ICAI imposes penalty & debarment on CA

The case involves allegations of false and excessive billing by CA Raghu Marwah, a member of M/s R.N. Marwah & Co., Bengaluru. The complainant, represented by the Bankruptcy Receiver of Quinn Investments Sweden A.B., Quinn Logistics Sweden A.B., and Quinn Hotels Sweden A.B., accused Marwah of misconduct under the Chartered Accountants Act, 1949.
According to the findings, Marwah allegedly entered into service agreements with Quinn Lodgings India Private Limited and Quinn Logistics India Private Limited, raising false invoices for services not rendered. These invoices, issued for monthly payments of Rs. 8,00,000/- and Rs. 45,00,000/- respectively, were significantly higher than those issued to other clients during the same period. Moreover, certain bills were allegedly altered by adding the letter ‘A’ to their numbers, raising suspicions about their authenticity.
Marwah’s conduct regarding legal proceedings further raised concerns. He initiated separate proceedings for recovery and winding up of the companies in question, yet failed to provide proper representation in court, leading to the dismissal of the cases. Additionally, he withdrew the suits only after disciplinary proceedings were initiated against him by the Institute of Chartered Accountants of India (ICAI).
The Board of Discipline found Marwah guilty of misconduct and imposed penalties accordingly. He was debarred from the Register of Members for three months and fined Rs. 1,00,000/-. The decision was made based on the gravity of the allegations, Marwah’s oral representation, and the findings of the Board.
The Board observed several irregularities in Marwah’s actions, including the insertion of unreasonable clauses in service agreements, suspicious billing practices, and inconsistent conduct in legal proceedings. These actions were deemed unbecoming of a chartered accountant and warranted disciplinary action.
Marwah defended himself by citing difficulties in receiving payments from the companies, changes in management, and legal complexities. He also highlighted disparities in treatment compared to other firms involved in the case. However, the Board found his explanations insufficient to justify the alleged misconduct.
The penalties imposed aim to uphold professional standards and deter similar misconduct in the future. Marwah is expected to comply with the sanctions within a specified timeframe.
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA(Set up by an Ad of Parliament)
(PPR/138/13 1313/130130/2913/B0p/294/2017]
ORDER UNDER SECTION 21A(3) OF THE CHARTERED ACCOUNTANTS ACT, 1949 READ WITH RULE 15(1) OF THE CHARTERED ACCOUNTANTS (PROCEDURE OF INVESTIGATIONS OF PROFESSIONAL AND OTHER MISCONDUCT AND CONDUCT OF CASES) RULES, 2007.
In the matter of:-Shri Leif Baeckltmd,Bankruptcy ReceiverQuinn Investments Sweden A.B.Quinn Logistics Sweden A.B.Quinn Hotels Sweden A.B. …Complainant
-Vs.-
CA Raghu Marwah (M. No. 502305)of M/s R.N. Marwah & Co., Bengaluru …Respondent
[PPR/138/13-DD/130130/2013/B0D1294/2017]
Date of Final Hearing: 12th November, 2021(decision reserved and decided on 9th December 2021)Date of Order: 23-May-2024
MEMBERS PRESENT at the time of hearing on 12th November 2021 (through video conferencing):
CA. Ptasanna Kumar D., Presiding OfficerMrs. Rani Nair, (IRS, Retd.), Government Nominee
MEMBERS PRESENT at the time of award of punishment on 9th December 2021(
through video conferencing):
CA. Prasanna Kumar D., Presiding OfficerMrs. Rani Nair, (IRS, Retd.), Government NomineeCA. Satish Kumar Gupta, Member
1. The Board of Discipline vide Report dated 11th February, 2021 held that CA. Raghu Marwah (M. No. 502305) is Guilty of ‘Other Misconduct” falling within the meaning of Item (2) of Part-IV of the First Schedule of the Chartered Accountants Act, 1949 read with section 22 of the said Act.
2. An action under Section 21A (3) of the Chartered Accountants Act, 1949 was contemplated against CA. Raghu Marwah and communication dated r November. 2021 was addressed to him thereby granting him an opportunity of being heard in person and/or to make written representation before the Board on 12th November, 2021.
