The Securities Appellate Tribunal ( SAT) has ruled that SEBI has not been empowered to take action against Chartered Accountants for lack of due diligence. The Appeal has been filed by CA Mani Oommen against the order dated December 31, 2019, passed by the Whole Time Member of Securities and Exchange Board of India whereby the appellant.

Mani Oommen Vs SEBI (Securities Appellate Tribunal)

SAT held that once the appellant is not found responsible for the preparation of the financials of the company merely because he was not cautious or did not carry out due diligence properly will not suggest that the appellant colluded with the promoters and the directors of the company. This finding of conclusion, in our opinion, is based on assumptions and is against the specific finding given by the whole time member, namely, that the understatement was specifically designed and carried out by the promoters and the directors of the company.

In our opinion, to give a finding on collusion, there must be some material that could lead to an inference of collusion. Once a finding is given that the appellant was not involved in the fabrication and fudging of the books of accounts and the balance sheet and if the appellant had no intention or knowledge of such understatement being shown in the financials, the charge of fraud or collusion or connivance with the directors and promoters of the company cannot be levied, only on the ground that he was not diligent or cautious or did not check the outstanding loan details from the banks and through other sources. Lack of due diligence can only lead to professional negligence which would amount to misconduct which could be taken up only by ICAI.