ACCOUNTANT OF INDIA Vs. ASHOK KUMAR

JUDGEMENT

(1.) The Institute of Chartered Accountants of India ('ICAI') has filed this reference under Section 21(5) of the Chartered Accountants Act, 1949 (hereinafter 'the Act'). The reference seeks passing of necessary orders under Section 21(6) of the Act pursuant to the recommendations of the ICAI Council in its 325th meeting held from 1st to 3rd June, 2013.

(2.) The genesis of the recommendations of the ICAI Council is the letter dated 10th June, 1999 received by the ICAI from the Securities and Exchange Board of India ('SEBI') pointing out several irregularities in the public issue of one M/s. Bhartari Financial Services Ltd. ('BFSL'). The letter written by SEBI to ICAI stated that investigations were conducted into the buying, selling and dealing in shares of BFSL, as also the role of Shri S. K. Gupta, Chairman of BFSL and Shri Ashok Chawla, Chartered Accountant ('CA'), who is also a member of the ICAI. SEBI informed ICAI that the Chairman, SEBI had approved issuance of intimation to the ICAI to proceed against both these persons, who are CAs, for misconduct, under the Act.

(3.) The request made by SEBI as contained in the letter dated 10th June, 1999 is set out herein below: "Investigations revealed that 27 applications to the Public Issue were accompanied by stock invest issued by Sangli Bank, Karol Bagh, New Delhi. The stock invests were got issued by Shri Ashok Chawla from the bank on 23.11.95 whereas the issue of BFSL closed on 5.10.95. Though these stock invest were issued for amounts ranging between Rs.1.00-1.20 lacs each, they were used at a multiple of Rs. 10 in the applications i.e. stock invest actually issued for Rs.27 lacs was used for Rs.270 lacs, resulting in an irregular allotment of 1,17,200 shares. These allotments were made despite the bank having received a request from Shri Ashok Chawla for cancellation of the stock invests and withdrawal of the applications. The shares so allotted were subsequently forfeited and re-allotted to associate concerns of BFSL. It was admitted by both that the finance was arranged by Shri S. K. Gupta and the share application forms along with the stock invests were handed over by Shri Ashok Chawla to Shri S. K. Gupta. However, neither Shri Ashok Chawla nor Shri S. K. Gupta could explain how the applications were made at higher amounts.