3. Raghu Marwah appeared before the Board on 12th November, 2021 through video conferencing and made his oral representation thereat. Upon consideration of the facts of the case along with the oral representation of the Respondent, the Board was of the view that it is desirable to have the view of all the members of the Board to arrive at a decision on the quantum of punishment to be awarded to the Respondent. Accordingly, the decision on the quantum of punishment to be awarded to the Respondent was reserved by the Board to be taken up in the presence of all the members of the Board on the basis of the documents and representation on record.
Thereafter, the case was considered on 9th December 2021 wherein all the members of’ the Board were present and noted that the Respondent in his oral representation, inter-alia, stated as under:
a. The payment against that fee was not forthcoming despite various reminders. In the interim, there was another work which was assigned. After submission of his initial work of advisory, the companies were pleased with his work. The companies asked him to submit a proposal for another engagement which he did. That engagement started from June and that engagement was signed by the General Manager Mr. Samson Arthur. For two months, the work under the scope of work of the second agreement was also rendered and again, no payment was forthcoming. The Respondent was forced to initiate recovery proceedings and send reminders. In the meantime, the Bankruptcy Receiver was appointed. The companies were unable to make payment because they were struggling to find out what is the real position in terms of ownership. The management of the companies was going through various changes. However, despite various reminders and legal notices, the Respondent had to file a case in the Honorable Andhra High Court where the registered office of the company was situated for recoveries of his dues. The Official liquidator was also appointed but, no favourable Order was there. Almost 20-25% of the recovery amount had already been spent by way of legal fees, expenses. charges for travels and so on and so forth.
b. Other firms like KPMG and M/s. Amarchand Mangaldas & Shroff received huge money on this case. The Respondent is the only victim or the only person who ended up with loss of time, money and the hardship and the stigma of being held Guilty by the honorable Institute.
c. The Respondent requested the Board to take the most lenient view and be mindful of the Respondent’s career which is at stake.
4. The Board has carefully gone through the facts of the case and also the oral representation of CA. Raghu
5. As per the Findings of the Board as contained in its report, the following are the observations:
(a) It was alleged that the Respondent entered into Service agreements dated 15/06/2011 and FEMA Advisory Service agreements dated 04/05/2011 with Quinn Lodgings India Private Limited and Quinn Logistics India Private Limited (Companies) and raised false invoices as no services were provided to the said Companies. Further, the Respondent suppressed material facts in the proceedings initiated before the Courts of Competent Jurisdictions and obtained Order from the Court of Competent Jurisdiction as regards winding up of the said Companies.’
(b) The Board observed that two separate agreements both dated 15th June, 2011 executed between Quinn Logistics India Pvt. Ltd./ Quinn Lodgings India Pvt. Ltd. on first part and Respondent on Other part contained specific clause with respect to Responsibilities as stated hereunder:
Agreement between Quinn Logistics India Pvt. Ltd. and the Respondent
“3. RESPONSIBILITIES
3.1 Logistics undertakes to not take any action (whether at any shareholders meeting or at any directors meeting) or any preparatory step (whether by convening a shareholders meeting or by convening a directors meeting) to remove any Director unless and until the Beneficiary has provided his written consent for such removal.
3.2 Logistics undertake to not take any action (whether at any shareholders meeting or at any directors meeting) or any preparatory step (whether by convening a shareholders meeting or by convening a directors meeting) to amend any provision of its articles and association relating to the removal of any Director unless and until the Beneficiary has provided his written consent for such amendment.
3.3 Without prejudice to the generality of the foregoing, Logistics shall undertake all actions necessary to amend it’s charter documents to incorporate the restrictions stated above.”
Agreement between Quinn Lodgings India Pvt. Ltd. and the Respondent “
3. RESPONSIBILITIES
3.1 Lodgings undertakes to not take any action (whether at any shareholders meeting or at any directors meeting) or any preparatory step (whether by convening a shareholders meeting or by convening a directors meeting) to remove any Director unless and until the Beneficiary has provided his written consent for such removal.
3.2 Lodgings undertake to not take any action (whether at any shareholders meeting or at any directors meeting) or any preparatory step (whether by convening a shareholders meeting or by convening a directors meeting) to amend any provision of its articles and association relating to the removal of any Director unless and until the Beneficiary has provided his written consent for such amendment.
3.3 Without prejudice to the generality of the foregoing, Lodgings shall undertake all actions necessary to amend it’s charter documents to incorporate the restrictions stated above.”
