INCHEM INC, A COMPANY INCORPORATED UNDER THE LAWS OF THE UNITED STATES OF AMERICAN IN THE STATE OF NEW YORK Vs. INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, NEW DELHI

JUDGEMENT

(1.) The case of the petitioners' is that a complaint dated 13.06.2013, under section 21 of the Chartered Accountants Act, 1949, (for short 'the Act') was given to the 1st respondent against the second respondent stating that the first petitioner is a Company by name Inchem Inc, a Company incorporated under the laws of United States of America in the State of New York having its Head Office in New York. The second petitioner is the President and Chief Executive officer of the 1st petitioner-Company and a non-resident Indian, settled in New York, USA, since 1969. The petitioners are the shareholders of the 3rd respondent-Company Doctors Organic Chemicals Ltd., Venkatarayapuram, Tanuku of West Godavari District. The 4th respondent, who was the Managing Director of the 3rd respondent Company, entered into shareholders agreement on 10.10.1995 for financing the operations of the 3rd respondent-Company. The 1st petitioner, an overseas Corporate body of NRIs, invested Rs. 5.68 crores in the 3rd respondent Company and also gave a loan of Rs. Rs. 70 lakhs to the 3rd respondent-Company, relying on the shareholders agreement and statements, promises and assurances of the 4th respondent. The 3rd respondent-Company ran into cash losses on account of mis-management and diversion of funds by 4th respondent, for which a Company Petition bearing CP No.51 of 1999 under sections 397 and 398 of the Companies Act, 1956, was filed. Meanwhile, the Industrial Development Bank of India (IDBI), as a prime lender, ordered a Special Investigative Audit (SIA), based on petitioners' complaint, a local auditor, the respondent No.2 from Mumbai was appointed by the IDBI for conducting SIA. Pursuant thereto, the 2nd respondent met the petitioners at Hyderabad, obtained information/clarifications and submitted report dated 20.12.2000 to the Company Law Board.

(2.) Further complaint of the petitioners, thereafter, the 2nd respondent again submitted a supplementary report, accepting the one sided, concocted and forged explanation and documents submitted by R-4, contrary to the first report, to water-down the effect and clarity of findings/facts and figures of the first respondent, to serve the needs and benefits of the fourth respondent. The discrepancies therein are very high in the supplementary report with that of the first SIA report. The second respondent submitted supplementary report without actually going to the 3rd respondent-Company for verifying the explanations and documents.

(3.) The 1st respondent filed counter affidavit stating that The Institute of Chartered Accountants of India (hereinafter referred to as 'Institute') is the creation of the Act. The management and affairs of the Institute are vested in the Council. The function of the Institute is to regulate the profession of the Chartered Accountants. The Institute is also empowered to take action against its members for any mis-conduct as contemplated in the Act and the Regulations framed thereunder. The complaint of the second petitioner against the second respondent was received by the 1st respondent and was dealt with according to the procedure prescribed under Section 21 of the Act and Regulation 12 (11) of the Chartered Accountants Regulations, 1988 (hereinafter referred to as 'Regulations').