2014 (9) TMI 1278 - HC - Indian Laws

Professional misconduct - company was posting losses year after year, though according to her, profits were being earned - Family dispute - HELD THAT - The record does not disclose that the complainant made any effort to question the persons in management of the company, such as Managing Director or other Directors about the state of affairs. Unfortunately, the respondent is being made scapegoat in the family disputes of the owners of the company. On a perusal of the report of the Disciplinary Committee and the resolution of the Council, we find that they have mechanically arrived at the conclusions as to the misconduct It is added here that every inadvertent omission cannot be treated as an act of misconduct. The implication of even the minute punishment imposed against a Chartered Accountant is far-reaching. The complaint is dismissed.

Summary

Issues involved: Allegations of professional misconduct against a Chartered Accountant in auditing a company's accounts.

Detailed Analysis:

1. Background and Allegations: The case involves a Chartered Accountant who audited the accounts of a company, facing six allegations of irregularities pointed out by a shareholder. The Disciplinary Committee found five allegations proved and recommended the Chartered Accountant's removal for three months.

2. Respondent's Defense: The Chartered Accountant submitted explanations for each allegation, citing reasons such as lack of clarity on certain orders, personal circumstances affecting work, and agreement with company management on certain matters.

3. Judicial Review: The judges considered the context of the closely held company, family disputes among shareholders, and the role of audited accounts in shareholder meetings. They highlighted that errors in accounts can be rectified and emphasized the need for mala fide intent for misconduct.

4. Decision: The judges concluded that the respondent's actions did not amount to misconduct, noting the lack of effort by the complainant to question company management. They criticized the mechanical approach of the Disciplinary Committee and Council in reaching conclusions and dismissed the complaint against the Chartered Accountant.

5. Legal Principles: The judgment emphasized that inadvertent errors do not necessarily constitute misconduct and highlighted the need for evidence of intent to mislead or defraud for a finding of misconduct against a Chartered Accountant.

In summary, the High Court dismissed the complaint of professional misconduct against the Chartered Accountant, emphasizing the importance of intent in establishing misconduct and the need for thorough scrutiny before imposing penalties on professionals.