Upon consideration of said clauses, the Board observed that generally such conditions are not made part of service agreements in common business parlance and the same also show that such conditions are not reasonable and contrary to business practice and entering into such an agreement itself raises suspicion/doubt on the genuineness of the said agreements.
(c) The Board observed that bills for the period 01/04/2011 to 31/03/2012 and details of professional fee received during the FY 2011-12 submitted by the Respondent were issued to the said client as per the two Purported Services Agreements both dated 15/06/2011 executed between the parties for monthly payments of Rs. 8,00,000/- per month respectively and for two Letter of engagements both dated 04/05/2011 for FEMA Advisory Services for Rs. 45,00,000/-and Rs. 9,00,000/- respectively. The said letter of engagements dated 04/05/2011 for FEMA Advisory Services contain a clause for “Payment and engagement terms” wherein at point 2 it was stated as hereunder:
“The invoice for the aforesaid amount shall be raised after six months from the date of the engagement and the amount payable within 30 days thereafter.”
The said bills were much higher in value than the bills ordinarily issued by the Respondent Firm against other clients of the Respondent Firm during the relevant period. The Respondent during hearing dated 30th January, 2021 submitted that he was not sure about why the letter ‘A’ was inserted in the voucher numbers issued to the Companies and further the Accounts Department of the Respondent Firm follows their own process of issuing the invoices in serial nos. and there is no significance for A or B. Subsequently, the Respondent in written submissions stated that the invoice numbers are raised in serial order by the Accounts Department and to avoid confusion, invoice raised by the Bangalore office are raised with ‘A’ in the invoice number. The Board also observed that only specific bills had alphabet ‘A’ inserted and on perusal of the details of Invoices with `A’ issued during the F.Y. 2011-12, the Board observed that around 65 % of the billing was in respect of the said 2 companies only which were not received by it. Also, the Respondent firm adopted the cash basis of accounting. Accordingly, it was viewed that bills would have been issued to clients with original number and doubt is raised that bills to the said 2 companies have been later inserted with alphabet ‘A’ purposely.
(d)The Board noted that the Respondent instituted two separate proceedings, namely:-
i. Before Hon’ble High Court of Andhra Pradesh at Hyderabad for winding up of Companies.
ii. Before Hon’ble Patiala House Courts, Delhi in Suit No. 144/12 in case titled
“M/s. RN Marwah & Company Vs. Quinn Logistics India Pvt. Ltd. & Ors.” and Suit No. 145/12 in case titled “M/s. RN Marwah & Company Vs. Quinn Lodgings India Pvt. Ltd. & Ors.” for recovery of amounts due alongwith injunction for obstructing the Complainant and other stakeholders to take control of assets of Companies.
The Respondent in a pre-planned manner and within short span of time approached two different Forums and did not submit proper facts before the said Forums in order to create unnecessary complications for the Complainant and other stake holders of the said companies.
(e) The Board further noted that CS 144/12 and CS 145/12 instituted by the Respondent was dismissed by Ld. ADJ, New Delhi vide Order dated 03/04/2012 only after giving several opportunities to the Respondent herein to appear and present his case. The Ld. Additional District Judge, New Delhi (ADJ) in the said Order dated 03/04/2012 observed as under:
‘Matter has been called out several times since morning. None has appeared on behalf of the plaintiff (Respondent herein). Perusal of file also shows that the plaintiff has not been appearing in the present matter since 08.11.2012. Further, that the plaintiff has also not been taking any steps for the service of defendants no. 2 to 4 [Mr. John (Sean) Ignatius Quinn (defendant no.2), Mr. John Data 0 Reilly (defendant no.3) and Mr. Peter Quinn (defendant no.4) all being directors of M/s. Quinn Logistics India Pvt. Ltd.]. It appears that the plaintiff is not interested in pursuing the present case. The present case is, therefore, dismissed in default…….
Thus, on one hand the Respondent initiated the proceedings (CS 144/12 and CS 145/12) for recovery of the amount from the respective Indian Company and on other hand he failed to appear before the Ld. Court and took the plea that the said suit was costing him a lot and therefore, he let go the said proceedings which seems a contrary stand of the Respondent as one cannot be expected to approbate and reprobate.
