In a statement to the media, the Institute of Chartered Accountants of India (ICAI), a statutory body that regulates the profession of Chartered Accountancy in India, said that the "Disciplinary directorate of ICAI is in receipt of complaints from offices of various Registrars of Companies across the country against CA professionals for their involvement in companies allegedly linked to Chinese nationals."
Digital
Desk: The Central
Government has suggested that 400 Chartered Accountants (CAs) and Company
Secretaries (CSs) be disciplined for their alleged role in illegally
incorporating Chinese shell firms in major cities.
Following the 2020 Galwan incident, in
which 20 soldiers were killed in violent skirmishes with the Chinese People's
Liberation Army, the government has adopted a variety of measures against
Chinese economic entities (PLA).
Given the fact that Chinese companies'
FDI has dried up in the last two years as a result of the government's numerous
regulatory measures, trade between the two nations reached a new high of $125
billion last year. According to data from the Department for Promotion of
Industry and Internal Trade (DPIIT), FDI from China reached $15,422 crore in
April-June 2020, but dropped to $12,622 crore
in the first quarter of 2022.
According to a senior government
official, the CAs and CSs facing disciplinary action assisted in the formation
of a large number of Chinese-owned or Chinese-run shell firms in key cities without
following the norms and laws. After receiving input from financial intelligence
units over the past two months, the Ministry of Corporate Affairs (MCA)
recommended the move. A spokesman for the ministry declined to comment.
In a statement to the media, the
Institute of Chartered Accountants of India (ICAI), a statutory body that
regulates the profession of Chartered Accountancy
in India, said that the "Disciplinary directorate of ICAI is in receipt of
complaints from offices of various Registrars of Companies across the country
against CA professionals for their involvement in companies allegedly linked to
Chinese nationals."
"To process complaints, the
Chartered Accountants (Procedure of Investigations of Professional and Other
Misconduct and Conduct of Cases) Rules, 2007 are employed." As a result,
the Institute of Chartered Accountants of India (ICAI) said that "guilt,
as alleged, as well as the number of Chartered Accountants purported to be
implicated, have still to be ascertained/determined after conducting a full
investigation/inquiry." and that "it is premature to comment on the
same."
The MCA amended the Chartered Accountants Act 1949, the
Cost and Work Accountants Act 1959, and the Companies Secretary Act 1980 in
April of this year to give the various institutes more responsibility and
time-bound disciplinary action against CAs and CSs.
It was believed that the Institute of Company Secretaries
of India (ICSI) would respond.
Since October of last year, the Income
Tax Administration has examined about a half-dozen Chinese telecom, fintech,
and industrial companies, alleging tax evasion and under-invoicing.
The MCA amended the Companies
(Appointment and Qualification of Directors) Rules, 2014 on June 1, making it
mandatory for any individual from a country that shares a border with India to
obtain a security clearance from the Ministry of Home Affairs (MHA) before
becoming a director or shareholder in an Indian company. According to the
official, the judgement will have an impact on Chinese enterprises that operate
in India via subsidiaries based in other countries.
On April 18, 2020, the DIPP issued a
new rule requiring prior government clearance for FDI from nations that share a
land border with India, with the goal of reducing opportunistic takeovers by
Chinese corporations of loss-making Indian industries.
Since FDI in non-critical industries
is permitted through an automatic route, these proposals would have been
approved without the MHA's approval previously. Investments in important areas
such as defence, media, telecommunications, satellites, private security
services, civil aviation, and mining, as well as any investments from Pakistan
or Bangladesh, require prior government approval or security clearance from the
MHA.
An FDI Proposal Review Committee,
chaired by the Union Home Secretary and including Secretary DIPP as a member,
was established in October 2020 to conduct a thorough review of security
clearances for Chinese FDI bids.
