The Mumbai bench of the National Company Law Tribunal (NCLT) on February 6 barred Mukesh Choksi from being appointed as an auditor of any company for a period of five years, holding him guilty of signing off on a company’s books without doing the audit and colluding with its promoters in a fraudulent manner.
Language use by the honorable member of NCLT-Mumbai Bench, inter-alia is:
It appears that the Statutory Auditor R-1 in collusion with the Directors of the R-2 company has made the Audit Certificate as a tradeable commodity, which cannot be permitted at any cost……… (Para 20 of the order)
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…… (Para 22 of the order)
This is the first time the NCLT has passed an order barring an auditor in such a fashion.
Facts of the case that the allegation raised in the complaints by Mr. Jagdip were:
- The company promised in its prospectus that the shares will be listed in a stock exchange
- Shares are not listed on Pune Stock Exchange.
- Siphoning of investors’ money.
- The company has not issued a financial statement after 1995
- Company changes registered office frequently
- No company representative attends calls given by ROC Mumbai
- Investors are complaining about serious irregularities but do not get any response from Regulators, Investigating Agencies.
MCA through its joint directors had raised many questions before the Auditor, some of the question and interesting reply are as follows:
Question No- 9: - Where is the factory/manufacturing facility of the Company is Located?
Answer:- I Do not know.
Question No- 10: Who are the persons, capable of giving information about the public issue, its utilization and day to day affairs of the company, also mention their address etc.,?
Answer:- According to the best of my knowledge Shri Arvind Goyal, Director, Shri Jayesh Sampat, director, and Shri Vithal Das Anannat Prabhuthe director of the company are capable of giving information about the public issue and day to day affairs/financial affairs of the company.
Question No- 11:- When was the last AGM of the Company was held, its agenda and where it is held?
Answer No:- I do not Know.
Question No- 12:- Have you attended the AGMs of the company during your tenure as a Statutory Auditor of the Company?
Answer:- I never attended any AGM of the Company.
Question No-13:- Whether any Income Tax raids are conducted and the documents seized by the IT Departments?
Answer:- I do not know.
Question No- 14:-Do you know an order has been issued to carry out the Inspection u/s 206 read with section 207 of the Companies Act, 2013?
Answer:- Yes, this aspect came to my knowledge on receipt of summon dated 09.03.2018.
Question No- 19:- Shri Vithal das Anant Prabhu, Director of the Company, at the time of recording his statement on 03.01.2018 has stated that he “ was working as ordinary Clerk with Mr. Mukesh Choksi, the former CA of the 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:- 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:- 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:- 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:- for the Financial year 2014-15.
Question No- 23:- How long you are a statutory auditor of the company?
Answer:- I was appointed as the statutory auditor, for the financial year 2014-15 & 2015-16.
Question No- 24:- Do you have the copy of the consent letter given to the company for appointment as Statutory Auditor of the Company and the copy of appointment letter issued by the company?
Answer:- consent letter given to the company is annexed to my letter dated 12.03.2014.
Question No- 25:- Whether an Internal Audit System was in place?
Answer No 25:-No.
Question No- 26:- Where are Books, of Accounts, records, papers etc., are kept?
Answer:- The records are with Shri Arvind Goyal Babulal, Director of the Company, I am not aware where he is keeping them.
Question No- 27:- Have you called for any Books of Accounts and Statutory Registers from the Company?
Answer: -I have not called for any Books of Accounts and Statutory Registers from the Company.
Question No- 28:- Who has submitted and coordinated the audit of Books of Accounts, Statutory Registers, other papers etc., of the Company?
Answer:-Shri Arvind Goyal, Director of the Company has coordinated the audit work.
Question No- 29:- Where you have audited the Books of Accounts and Statutory Registers, Papers etc., of the Company?
Answer:-I have not audited the books of accounts of the company. However, I have signed the auditor report of the company for the relevant period.
Question No- 30:- What is/was your role as an auditor, mention in brief your duties and responsibilities in the company under inspection?
Answer:- I have to check the Accounts, Statutory Registers, Papers etc., but the records essential for audit purpose was not produced before me. I have been informed the Statutory Auditor has further 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 Statutory Auditor is a shame 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.
The honorable bench also stated in its order that “in the present times when the national economy is highly dependent upon the profitability and credibility of commercial institutions, the role of statutory auditors is becoming a very important tool of keeping a check and preventing re-occurrence of scams like Satyam therefore Mr. Mukesh Maneklal Choksi shall not be eligible to be appointed as an Auditor of any company for a period of 5 years from the date of passing this order, and the auditor shall also be liable for action under Section 447 of the Companies Act, 2013.” Through the same order, the honorable bench also directed that the copy of the order be sent to the National Financial Reporting Authority (NFRA) and ICAI “to take proper action as they may deem fit.
I have seen this type of order first time and a great lesson to the professional doing reckless certification or taking their certificate as a tradable commodity.
you may click the following link to read original order
https://nclt.gov.in/sites/default/files/Interim-order-pdf/CP%204365%20of%202018%20Union%20of%20India%20vs%20Mukesh%20Choksi%20-%206.2.2019%20FINAL_AMENDED%208.2.19.pdf
The order is analyzed by
CS Ravi Bhushan Kumar
FCS, M.Com, LL.B, B.Com(H)
9990339200
you may click the following link to read original order
https://nclt.gov.in/sites/default/files/Interim-order-pdf/CP%204365%20of%202018%20Union%20of%20India%20vs%20Mukesh%20Choksi%20-%206.2.2019%20FINAL_AMENDED%208.2.19.pdf
The order is analyzed by
CS Ravi Bhushan Kumar
FCS, M.Com, LL.B, B.Com(H)
9990339200