(f) The Complainant company filed application before Ld. Additional District Judge, Patiala House Courts, New Delhi under Order 1 Rule 10 r/w Order 39 Rule 4 r/w Section 151 of the Code of Civil Procedure, 1908 and the Ld. Court vide Order dated 06/06/2012 was pleased to partly allow the said application and permitted the Complainant company to be impleaded as defendant number 5 in the said matter.
(g) The Respondent filed an application dated 14/07/2014 for withdrawal/ not pressing before the Ld. ADJ, Patiala House Courts, New Delhi in suit no. 144/2012 and suit no. 145/2012 under Order 9 Rule 4 and 9 read with Section 151 of the Code of Civil Procedure and accordingly, the said suits were not perused further by the Respondent. Thus, it seems that the Respondent has withdrawn the said Suits only when the Complainant approached the Institute by filing Form ‘I’ dated 14/05/2013 and Disciplinary proceedings were initiated against him.
(h) The parent company Quinn Logistics Sweden AB instituted OS No. 19 of 2012 and OS No. 20 of 2012 to protect its assets and Indian subsidiary companies (Quinn Logistics India Pvt. Ltd. and Quinn Lodgings India Pvt. Ltd.). The parent company while seeking permanent injunction restraining the Indian subsidiary companies, their agents/ nominees acting through or under them from alienating any property of Company in any manner or creating third party rights or interests thereon. The parent company also sought injunction restraining the agents/ nominees or anybody through or under them from changing or taking any steps to change the share capital structure of Indian company in any manner. Thus, the parent company initiated the proceedings before the Hon’ble District Courts at Hyderabad restraining the defendant no. 2 to 4 therein from alienating/ creating third party rights in respect, of any property of Indian Company and/ or also changing the composition of the shareholding pattern and/ or reconstituting the Board of directors of the Indian Company. The above agreements executed by the Respondent with the respective Indian Company was to bypass the relief sought by the parent company under injunction suit O.S. No. 19 of 2012 and O.S. No. 20 of 2012. Further, the role of the Respondent came into picture only with the execution of said Agreements dated 04/05/2011 and 15/06/2011.
(i) The said companies as per present status of MCA portal are “Active Compliant” and no such Orders for winding up was proceeded with which further negates the contentions raised by the Respondent.
6. The Board viewed that the conditions stipulated in the agreements entered into by the Respondent with the companies under question were neither reasonable nor generally made part of service agreements in common business parlance. Further, doubt was raised that bills to the said 2 companies had been later inserted with alphabet ‘A’ purposely. On one hand. the Respondent initiated the proceedings (CS 144/12 and CS 145/12) for recovery of the amount from the respective Indian Companies and on the other hand, he failed to appear before the Ld. Court and subsequently withdrew the said Suits taking the plea that the said Suits were costing him a lot and therefore, he let go the said proceedings which seems a contrary stand of the Respondent as one cannot be expected to approbate and reprobate. Thus, the Board viewed that the Respondent being member of the institute should work rationally in his professional endeavors and should not be unreasonable in using his professional acumen. The conduct of the Respondent in the explained circumstances is clearly unbecoming of a Chartered Accountant. Thus, as per the Findings of the Board as contained in its report, it has already been held that CA. Raghu Marwah is Guilty of Other Misconduct falling within the meaning of Item (2) of Part IV of the First Schedule of the Chartered Accountants Act, 1949 read with Section 22 of the said Act.
7. Upon consideration of the facts of the case, the consequent misconduct of CA. Raghu Marwah and keeping in view his oral representation before it, the Board decided to remove the name of CA. Raghu Marwah(M.No. 502305) from the Register of Members for a period of 3 (three) months and also imposed a Fine of Rs.1,00,000/- (RS. One Lakh only) upon him payable within a period of 60 days from the date of receipt of the Order.
This is issued pursuant to the Order dated 291” April 2024 passed by Hon’ble High Court of Delhi in W.P.(C) 5247/2024 namely ICAI Vs R. Vinod Kumar & others.
Sd/-CA. PRASANNA KUMAR D(PRESIDING OFFICER)
Sd/-MRS. RANI NAIR, (IRS, RETD.)(GOVERNMENT NOMINEE)
Sd/-CA. SATISH KUMAR GUPTA(MEMBER)