M/s. Saikat Datta & Associates vs The State of Tripura & Ors

Heard Mr. P. R. Barman, learned counsel appearing for the petitioner as well as Mr. J. Majumder, learned counsel appearing for the State-respondents.

We are dealing with two review petitions being Rev. Pet. No.28 of 2016 [M/s. Saikat Datta & Associates vs. the State of Tripura & Ors.] and Rev. Pet. No.29 of 2016 [M/s. Saikat Datta & Associates vs. the State of Tripura & Ors.]. Both these review petitions emanate from the order dated 19.04.2016 delivered in W.P.(C)(PIL) No.16 of 2014 and W.P.(C)(PIL) No.17 of 2014 where this court has observed as under: "22. ............................. We may also point out that the only certificate and the audit report of the Chartered Accountant produced before us is for the year 2012-2013 and it is apparent that prior to 2012-2013 no Chartered Accountant or any other authority audited the accounts under the scheme. Along with the audit report submitted by the Chartered Accountant, M/s. Saikat Datta & Associates they have filed a balance sheet which runs into only one page. More shockingly, it is stated that the date of commencement and date of completion of audit is 19.6.2014. Therefore, the audit started and was completed in one day itself on 19.6.2014. At the relevant time there were at least 45 Blocks in the State comprising of more than 200 Gram Panchayets. How could the Chartered Accountants have audited all these Gram Panchayets in one day?

It is thus apparent that in March, 2014 the State itself was aware that there are serious allegations of embezzlement of funds. The Chartered Accountants have submitted their own report in June, 2014 and according to them, they commenced and completed the audit on 19th June, 2014. In all probability they were appointed after the investigation with regard to Bishalgarh Block had already started. These Chartered Accountants have not done their work as per the settled principles of Audit of Accounts. Any auditor who has to audit the accounts cannot do so without going through all the Books of Accounts such as the Cash Book, Receipt and Payment statement, Muster Rolls, Payment Vouchers etc. etc. The audit conducted by Chartered Accountant M/s. Saikat Datta & Associates, to say the least is an eyewash and therefore we direct Government to consider recision of the agreement, if any, with the said Chartered Accountants and not to give any work of Government Audit in future to the said firm." [Emphasis added]

Being aggrieved by that observation, the said Chartered Accountant has filed these petitions for review contending that they did not have any opportunity of having their say. It has been further asserted in the petitions for review that the petitioner has been condemned unheard.

The petitioner, however, did not contest the finding that having been appointed as the Chartered Accountant for the audit of the State Employment Guarantee Fund, they completed the audit and submitted the audit report, Annexure-P/3 to this petition. The petitioner has categorically averred that: "In course of auditing of the State Employment guarantee Fund of the state Mahatma Gandhi National Rural Employment Guarantee Act Cells, the Petitioner was required to check the receipt heads and disbursement heads under which all the receipts including i.e., fund receipt from Central and State Govt., subsequent payment and disbursement to various districts were made, principle amount and interest accrued thereon are reflected and recorded alongwith disbursement of statements. After such checking and auditing, the Petitioner prepared consolidated receipts and disbursement statement for the year ending on 31.03.2014. The Petitioner meticulously and in accordance with the norms of auditing, audited State Guarantee Employment Fund for the year 2013-14 and thereafter Audit Report by giving Auditor Certificate."

Afterwards, by the judgment and order dated 16.11.2016 delivered in W.P.(C)(PIL) No.16 of 2014 and W.P.(C)(PIL) No.17 of 2014, this court had occasion to observe and direct as under: "6. Having regard to the serious public interest involved in implementation of MGNREGA, this court now shall direct the State-respondents, represented by the Secretary to the Rural Development Department, Government of Tripura to engage competent Chartered Accountants to conduct the audit of accounts of the scheme under the said Act for each District as well as of the State Employment Guarantee Fund for each year from the inception till 31st March, 2016. The Chartered Accountants within the meaning of Section 2(b) of the Chartered Accountants Act, 1949 shall only carry such audit. For the observation on the manner how the Chartered Accountants earlier carried out the purported audit, this court has been persuaded to refer a decision of the apex court in Institute of Chartered Accountants of India vs. P.K. Mukherjee & Anr., reported in AIR 1968 SC 1104, where the apex court had occasion to observe as under:

