2011 (9) TMI 845 - HC - Indian Laws

Writ petition whether Rule 9(3)(b) of Chartered Accountants Rules 2007 ultra vires as the said Rule transgresses and supplants section 21A(4) of the Chartered Accountants Act 1949 Held that - Section 21(4) stipulates that the Disciplinary Directorate shall follow the procedure as they may be specified. The procedure is specified in Rules including the impugned Rule 9(3)(b). Director (Discipline) functions as the Secretary of the Board of Discipline. in case Director (Discipline) gives a closure report on the basis of his or her opinion that there is no prima facie case the Board of Discipline/Disciplinary Committee must accept that opinion and the only option to the Board of Discipline is to advise the Director (Discipline) to investigate the matter further. The provisions do not postulate finality to the prima facie opinion of the Director (Discipline). On the other hand Director (Discipline) is the Secretary of the Board. The final determination whether or not a member is guilty of professional or other misconduct in the First Schedule or the Second Schedule is decided by the Board of Discipline or the Disciplinary Committee. Board is not bound in all cases of disagreement to refer for reinvestigation. Rule 9(3)(b) is procedural and states how the steps should be taken and therefore it would be an anathema to the basic conception of statutory interpretation that section 9(3)(b) transgresses or encroaches upon the power conferred under section 21A(4). writ petition stands disposed of.

Summary

Issues:
Challenge to Rule 9(3)(b) of Chartered Accountants (Procedure of Investigation of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 as ultra vires Section 21A(4) of the Chartered Accountants Act, 1949.

Analysis:
The petitioner, a Chartered Accountant, invoked the jurisdiction under Article 226 of the Constitution to challenge Rule 9(3)(b) of the 2007 Rules. The contention was that the Rule transgressed and supplanted Section 21A(4) of the 1949 Act. The dispute revolved around the powers of the Director (Discipline) and the Board of Discipline in handling complaints of misconduct.

Upon analyzing the statutory provisions, it was found that Section 21A(4) empowers the Director (Discipline) to submit reports to the Board of Discipline for decision-making. If the Director opines no prima facie case, the Board can either close the matter or advise further investigation. The Rule in question, 9(3)(b), allows the Board to proceed under different chapters based on disagreement with the Director's opinion.

The Court examined the legislative intent behind Sections 21A and 21B, which deal with the functioning of the Board of Discipline and the Disciplinary Committee. It was emphasized that the Board's power to refer a matter to the Disciplinary Committee was not restricted by Section 21A(4) and should not be impliedly inferred. The phrase 'prima facie' indicated the tentative nature of the Director's report, with final determination resting with the Board or Committee.

Regarding the term "may" in Section 21A(4), the Court held that it granted discretion to the Board in cases of disagreement. The word "may" should not be read as "shall," as it conveys legislative intent to provide choice. The Court concluded that Rule 9(3)(b) did not transgress Section 21A(4) but supplemented it in procedural matters.

In the final decision, the Court found Rule 9(3)(b) not ultra vires and disposed of the writ petition. The petitioner was advised to file a separate petition for individual grievances. The judgment clarified the powers and procedures concerning misconduct investigations under the Chartered Accountants Act, 1949, and the corresponding Rules of 2007.