ICAI’s Disciplinary Action Confirmed; Delhi HC Upholds 3 Month Removal of CA for Audit Lapses

The Delhi High Court has affirmed the disciplinary action taken by the Council of the Institute of Chartered Accountants of India (ICAI) against a chartered accountant, upholding the punishment of removal of his name from the register of members for a period of three months. The bench of Justice Dinesh Mehta and Justice Vinod Kumar held that the findings of serious professional misconduct, particularly relating to failure to detect inflated assets and undisclosed liabilities, fully justified the penalty imposed by the Institute. The disciplinary action originated from a communication dated October 20, 2006, sent by the Reserve Bank of India (RBI) to ICAI. The RBI flagged serious deficiencies in the audit report of Escorts Finance Limited, stating that it did not present a true, correct, and complete disclosure of the company’s liabilities towards public deposits and also failed to detect “ever-greening” of assets. Acting on this information, ICAI initiated proceedings against the respondent auditor. Following an initial notice issued in June 2008 and an unsatisfactory reply from the audit firm, the matter was treated as an information case. A prima facie opinion was formed in August 2009, leading to a full-fledged investigation by the Disciplinary Committee. Notably, despite repeated notices, the respondent failed to file any reply or participate meaningfully in the disciplinary proceedings, compelling the Committee to proceed on the basis of the available record. Three specific charges were framed against the respondent. These included failure to verify and disclose the correct liability of the company on account of public deposits, inability to detect the ever-greening of assets while finalising the balance sheet as on March 31, 2005, and non-compliance with RBI directions requiring submission of an auditor’s certificate. The Disciplinary Committee found all charges proved against the respondent. ICAI subsequently imposed the punishment of removal of the respondent’s name from the register of members for three months during its 364th (Adjourned) meeting held in April 2017. The respondent challenged the applicability of the unamended Chartered Accountants Act, arguing that his case should be governed by the amended provisions. ICAI rejected this contention and proceeded under the applicable law at the relevant time. Before the High Court, senior counsel appearing for ICAI emphasized the gravity of the misconduct. It was pointed out that the audit report showed cash and bank balances of nearly ₹48 crore, even though the cheques concerned were credited much later, thereby falsely inflating the company’s assets. Additionally, interest liability amounting to ₹17.23 crore was allegedly not reported. The Court was informed that the RBI had ultimately closed the company’s operations due to multiple financial irregularities, including fabrication of accounts. The Bench noted that the respondent neither contested the proceedings before the Disciplinary Committee nor appeared before the High Court, despite service of notice and publication. Taking into account the seriousness of the charges—particularly those relating to inflated assets and non-disclosure of liabilities—the Court held that the punishment imposed by ICAI was proportionate and warranted. The Delhi High Court confirmed the removal of the respondent from the register of members for three months. The Court further directed that although the respondent’s certificate was currently inactive, his membership would not be revived automatically after the expiry of the punishment period. Instead, revival would be subject to an application by the respondent and compliance with the stipulated conditions. The removal was ordered to take effect from April 1, 2026. Case Details Case Title: Council of ICAI Versus S.N. Shivakumar Case No.: Chat.A.Ref 1/2018 Date: 14/01/2026 Counsel For Petitioner: Pooja M. Saigal, Sr. Advocate Counsel For Respondent: None Click Here To Read Order Read More: Live Telecast Fees Are Not “Royalty”: Delhi HC Dismisses Tax Appeal Against Sri Lanka Cricket

ICAI’s Disciplinary Action Confirmed; Delhi HC Upholds 3 Month Removal of CA for Audit Lapses

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