Delhi HC Upholds Reprimand, ₹25,000 Fine For Concurrent Auditor Who Failed To Flag Bank Transactions Lacking Cheque Support

The petitioner was appointed concurrent auditor of the Anthiyur Branch of Karur Vysya Bank for 1 July 2018 to 30 June 2019.

The Bank’s Chief of Internal Vigilance complained that he had failed to report four unauthorised transactions, dated 18 September, 25 September, 3 October and 31 October 2018, allegedly lacking supporting cheques and RTGS challans.

The ICAI Disciplinary Committee found him guilty of professional misconduct under Clause 7 of Part I of the Second Schedule to the Chartered Accountants Act, 1949, and imposed a reprimand and fine of ₹25,000; the Appellate Authority affirmed those orders.

The petitioner challenged the appellate order under Article 226, relying, among other things, on later communications to the RBI and contending that the alleged fraud predated his appointment.

Clause 7 of Part I of the Second Schedule to the Chartered Accountants Act, 1949, formed the basis for the misconduct finding.

The Court applied the limits of judicial review under Article 226: it does not sit as an appellate authority over disciplinary findings, and ordinarily will not reappreciate evidence or substitute its factual view. Interference may be justified where the decision-making process has a recognised legal infirmity or the findings are perverse or otherwise unsustainable in law.

The Court also considered whether the penalty was sufficiently disproportionate to justify writ interference.

The disciplinary authorities had considered the petitioner’s audit assignment, reports and explanation, and found that the specific irregularities were not reported in the relevant September and October 2018 audit reports.

The petitioner’s later communications to the RBI did not, by themselves, establish timely reporting during the audit period, while his arguments about when the fraud occurred and the assessment of the Bank’s loss would require the Court to reassess evidence.

The Court found no recognised legal infirmity or perversity warranting such intervention.

Given the authorities’ finding of gross negligence, the reprimand and ₹25,000 fine were not so disproportionate as to merit interference.

It dismissed the writ petition and disposed of the pending applications.