The Bill has been notified on 18th April, 2022 which is now known as the “CA, CWA and CS Act, 2022“.
The Bill was presented in response to a surge in corporate fraud in India over the years. The out-turn of corporate scams like Jet Airways Scam, Punjab National Bank Scam, PwC Scam, which have not been forgotten and investigations into these companies are still underway which has harmed public trust and the people’s capacity to fully rely on the corporate world. The statutes substantially contours the obligations, standards, and procedures that professionals like Chartered Accountants, Company Secretaries and Cost Work Accountants are supposed to follow.
The Government has created legislation to develop and regulate professions such as CA, CWA and CS to ensure transparency in the mechanism. These professions are currently governed by the following Acts:
- The Chartered Accountants Act, 1949, (hereinafter referred as CA, Act 1949)
- The Cost and Works Accountants Act, 1959 and (hereinafter referred as CWA Act, 1959)
- The Company Secretaries Act, 1980 (hereinafter referred as CS Act, 1980)
The key amendments include register/registration of firms, composition of the Board of Discipline and Disciplinary Committee (DC), and the Constitution of a Coordination Committee, etc. which are as discussed below.
KEY AMENDMENTS
Under CA Act, 1949, CWA Act, 1959 and CS Act, 1980, the following amendments have been made:
| ESTABLISHMENT OF A COORDINATION COMMITTEE | CHANGE IN DISCLIPLINARY COMMITTEE MECHANISM |
|---|---|
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| DISCIPLINARY PROCEEDINGS | REGISTRATION OF FIRMS WITH THE INSTITUTES |
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COMPARITIVE ANALYSIS OF PREVIOUS AND AMENDED PENALTIES
Under CA Act, 1949, CWA Act, 1959 and CS Act, 1980, the following amendments have been made:
| S.No. | Penalty Description | Previous Penalty | Amended Penalty |
|---|---|---|---|
| 1 | For Professional and other Misconduct, the Board of Discipline may take the following actions:
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Removal of name for 3 months; Rs. 1 lakh. Previously, there were no such provisions for repeated offenders. |
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| 2 | For Professional and other Misconduct, the Disciplinary Committee may take the following actions
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Rs. 5 Lakhs Previously, there were no such provisions for repeated offenders. |
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| 3 | Penalty for falsely claiming to be a member on first conviction shall be punishable with fine (as specified for first offence), which may extend to, and on any subsequent conviction with imprisonment which may extend to six months or with fine which may extend to (as specified for subsequent penalty), or with both. | Rs. 1000/- (First Offence); Rs. 5000/- (Subsequent Penalty) | Rs. 1 Lakh (First Offence); Rs. 5 Lakhs (Subsequent Penalty) (Section 24) |
CASE STUDIES
- VIVO Scam, 2022
Vivo Mobiles Pvt. Ltd was incorporated in 2014, as a subsidiary of a Hong-Kong based company. Recently, to avoid getting taxed in India, Vivo sent a whopping Rs. 62,476 Cr worth turnover to China. The money is almost half of Vivo’s turnover of Rs. 1,25,185. On July 5, 2022, ED raided 48 locations of Vivo Mobiles India Pvt. Ltd. and its associated companies across the country. Indian Intelligence Services also found that the data of domestic customers was being illegally transferred by Chinese Companies to servers kept in that country. 2 Professional Chartered Accountants and a Professional Company Secretary are under the scanner of the investigators. The documents were forged and filled with false information by the 3 professionals. The probe also revealed that the Professional Chartered Accountants facilitated incorporation of the company by witnessing the signature and documents of the Chinese nationals. The 3 professionals also failed to verify the documents and comply with the legal requirements under the Companies Act. Non-Compliances of law by a Professional CA or CS is a serious offence.
Sources: Newspaper Publication - Gurugram GST Scam: Bail Denied to CA by Gurugram Court
Recently, in the case of CGST, Gurugram. Vs. Sunil Mehlawat the Court has denied bail to the accused. The accused was practicing as a Professional for the past 6 years. The bench (ACJM) observed that the Professional is involved in causing a loss to the government treasury amounting to Rs.7,60,89,626/ Thus, he has committed an offence under Section 132 (1)(i) read with 132(1)(b), 132(1)(c), 132(1)(e) and 132(1)(f) CGST Act 2017. He has actively participated in the preparation of forged certificates for bogus or non-existent companies to claim a GST refund, causing loss to the public and affecting the economy of the country. So, from this case study, we can clearly see that the court’s approach toward culprits is conscientious and rigid.
Sources: Newspaper Publication
CONCLUSION
The Act states that the Presiding Officers of the Committees will not be members of all the 3 Institutes. Therefore, there are two perspectives of the same as this may be against the interest of the members of the Institutes. Secondly, the Government is trying to neutralize the process as there will be no biasness regarding the disciplinary action taken by the committee.
Regarding Coordination Committee, the Government is trying to create a Coordination Committee with respect to all the 3 Institutes. However, there is a probability the functions proposed for the Coordination Committee may overlap with the current norms of the 3 Institutes and the Councils as the 3 Institutes also have committees for coordinating among themselves. With respect to disclosure of pending complaints or actionable information against members of the Institutes and firms registered with them which may harm the reputation of the Registered firms.
Data Source: Ministry of Law and Justice and leading publications
Disclaimer
The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. The content of this article is not intended to create and receipt of it does not constitute any relationship. Readers should not act upon this information without seeking professional legal counsel.
