1957 (9) TMI 60 - SC - Indian Laws

Summary

Issues Involved:
1. Professional misconduct of a Chartered Accountant.
2. Scope and extent of disciplinary jurisdiction under the Chartered Accountants Act, 1949.
3. Interpretation of "in practice" under Section 2(2)(iv) of the Act.
4. Powers and jurisdiction of the High Court under Section 21 of the Act.

Issue-wise Detailed Analysis:

1. Professional Misconduct of a Chartered Accountant:
The respondent, a Chartered Accountant, was appointed as a Liquidator for three companies. He failed to report on the progress of liquidation, did not respond to repeated requests from the Assistant Controller of Insurance, issued a dishonored cheque, and did not hand over securities and cash to the newly appointed Liquidator. The disciplinary committee found the respondent guilty of gross negligence. The Council agreed but deemed the misconduct more serious than gross negligence. The High Court, however, rejected the reference, stating no action could be taken under the Act despite the respondent's "grossly improper conduct if not dishonesty."

2. Scope and Extent of Disciplinary Jurisdiction under the Chartered Accountants Act, 1949:
The Supreme Court examined the scheme of the Act, emphasizing that the Act regulates professional accountants and establishes the Institute of Chartered Accountants. Sections 21 and 22 deal with misconduct and disciplinary procedures. Section 21(1) mandates the Council to inquire into misconduct that renders a member unfit to be part of the Institute. Section 22 defines misconduct inclusively, allowing the Council to investigate beyond the listed acts and omissions in the Schedule.

3. Interpretation of "In Practice" under Section 2(2)(iv) of the Act:
The Court held that a Chartered Accountant is deemed to be "in practice" when rendering services like acting as a Liquidator, as per Regulation 78 and Section 2(2)(iv). The respondent, while acting as a Liquidator, was thus in practice as a Chartered Accountant. Consequently, his acts and omissions in this role were professional acts and omissions, making his misconduct professional misconduct.

4. Powers and Jurisdiction of the High Court under Section 21 of the Act:
The Supreme Court clarified that the High Court has broad powers under Section 21(3) to pass final orders or refer cases back for further inquiry. The High Court can examine the correctness of the Council's findings and is not restricted to the Council's specific findings. The Court criticized the High Court for its narrow interpretation and held that the High Court can take action based on broader interpretations of Sections 21 and 22.

Conclusion:
The Supreme Court concluded that the respondent's conduct amounted to professional misconduct. It reversed the High Court's decision, emphasizing the broader disciplinary jurisdiction under the Act. The Court ordered the respondent's name to be removed from the Register for four years and directed him to pay the appellants' costs in the Supreme Court, with parties bearing their own costs in the lower court.