"It is not possible for us to accept this argument. Respondent No.1 owed a duty to all the subscribers of the Provident Fund who were in the position of beneficiaries. It is not correct to say that respondent No.1 owed a duty only to the Company which had appointed him to perform the auditing. The contributors to the Provident Fund had a beneficial interest in the Fund and the primary object of auditing the Fund was to appraise them of the true financial position of the accounts and investments made from time to time. Respondent No.1 therefore owed a duty to the contributors to the Provident Fund for making a true report to them of the financial position. In other words, the auditing was intended for protection of the beneficiaries and the auditor was expected to examine the accounts maintained by the trustees with a view to inform the beneficiaries of the true financial position. The auditor is, in such a case, under a clear duty towards the beneficiaries "to probe into the transactions" and to report on their true character. In our opinion, the legal position of the auditor in the present case is similar to that of the auditor under the Indian Companies Act, 1956. In such a case the audit is intended for the protection of the shareholders and the auditor is expected to examine the accounts maintained by the Directors with a view to inform the shareholders of the true financial position of the Company. The Directors occupy a fiduciary position in relation to the share-holders and in auditing the accounts maintained by the Directors the auditor acts in the interest of the shareholders who are in the position of beneficiaries. In London Oil Storage Co. Ltd. v Seear, Hasluck and Co. Dicksee on Auditing, 17th Edn. p 632. Lord Alverstone stated as follows :

"He must exercise such reasonable care as would satisfy a man that the accounts are genuine, assuming that there is nothing to arouse his suspicion of honesty and if he does that he fulfils his duty, if his suspicion is aroused, his duty is to probe the thing to the bottom and tell the directors of it and get what information he can."

[Emphasis added]

In view of the guidelines as referred and having regard to the duty and obligation attached to the office of the Chartered Accountants, this court is persuaded to observe that the Chartered Accountants while performing the auditing shall probe into the transactions and report its true character. They are to remember that they are not only obliged to protect the interest of the beneficiaries of the MGNREGA but they are obliged to the nation to inform the true financial position in respect of utilisation of the Employment Guarantee Fund. The implementing agencies are the trusties and those trusties are in fiduciary relation with the beneficiaries, the poorest of the poor of the country. Hence the report/statement of the Chartered Accountants shall be above any suspicion. While engaging such Chartered Accountants, the State Government shall verify their resource, their process of certification and above all their integrity. The State Government shall engage the Chartered Accountants within a period of 2(two) months from today and those Chartered Accountants shall complete their audits of all accounts of the Scheme under the MGNREGA for each District including its units as well as of the State Employment Guarantee Fund for each year from its inception till 31st March, 2016. The Chartered Accountants shall file their reports after full auditing within 8(eight) months from the day of their engagement by the State Government.

Mr. Roy Barman, learned counsel has urged this court that the observation that "These Chartered Accountants have not done their work as per the settled principles of Audit of Accounts. Any auditor who has to audit the accounts cannot do so without going through all the Books of Accounts such as Cash Book, Receipt and payment statement, Muster Rolls, Payment Vouchers etc etc. The audit conducted by the Chartered Accountant M/s. Saikat Datta & Associates, to say the least is an eyewash and therefore we direct Government to consider recision of the agreement, if any, with the said Chartered Accountants and not to give any work of Government Audit in future to the said firm" is highly prejudicial for the petitioner as it casts serious stigma on the integrity and competence of the petitioner as the Chartered Accountant and such stigmatic observation has been made without affording any opportunity of being heard.

We have given an anxious consideration to the submission made by the learned counsel for the petitioner and are inclined to interfere with the following observation. "The audit conducted by the Chartered Accountant M/s. Saikat Datta & Associates, to say the least is an eyewash and therefore we direct Government to consider recision of the agreement, if any, with the said Chartered Accountants and not to give any work of Government Audit in future to the said firm"

While depicting the un-acceptable state of affairs, the said observation was made and true it is that the petitioner was not afforded any opportunity to have their say. Even though the said observation was made on the basis of records but still we are persuaded to hold that the petitioner had a right to have say on that aspect. Hence, the said statements as quoted immediately above [in the para 07] are expunged from the said order. However, the State Government shall assess the past performance of the petitioner if they are at all considered for engagement as the Chartered Accountant in terms of the final order dated 16.11.2016 as delivered in W.P.(C)(PIL) No.17 of 2014 and W.P.(C)(PIL) No.16 of 2014 or in future. Having held so, these review petitions are allowed to the extent as indicated above. There shall be no order as to costs.