2013 (3) TMI 367 - HC - Companies Law

Interpretation of Section 21D of the Chartered Accountants Act, 1949 - Unamended & Ammended CA Act - The Department of Company Affairs had carried out inspection of books of accounts of Global Trust Bank Limited under Section 209A of the Companies Act, 1956 - Chartered Accountants, who were also asked to furnish certain details to the Department of Company Affairs and the Reserve Bank of India. - Violations of Sec. 227, 228, 292 and 211 of the Companies Act by the Auditors of the Bank - letter dated had been forwarded to the Disciplinary Committee - L&L submitted their reply dated 9th August, 2004 - Held that - Amended provisions would apply to a fresh complaint or information and the Unamended Act will apply to the pending complaints or information. Proceedings or complaint in the form of information was pending before the Council on 17th November, 2006 and accordingly the unamended provisions will apply As per the unamended Act, on receipt of information or a complaint, the Council is required to see whether the member of the institute is guilty of any professional or other mis-conduct. If the Council finds that the member is guilty of any professional or other misconduct, reference of the case is made to the Disciplinary Committee, it will hold an enquiry and submit a report to the Council. If on receipt of the report, the Council holds that the member is not guilty of any professional or other misconduct the complaint is dismissed. And if the Council holds that the member is guilty of professional or other misconduct, then the Council will proceed under Section 21 makes distinction between professional misconduct specified in the First Schedule and the Second Schedule. For professional misconduct specified in the First Schedule, the Council after hearing the member, can make an order of reprimand or recommend removal of name of the member from the register for a period not exceeding five years. As per the proviso to sub-section 4 to Section 21, in case the Council is of the opinion that the name of the member ought to be removed from the register for a period exceeding five years or permanently, it is required to forward the case to the High Court with it s recommendation. Thus in cases not covered by the First Schedule and covered by the proviso to sub-section 4 to Section 21, the recommendation of the Council have to be forwarded to the High Court. Sub-section 6 to Section 21 relates to the procedure to be followed when reference is made to the High Court under sub-section 4 or sub-section 5 to Section 21 of the CA Act, 1949. Section 22A deals with appeals to the High Court from penalties referred to in sub-section 4 to Section 21. These obviously will not apply when reference is made to the High Court under the proviso to sub-section 4 or sub-section 5 of Section 21 of the CA Act, 1949. The appeal is allowed and it is held that the procedure prescribed by the unamended C.A. Act, 1949 i.e. Sections 21, 22 and 22A as discussed above would be applicable to pending proceedings.

Summary

Issues Involved:
1. Interpretation of Section 21D of the Chartered Accountants Act, 1949.
2. Distinction between 'complaint' and 'information' under the CA Act, 1949.
3. Applicability of amended versus unamended provisions of the CA Act, 1949 to pending cases.

Detailed Analysis:

1. Interpretation of Section 21D of the Chartered Accountants Act, 1949:
The core issue in the appeal was the interpretation of Section 21D of the CA Act, 1949. The court noted that the purpose of Section 21D is to distinguish between pending matters and new matters as of the date 17th November 2006. It was emphasized that the intention of the legislature was to ensure that all pending matters before the Council, any inquiry initiated by the Disciplinary Committee, or any reference or appeal made to a High Court prior to the commencement of the Chartered Accountants (Amendment) Act, 2006, shall continue to be governed by the provisions of the unamended Act. This interpretation was aimed at preventing any disruption in the ongoing proceedings.

2. Distinction between 'complaint' and 'information' under the CA Act, 1949:
The respondent argued that the CA Act, 1949, makes a clear distinction between 'complaint' and 'information,' and that these terms should not be used interchangeably. The respondent cited the Naresh Chandra Committee report, which recommended separate procedures for dealing with 'information cases' and 'complaint cases.' However, the court concluded that while there may be procedural differences, the ultimate aim of both 'information' and 'complaint' cases is to investigate allegations of professional or other misconduct. The court held that for the purpose of Section 21D, the term 'complaint' should be interpreted broadly to include 'information' cases, especially those where the Council has already taken cognizance.

3. Applicability of amended versus unamended provisions of the CA Act, 1949 to pending cases:
The court highlighted that the procedure before and after the Amendment Act, 2006, was significantly different. Before the amendment, the Council formed a prima facie opinion on the misconduct and referred the case to the Disciplinary Committee. Post-amendment, a Disciplinary Directorate headed by a Director (Discipline) was established to investigate complaints. The court emphasized that the legislative intent was to apply the unamended provisions to all pending matters before the Council or any inquiry initiated by the Disciplinary Committee before the amendment date. This interpretation avoids any potential anomalies or inconsistencies that could arise from applying different procedures to similar cases.

Conclusion:
The court allowed the appeal, holding that the unamended provisions of the CA Act, 1949, would apply to pending 'information' cases as of 17th November 2006. The term 'complaint' in Section 21D was interpreted to include 'information' cases to align with the legislative intent and ensure consistent application of the law. The appeal was disposed of with no order as to costs.