A success fee as a CA: Regulation 192 is only the first test

Summary

A percentage or success fee is not banned outright for a Chartered Accountant, because Regulation 192 of the Chartered Accountants Regulations, 1988 lists exceptions that Council decisions have widened. But a lawful fee shape is only the first test: the second is whether you audit the client, and a fee that passes Regulation 192 can still fail that one.

The situation

On 25 August 2026 the NCLT Chennai dismissed an insolvency petition by Ernst & Young LLP against Mobase Electronics India. The engagement was ₹25 lakh plus 1% of the GST relief obtained, and the petition claimed about ₹3.11 crore. The Tribunal dismissed it on a pre-existing dispute, which included the permissibility of an outcome-based fee. It made no finding of misconduct and said a copy of the order may be forwarded to ICAI to examine whether the fee fell inside a permissible exception.

The coverage that followed repeated the folk rule: success fees are misconduct for a CA. In a Tier-2 practice the real questions are more ordinary. Can I take 1% of the refund on a GST refund file? 0.5% of the loan I arrange? A share of the subsidy I get sanctioned? The folk rule gets most of these wrong, and the tribunal's own two questions are the better way in.

The rule

The misconduct. Clause (10) of Part I of the First Schedule to the Chartered Accountants Act, 1949 makes it misconduct for a member in practice to charge fees "based on a percentage of profits or which are contingent upon the findings, or results of such employment, except as permitted under any regulation made under this Act".

The regulation. Regulation 192 repeats the prohibition and then lists the exceptions. Only (a) to (c) are quoted here, from the BCAJ reproduction. The rest are paraphrased.

What the Council has decided under (h). There are two decisions. The first is ICAI's announcement of 9 June 2017. It lets members enrolled as Insolvency Professionals charge fees as a percentage of recovery or assets, "either individually or as an entity". The second, reported by two ICAI branch study papers and by the CAclubindia summary of ICAI's Know Your Ethics (January 2023), permits contingent fees for non-assurance services to clients you do not audit. I have not read that second decision in ICAI's own text. It carries the most common case (a GST refund or litigation-support fee for a client you do not audit), so read Volume II of the Code of Ethics before you rely on it.

The second test. Volume I of the Code (the IESBA-aligned independence provisions) bars a contingent fee for an audit engagement. It also bars one for a non-assurance service to an audit client where the fee is material to the firm or the outcome turns on a judgment about a material amount in the financial statements. That is an independence rule. Regulation 192 answers a different question.

The consequence. Clause (10) is First Schedule misconduct. It goes to the Board of Discipline under section 21A(3) of the Act: reprimand, removal from the Register for up to three months, or a fine of up to ₹1,00,000. The ₹5,00,000 fine and longer removals belong to the Disciplinary Committee under section 21B, for Second Schedule matters.

Where people go wrong

"Success fees are banned." They are banned unless an exception applies, and for a practice that does no audit for the client, the exception reported under (h) is broad. The folk rule would have you turn down work you may lawfully price on results.

"The exception applies, so I am fine." This is the trap the Mobase questions point at. Arranging an audit client's bank loan for 1% is a fund-raising fee in shape. It is still a non-assurance service to an audit client, so the independence bar applies separately. The honest answer is "only if it is not material", and materiality is a judgment you will have to defend. I built my own tool wrong on exactly this point at first: it cleared the fund-raising case without asking whether you audit the client.

Measuring the fee on the wrong base. Each exception names what the percentage may be measured on. A co-operative society audit fee may be a percentage of profits. A percentage of turnover is not permitted outside the Regulation 192 cases. A percentage of a loan sanctioned is not obviously "funds raised": older Ethical Standards Board guidance treated it as misconduct, and nothing I can find has settled it since.

The tax-audit-only client. Whether a client for whom you sign only the tax audit report (section 63 of the Income-tax Act, 2025, the old section 44AB) is an "audit client" for this rule is not answered anywhere I can find. Treat it as one.

