ICAI Clears Chartered Accountant in DIR-12 Certification Case Involving Foreign National Director
Disciplinary Committee Rules No Misconduct in Certification of DIR-12
ICAI Reaffirms Responsibility Lies with Directors, Not Certifying Professionals
By Our Legal Reporter
New Delhi: December 08, 2025:
In a significant decision, the Institute of Chartered Accountants of India (ICAI) has dropped charges against a Chartered Accountant accused of wrongly certifying Form DIR-12 for the appointment of a foreign national director. The case, which drew attention from regulators and professionals alike, revolved around whether certifying professionals could be held liable for incomplete or incorrect disclosures made by directors.
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The ICAI’s Disciplinary Committee concluded that the CA had exercised due diligence and that the responsibility for disclosures rests with the director himself. This ruling is expected to have a wide impact on corporate governance and professional accountability in India’s compliance ecosystem.
Background of the Case
- The Allegation: A Chartered Accountant was accused of wrongly certifying Form DIR-12, which is filed with the Registrar of Companies (RoC) to record the appointment or resignation of directors.
- Foreign National Director: The case involved the appointment of a Chinese national as a director of an Indian private company.
- Regulatory Concern: Authorities alleged that the CA failed to ensure proper disclosures and security clearances under the Companies (Appointment and Qualification of Directors) Rules.
- Disciplinary Action: The ICAI initiated proceedings against the CA, citing possible professional misconduct.
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ICAI’s Findings
Justice was delivered after a detailed inquiry:
- No Professional Misconduct: The ICAI ruled that the CA was not guilty of professional misconduct.
- Responsibility of Directors: The committee emphasized that the primary responsibility for disclosures lies with the director, not the certifying professional.
- Due Diligence: The CA had obtained confirmation from the director before certifying the form, including through written communication and even a WhatsApp message.
- Security Clearance Issue: The director had declared that he was not required to obtain clearance from the Ministry of Home Affairs, which the CA relied upon in good faith.
Legal and Professional Implications
- For Chartered Accountants: The ruling provides relief, clarifying that certifying professionals are not liable for false declarations made by directors.
- For Directors: The judgment reinforces that directors must take full responsibility for their disclosures and declarations.
- For Regulators: The case highlights the need for stricter checks on foreign nationals appointed as directors, especially regarding security clearances.
- For Companies: Firms must ensure compliance with disclosure norms to avoid regulatory scrutiny.
Industry Reactions
- Professional Community: Many CAs welcomed the decision, saying it protects professionals from unfair liability.
- Corporate Governance Experts: Some experts argue that while directors bear responsibility, professionals must still exercise caution and verify documents thoroughly.
- Regulators: The RoC and Ministry of Corporate Affairs are expected to tighten rules for foreign national directors to prevent misuse.
Wider Context
- DIR-12 Form: Used to notify the Registrar of Companies about changes in company directors.
- DIR-2 Attachment: Requires directors to disclose interests in other entities. In this case, the director allegedly failed to disclose interests in multiple companies.
- ICAI’s Role: As the statutory body regulating Chartered Accountants, ICAI’s disciplinary rulings set important precedents for professional accountability.
Also Read: ICAI Clears Chartered Accountant in DIR-12 Certification Case Involving Foreign National Director
Conclusion
The ICAI’s decision to drop charges against the Chartered Accountant in the DIR-12 certification case marks a crucial precedent in India’s corporate compliance framework. By reaffirming that directors are responsible for their own disclosures, the ruling protects professionals from undue liability while emphasizing the importance of due diligence.
This case also underscores the need for stronger regulatory oversight of foreign national directors in Indian companies, ensuring transparency and safeguarding national interests.
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