ICAI to quiz Lodha over 'unethical practice'

The apex body for accountants, ICAI, on Friday said it will seek explanation from R S Lodha on the structure of his audit firms following a complaint for alleged breach of its Code of Ethics and flouting of Companies Act, Income Tax Act and Banking Regulation Act.

Three chartered accountants -- Om Prakash Agarwal, Shashi Agarwal and Suresh Kumar Sharma -- have filed a written complaint to the Institute of Chartered Accountants of India against the Lodha firms for furnishing names of 14 persons as partners with 'false, fraudulent and malafide motive' to carry out tax audits of companies far beyond limits permitted under Companies Act and Income Tax Act.

The complainants asked the Council of ICAI to hold an inquiry against Lodhas and take appropriate action, including removing their names from the register of ICAI members. Confirming the development, ICAI president Kamlesh Vikamsey said: "We have received the complaint last month and will be seeking explanation from the Lodhas. We will give them about 30 days to respond to the charges."

ICAI, he said, may take about six months to formalise its stand on the matter, after hearing both the parties in detail. According to the complainants, though Lodha & Co. had in effect three partners -- RS Lodha and his two sons HV Lodha and AV Lodha -- as per which they were allowed to carry out audit of a maximum 60 companies, they furnished data to ICAI as having 14 partners so as to undertake tax audit of 280 companies.

Moreover, the Lodhas were also charged of violating Companies Act by carrying out audit of firms where they were directors.

Lodha & Co was carrying out statutory audit of several Birla companies like Vidhya Telelinks, Universal Cable and Birla Ericsson Optical, where R S Lodha's sons were directors.

The complainants also alleged that R S Lodha breached the Banking Regulations Act by taking up the post of director in State Bank of India during 1996 but at the same time had interest in Birla Corporation, which took loans from the bank.

Lodha held the position of SBI director and at the same time he was Birla Corp's advisor and special invitee in all board meetings.