The Institute of Chartered Accountants of India (ICAI) has formally reprimanded CA Ravish Shashikant Maniyaror professional misconduct after it was found that he incorrectly stated in his audit report that no litigation was pending against his client company, Orange Medicare and Research Centre Pvt. Ltd., even though proceedings under the SARFAESI Act had been initiated by Saraswat Co-operative Bank.
The case stems from a complaint filed by Dr. Rajkumar Kaluram Gaikwad, a director of Orange Medicare and Research Centre Pvt. Ltd., who alleged that the statutory auditor, CA. Maniyar, failed to report pending litigation and neglected material facts while auditing the company’s financials for FY 2017-18.
Background
Orange Medicare had defaulted on its loan repayments to Saraswat Co-operative Bank in 2017, resulting in the account being classified as a Non-Performing Asset (NPA). The bank initiated proceedings under the SARFAESI Act and issued multiple notices for possession of company assets, including an order from the District Magistrate dated April 27, 2018.
Despite this, the auditor stated in his report that there were “no pending litigations impacting the financial position,” and that “no significant events occurred after the balance sheet date.”
Committee’s Observations
The ICAI Disciplinary Committee comprising CA. Ranjeet Kumar Agarwal, Presiding Officer (in person), Mrs. Rani S. Nair, IRS (Retd.), Government Nominee) (through VC), Arun Kumar, IAS (Retd.), Government Nominee (in person), CA. Sanjay Kumar Agarwal, Member (in person), and CA. Cotha S Srinivas, Member (in person) found that:
The auditor failed to exercise due diligence by not properly assessing the impact of SARFAESI proceedings on the company’s financial position and going concern status.
Disclosure requirements under the Companies (Audit and Auditors) Rules, 2014 were not properly met. For example, the auditor failed to name the bank or specify the period of loan default in his audit report.
The company had defaulted on repayment of approximately 65% of its total long-term borrowings.
A proposed one-time settlement of ₹13 crore was only partially fulfilled (with just ₹2.5 crore received), further underscoring the severity of the situation.
While CA. Maniyar maintained that he was unaware of the SARFAESI order at the time of signing the audit report and relied on management representations, the Committee rejected this defense, emphasizing that the auditor’s responsibility includes independent verification and skepticism.
The Committee cleared CA. Maniyar of four other charges, including alleged irregularities related to provisioning of construction expenses, documentation of loans and advances, loan from a director (Mrs. Smeeta Patil), and valuation of capital work in progress.
The Committee found that CA. Maniyar had exercised due diligence, provided adequate documentation, and made appropriate disclosures.
The Committee decided that a reprimand under Section 21B(3)(a) of the Chartered Accountants Act, 1949, was an appropriate punishment. The order was signed by the Presiding Officer CA. Ranjeet Kumar Agarwal and other committee members.
Case Details
Case Title: Dr. Rajkumar Kaluram Gaikwad Versus CA. Ravish Shashikant Maniyar
Case No.: PR/369/2018-DD/70/2019-DC/1360/2020
Date: 9th May, 2024
Counsel For Petitioner: Ambernath Vibhute, Advocate
Counsel For Respondent: CA. Shashikant Barve
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