The Supreme Court had revived criminal proceedings against Chartered Accountant (CA) accused of defrauding a subsidiary of foreign company and extracting money in the name of Input Tax Credit liability.
The bench of Justice Sanjay Karol has observed that the rule of law has a responsibility to protect the investments of foreign investors, while at the same time ensuring that any person accused of mishandling such funds is really and fully protected by the power of the phrase ‘innocent till proven guilty’.
The alleged fraud having been committed by the respondent while in the employment of Daechang Seat Automotive Ltd.
The present appellant is the authorized representative of the Company. The main business of this company is to manufacture seat related equipment for cars of the ‘KIA’ make.
The services of Mr. Nikhil K.S. of M/s. N.K. Associates were engaged as Chartered Accountants and Financial Advisors. Over time, a close relationship developed. The substance of the dispute is that the Company was informed that it had wrongly claimed input tax credit amounting to Rs.9,73,96,225.80p., by N.K. Associates. It was said that the amount owed to the Goods and Services Tax Department and failure to pay the same entails serious consequences. N.K. Associates then informed the Company that it is the standard practice in India for tax amounts payable to be transferred to the financial advisors who would then pay it onward to the concerned department.
In furtherance of the same, the Company, after some internal transfer of money from one account to another, made a transfer from its Indian Overseas Bank Account, which was used for payments, statutory or otherwise, totaling to Rs.10,18,54,894.80p.
The FIR came to be registered. In the course of investigation, a detailed statement of the accused was recorded. It has come forth in the said statement that the complainant was the successor of the respondent herein as the Chief Financial Officer and upon taking over such position and inspecting the records of the Company, he found that money had been debited from the Company’s account(s) on account of ‘GST payment’, but the same had not been credited to the concerned authority.
The quashed the criminal proceedings and held that there is no prima facie material placed on record for framing charge against the accused for having received money from the main accused, he is the salaried person obtaining salary from the company.
“We are surprised by the fact that the CFO of a company and an alleged chartered accountant, both readily agreed to not put ink to paper to formalise this relationship between them, and sans the same found it completely alright to share all financial details and books of accounts,” the court said.
The court while quashing the high court’s judgement revived and restored to the file of III Additional Chief Metropolitan Magistrate, Bengaluru. The parties are directed to appear before the said Court on 16th April 2025.
Case Details
Case Title: Hyeoksoo Son Versus Moon June Seok
Case No.: SLP(Crl.) No.6917 of 2024
Date: April 8, 2025
Read More: GST Payable On Biotech’s Cancer Test: AAR
