Gujarat High Court Quashes FIR Against Chartered Accountant Firm In GSLDC Scam

The court emphasized that the firm's role was confined to auditing vouchers and records, and it was not directly implicated in the misconduct associated with the Khet Talavadi project, the focal point of the accusations.

Justice Sandeep N. Bhatt, heading a single bench, underscored the potential ramifications of routinely involving professionals in such cases by state authorities. The court warned that such a practice could lead to administrative chaos and deter highly skilled professionals from collaborating with the government or its offices.

The ruling came as a result of applications under Section 482 of the Code of Criminal Procedure, 1973, and Section 226 of the Constitution of India. The applicant sought the quashing of identical but separate FIRs registered with the ACB Police Station, Bharuch, for the offences punishable under Sections 409, 465, 466, 467, 471, 477A and 120B of the Indian Penal Code and Sections 12, 13(1)(A) and 13(2) of the Prevention of Corruption Act.

The prosecution case revolved around the examination of Khet Talavadi's work across various survey numbers conducted by the Gujarat Land Development Corporation in the village of Kharach, Taluka: Hansot, District: Bharuch. Upon inspection, authorities discovered that applications were submitted on behalf of farmers without their knowledge by officials from the Corporation.

This misuse of power involved falsely representing Khet Talavadi on documents, providing incorrect measurements in records, making payments to specific contractors, and creating fraudulent records in collaboration with unqualified employees appointed by Pipara & Company, a Chartered Accountant Firm. These actions are alleged to have violated the Chartered Accountant Act, leading to the filing of the present complaints.

The applicant's lawyer argued that the filed FIRs lacked any reference to fraudulent activities committed by the applicant. Instead, the allegations centered solely around the recruitment of an unqualified employee, asserting that this constituted a breach of the Chartered Accountant Act. They further argued that such complaints could potentially subject professionals to legal accountability for the actions of their staff or representatives.

The High Court ruled that individuals associated with the Gujarat State Land Development Corporation had submitted fraudulent applications in an attempt to exploit the benefits of the State Government’s 'Khet Talavadi' Scheme. Notably, the court did not find a direct link between the applicant, the Corporation's officers and staff, or the contractors. Additionally, the court noted the absence of any financial transactions, except for the fees paid to the firm.

Moreover, the Chartered Accountant Act includes provisions addressing the appointment of unqualified personnel for audit work. Considering these aspects, the court concluded that there was no prima facie evidence of an offense committed by the applicant. Consequently, the court quashed and set aside the FIR against the Chartered Accountant firm.

“In view of above facts and circumstances of the case as well as the ratio laid down by the Hon’ble Apex Court as noted above, this Court is inclined to exercise the powers under Section 482 of the Code of Criminal Procedure, 1973 in favour of the applicant, at this stage. All these applications there needs to be allowed,” the Court concluded.

Appearance: Mr Manish R Bhatt, Senior Advocate With Mr Munjaal M Bhatt, Advocate For M R Bhatt & Co. For The Applicant Mr Chintan Dave, App For The Respondents – State Authorities

LL Citation: 2023 LiveLaw (Guj) 191

Case Title: Naman Gyanchand Pipara Versus State Of Gujarat & Ors.

Case No.: R/Criminal Misc.Application (For Quashing & Set Aside Fir/Order) No. 11635 Of 2021

Click Here To Read The Order / Judgement