People familiar with the matter said that some CAs are alleged to have done due diligence without signing various statutory documents such as incorporation forms, and annual returns of these app companies.
For example, some of these loan app entities provided fake addresses in incorporation documents that were not physically verified by the CA.
“The right of inquiry is to ascertain whether there was any professional misconduct on the part of the chartered accountants,” said Debashish Mitra, president, ICAI. “Further, the investigation will also examine whether these professionals have signed or written any false documents supplied by such shell companies.”
Earlier this year, the Registrar of Companies (ROC) filed a complaint with the Serious Fraud Investigation Office (SBI).FIO) launched an investigation into several shell entities acting as a front for these Chinese lenders doing business in violation of various domestic laws. anymore, Enforcement Directorate (ED) also launched a comprehensive investigation.
Any institution that wants to enter into the business of lending needs to obtain a license reserve Bank of India ,reserve Bank of India) as a non-banking financial company (NBFC).
A person with direct knowledge of the matter said, “The process is much more stringent for foreign entities. Also, there are some limits on investment from China.”
Some NBFCs created fake entities in India which were used by Chinese entities for lending activities.
Now while creating such fake entities, some professionals like CA and company Secretary The person said that he allegedly attested the documents without due diligence.
“Once the prima facie opinion is formed by the ICAI, the cases where lapses are found will be referred to the disciplinary committee,” Mitra said.
The ICAI investigation is in addition to the investigation by other agencies.
In some cases, the SFIO or the local police have registered FIRs against various entities including professionals like CAs and company secretaries.
Mitra said the institute had received references from the government since January regarding the alleged role of some professionals, including CAs, in facilitating Chinese shell companies.
It is worth noting that there is no bar on Chinese companies to set up shop in India. However, entities will have to comply with various requirements laid down in Indian law, including security clearance from the Ministry of Home Affairs.