of the Kotak Mahindra Bank containing the details of the account holder name, address, account number etc., have been superimposed upon some others account to show as if MMM enterprises is having cash balance of Rs.32,276.80/- as on 30.07.2013. Being a photocopy, the petitioner herein had failed to see the superimposition. Had the petitioner shown better amount of alacrity he could have noticed the superimposition. 16. Having failed, should he be mulcted with criminal prosecution is a point for consideration. 17. The perusal of the Due Diligence certificate given by the petitioner indicates at the bottom, that Bank Statement of the applicant not been submitted. Which means that, the Indian Bank which has sought the professional assistance of the petitioner had not furnished adequate document of its borrower but for sake of record had requested the petitioner to provide due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Murugan. 21. PW.16, Malliga Rani had stated during the investigation that she assessed the eligibility of Murugan on 10.09.2013 and sanctioned Rs.20 lakhs as housing loan 11.09.2013 she had not referred anything about CIBIL report which the bank has received on 03.09.2013. Thus it is very clear from the record that the bank Official who have advanced loan had fail to forward CIBIL report to the petitioner for getting due diligence certificate and even after obtaining the CIBIL report they have not considered the entries found in the CIBIL report for themself to cross verify whether the statement of account produced by the borrower is genuine or not. 22. It is the responsible of the bank officials who advance loan to place all the necessary documents before an expert for getting his opinion. While the builder in connivance with the bank officials had purported the crime of availing loan based on forged documents, the petitioner herein who as an auditor given his Due Diligence Certificate solely based on the documents produced by the Bank. From the records it is found that the bank officials have not placed all the necessary and vital records before the auditor/petitioner, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use. What is reasonable skill, care and caution must depend on the particular circumstances of each case. An auditor is not bound to be a detective, or as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watch-dog, but not a bloodhound. He is justified in believing tried servants of the company in whom confidence is placed by the company. He is entitled to assume that they are honest, and to rely upon their representations, provided he takes reasonable care. IE there is anything calculated to excite suspicion he should probe it to the bottom; but in the absence of that kind he is only bound to be reasonably cautious and careful. The duties of auditors must not be rendered too onerous. Their work is responsible and laborious and the remuneration moderate." 3. "On the face of this explanation offered by the first respondent, is it possible for me to say that, as per the provisions of Section 21(5) and Section 22-A or the second schedule part I, R. (5), the respondent, a chartered accountant in practice, shall be deemed to be guilty of professional misconduct if he failed to disclose a material fact known to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificate given by the Audit/petitioner herein. When the record indicates that they have obtained CIBIL report rating of the borrower before advancing the loan and despite adverse information they have extended loan, her statement does not appears to be correct or true. Therefore it is very clear from the statement of LW.16 that they have over looked the relevant materials which were available with them before granting loan. To make proper assessment and appraisal or to seek expert opinion the Bank should have furnished the CIBIL report to the Auditor. Without furnishing relevant documents but expecting the auditor to do the job of deductive, does not fall within the scope and ambit of Auditors profession. 27. In Central Bureau of Investigation, Hyderabad versus K. Narayana Rao reported in (2012) 9 SCC 512 the Hon'ble Supreme Court has observed that: In the banking sector in particular, rendering of legal opinion for granting of loans has become an important component of an advocate's work. In the law of negligence, professionals such as lawyers, doctors, architects and others are included in the category of persons professing some special skills. A lawyer does not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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