Court upholds ICAI decision to bar auditor from practising

The Delhi High Court has upheld the decision of the Institute of Chartered Accountants of India (ICAI) to bar an auditor for Global Trust Bank (GTB) from practising accountancy for five years, according to the national professional accounting body.

It was last year that the capital-headquartered ICAI decided to blacklist P Ramakrishna after the institute’s disciplinary committee found that him guilty of professional misconduct as auditor for the troubled GTB during 2000-01. That was when the 1993-formed bank was on the verge of collapse due to reckless lending.

Soon after, a single bench of the High Court had quashed the ICAI order. Ramakrishna had argued that the ICAI had not followed its laid down procedures while conducting the disciplinary proceedings against him.

The 1949-formed institute then appealed against the single-bench decision before the division bench of the High Court. Its verdict, upholding the institute’s position, came on September 30, according to ICAI president G Ramaswamy.

“Ramakrishna had argued that we conducted the inquiry under old disciplinary norms. He wanted it to be carried out afresh following the new norms,” Ramaswamy said.

“The court has upheld our view and said the changes in the amended norms were only meant to fine-tune certain technical issues.

The bench noted that it could not be a reason to turn our inquiry invalid,” he told Business Standard.

The court has now clarified that the procedure prescribed by the unamended Chartered Accountants Act, 1949, that is Sections 21, 22 and 22A would be applicable to all pending proceedings in information case — and not the procedure prescribed after the amendment made by the Chartered Accountants (Amendment) Act, 2006, he explained.

ICAI can initiate inquiry against an accused on the basis of information or complaint. An inquiry that was initiated against Ramakrishna was on the basis of information — and not complaint. Ramakrishna was associated with Lovelock & Lewes, a network-affiliate of PricewaterhouseCoopers, when he audited accounts of GTB promoted by Ramesh Geli, the first banking executive to have received a Padma award.

The bank’s networth was wiped off due to accumulated losses to the tune of Rs 265 crore as of March, 2003. If the bank had made provisions for the entire gross non-performing assets of Rs 916 crore, the accumulated loss would have escalated to Rs 552 crore.

As the management failed to infuse capital in GTB, the RBI placed a moratorium on the bank’s operations on July 24, 2004, to protect the depositors’ interest. On July 26 that year, RBI announced the merger of GTB with Delhi-based public sector lender Oriental Bank of Commerce.
 

Correction

The Institute of Chartered Accountant of India (ICAI) has clarified that its decision on proceedings against former Global Trust Bank auditor was taken by its disciplinary committee and is yet to be approved by its council. The error is regretted.