Billing through an entity. The 2017 announcement applies the Insolvency Professional exception to services rendered "either individually or as an entity". The NCLT's first question was whether the service was rendered by persons governed by ICAI's framework at all. Moving the engagement into an LLP or a consultancy company does not, by itself, take a member outside the rule.

Waiting for ICAI to settle it. As at 26 September 2026, ICAI's Recent decisions of the Ethical Standards Board page carries nothing on contingent fees. It has not answered the Mobase question.

What to do

1. Answer the tribunal's two questions first: who renders the service, and do you audit this client, including a tax audit.
2. Find the exception by service, then check that your fee is measured on the base that exception names, not on turnover or a loan sanctioned.
3. For any audit client, move to a fixed or stage-based fee, or write down your materiality judgment before the engagement letter is signed.
4. Where the answer rests on the reported non-assurance decision under (h), read it in Volume II of the 13th-edition Code, or write to the Ethical Standards Board, before you invoice.
5. Put the basis in the engagement letter's fee clause, naming the exception, so the file shows why you thought the fee was permitted.

The tool

After the Mobase coverage I was asked the same question five ways in a week, and I kept rebuilding the same table. So I built a resolver. You answer five questions about one engagement: who renders it, what the service is, whether you audit the client, whether the fee is contingent, and what the percentage is measured on. You get permitted, prohibited or grey under Regulation 192, with the exception cited by letter, the audit-client bar applied on top, the Board of Discipline ceiling, and an engagement-letter fee clause you can edit. That clause opens only on a permitted verdict. Where the answer turns on one of the paraphrased exceptions, the verdict says so, and five points that need confirming against the Code are flagged on the face of the result. It does not tell you what to charge, it does not judge materiality for you, it is not an opinion of the Ethical Standards Board, and nothing you type leaves your browser.

Open the fee check page

Sources

1. The Chartered Accountants Act, 1949, First Schedule Part I, Clause (10) — https://www.advocatekhoj.com/library/bareacts/charteredaccountants/schedule1part1.php (and India Code)
2. BCAJ — ICAI and its members (quotes Regulation 192's chapeau and exceptions (a)–(c)) — https://bcajonline.org/journal/icai-and-its-members-17/
3. ICAI announcement of 9 June 2017 on Insolvency Professionals' fees, reproduced by TaxGuru — https://taxguru.in/chartered-accountant/permitting-members-act-insolvency-professional-insolvency-bankruptcy-code-2016-related-matters.html
4. CAclubindia — ICAI releases January 2023 edition of Know Your Ethics — https://www.caclubindia.com/news/icai-releases-jan-2023-edition-of-know-your-ethics-21962.asp
5. Bangalore ICAI and Anand ICAI branch study papers on the Code of Ethics — https://bangaloreicai.org/assets/uploads/newsletters/9a76a542-ee4e-439f-ab21-7cf8de2a9737.pdf ; https://anand-icai.org/Pdf/Study-material/Code-of-Ethics-CA-Rahul-Parikh-8-6-2023.pdf
6. ICAI Code of Ethics, 13th Edition, Volumes I and II — https://resource.cdn.icai.org/92475coe2026v1.pdf ; https://resource.cdn.icai.org/92476coe2026v2.pdf
7. LiveLaw Biz — NCLT Chennai, Ernst & Young LLP v. Mobase Electronics India Pvt. Ltd., C.P.(IB)/370(CHE)2025, 25 August 2026 — https://www.livelawbiz.com/top-stories/nclt-chennai-dismisses-eys-plea-seeking-1-success-fee-for-relief-in-gst-proceedings-asks-icai-to-examine-548611
8. Bar & Bench on the same order — https://www.barandbench.com/news/litigation/nclt-flags-ernst-youngs-1-success-fee-for-securing-relief-in-gst-cases-asks-icai-to-examine
9. ICAI — Recent decisions of the Ethical Standards Board (re-read 26 September 2026) — https://www.icai.org/post/recent-decisions-of-ethical-standards-board