Scores of chartered accountants, company secretaries and cost accountants are currently under the regulatory scanner for alleged violations of the companies law with respect to setting up of certain Chinese companies and their subsidiaries in India, according to officials.
The apex bodies of chartered accountants and company secretaries, ICAI and ICSI, have together received around 400 complaints on the issue and necessary actions have been initiated.
The Institute of Cost Accountants of India has also initiated action against some of their members in the matter.
The process started after communications were sent out to the institutes from the corporate affairs ministry, which is implementing the companies law.
The ministry provided the institutes with the details of their respective members who are alleged to have committed violations, the officials said.
The government is looking at whether the Chinese companies and their subsidiaries have complied with all the regulations to come and do business in India, ICAI President Debashis Mitra said.
Show cause notices have been issued to the members concerned by the Institute of Chartered Accountants of India (ICAI) and the Institute of Company Secretaries of India (ICSI), respectively.
The Institute of Cost Accountants of India has also issued show cause notices to some of its members.
After ascertaining whether the members violated the companies law, appropriate disciplinary actions would be taken against them, the officials said.
The members have been asked to explain about the alleged violations of companies law with respect to incorporation of various Chinese companies and their subsidiaries.
"The ministry had asked the institute to start disciplinary proceedings. It is not much to do with audit."It is more to do with formation of the companies concerned and aspects such as whether the registered addresses were checked properly or not, those kind of things," ICAI president Debashis Mitra told PTI.
The institute has received details for about 200 cases.
"We started getting complaints from the RoC's offices in the month of January 2022, then some in June and then some in August...," with respect to the Chinese companies, Mitra said.
"Chinese companies in the sense that they have Chinese directors, promoters... the government is looking at whether they have complied with all the regulations to come and do business in India," he said.
ICSI president Devendra V Deshpande said in the recent past, the enforcement agencies have noticed some wrongdoing by few companies and accordingly, the corporate affairs ministry has issued notices to the companies, its directors and also to the professionals, who were engaged in incorporation of these companies.
"ICSI has also received around 200 complaints raising questions on the due diligence carried out by the professionals during the process of incorporation.
"The professionals usually carry proper due diligence in incorporating companies especially where the promoters are from outside India.
"The Institute has a robust mechanism for dealing with any kind of complaints filed against its members, where there is lack of due diligence by the member," Deshpande told PTI.
As far as these new cases are concerned, he said the institute has already issued notices to its members asking for their response.
Once the written statement and rejoinders are received, the matters will be heard by Board of Discipline or Disciplinary Committee, as the case may be.
Considering the seriousness of the cases, ICSI has strengthened its Disciplinary Directorate by adding more work force, he noted.
The Institute of Cost Accountants of India president P Raju Iyer told PTI that the institute has issued show cause notices to some of its members and the process has been going on for the past three months.
"We have issued the show cause notices to the members concerned... It is less than 10 members in our (insitute's) case," he said.
Deshpande said ICSI has always ensured speedy disposal of cases related to misconduct.
"At present, only a few cases are pending for final orders.
"These cases are handled as per the Rules prescribed and notified by the Ministry of Corporate Affairs.
"The institute shall follow a complete process for dealing with these complaints and members who have not exercised due diligence while certifying /authenticating the documents would be convicted for professional misconduct," Deshpande said.
The incorporation process involves various services such as drafting and certifying the documents and submission of the same to Registrar of Companies for their approval.
ICAI has more than 3.50 lakh members while ICSI has around 68,000 members and out of them, about 12,000 are practising professionals and involved in incorporation of Companies and Limited Liability Partnership (LLPs).
The Institute of Cost Accountants of India has around 90,000 members.
All the three institutes, set up under Acts of Parliament, come under the corporate affairs ministry.
The government, in recent times, has been stepping up efforts to clamp down on Chinese entities allegedly indulging in illegal activities in the country.
On June 1, the corporate affairs ministry put in place stricter norms for appointment of individuals from certain countries, including China, as directors on the boards of Indian companies, by making security clearance mandatory for such individuals.
On May 20, the ministry had made declaration in connection with FEMA mandatory for entities from such countries involved in amalgamations with Indian companies and amendments were made to the rules governing compromises, arrangements and amalgamations.
The ministry, on May 5, amended the rules governing companies with respect to prior approval being mandatory for investments by entities and individuals from countries that share a land border with India.
In August this year, the ministry informed the Lok Sabha that there were 3,291 foreign companies having active status out of the total of 5,068 foreign companies registered in the country as on July 27, 2022.