HC reprieve for CA associated with PMC Bank

Mumbai: In a reprieve for a city-based chartered accountant, the Bombay high court on Thursday stayed an order of the Insolvency and Bankruptcy Board of India (IBBI), suspending his registration as a valuer after he was arraigned as an accused in the Punjab and Maharashtra Cooperative (PMC) Bank-Housing Development and Infrastructure Limited (HDIL) loan fraud case

Mumbai: In a reprieve for a city-based chartered accountant, the Bombay high court on Thursday stayed an order of the Insolvency and Bankruptcy Board of India (IBBI), suspending his registration as a valuer after he was arraigned as an accused in the Punjab and Maharashtra Cooperative (PMC) Bank-Housing Development and Infrastructure Limited (HDIL) loan fraud case.

HT Image

“On the face of it, it is difficult to comprehend the reasoning, logic or rationale in this order,” a division bench of justice GS Patel and justice SG Dige said, while disapproving the order passed by the IBBI on February 28, 2022, against CA Vishwanath Prabhu.

“The impugned order proceeds on the basis that a simple allegation or accusation is enough to impeach the ‘integrity, reputation and character’ of a person, and that on a mere accusation a person is rendered unfit and improper,” the bench added.

Prabhu was a promoter of Yardi Prabhu Consultants, one of the valuers empaneled by PMC Bank. He was arrested on March 12, 2020 by the Economic Offences Wing (EOW) of the Mumbai police in the loan fraud case and granted bail on October 20, 2020.

The bench said it is true that Prabhu was arrested in connection with the loan fraud case, involving HDIL and its promoters—father-son duo Rakesh and Sarang Wadhawan—and the EOW had also filed a charge sheet against him.

However, the bench observed that the CA can file for discharge and the trial court may not even frame charges against him, he can also seek quashing of the criminal proceedings, apart from the possibility of him getting acquitted at the end of the trial, as the CA claimed that the case against him was based on conjectures and surmises.

The HC also disagreed with conclusions drawn by the IBBI in the suspension order that the pendency of the criminal proceeding against him had “adversely affected his integrity and reputation and made him unfit to be eligible as a registered valuer.”

“The impugned order seems to us to have completely overlooked the inherent absurdity that it creates,” the bench said, adding that it proceeded on the basis that mere pendency of a criminal proceeding robs a person of his status of being a “fit and proper person” and affects his “integrity, reputation and character.”

“In other words, it is being suggested that on account of mere accusations and allegations, the petitioner is already so guilty that his professional integrity, reputation and character are tarnished,” the court said while staying the IBBI order.