2016 (8) TMI 825 - HC - Indian Laws

Professional misconduct - removal of respondent No.1 s name from the Register of Members for a period of six months - whether respondent No.1 was discharging functions as a Chartered Accountant when he sold the shares? - Held that - Member of the Institute would be deemed to be in practice when, for remuneration received or to be received the person performs the acts enumerated in the four clauses hereinabove noted. Section 30 of the Act confers power on the Central Government to make regulations. In the instant case the respondent was acting as an individual in his dealings with the complainant which were purely commercial. While selling the shares held by him the respondent was not acting as a Chartered Accountant. He was not discharging any function in relation to his practice as a Chartered Accountant.The Reference is accordingly answered by declaring the law as above and not inflicting any penalty upon the respondent.

Summary

Issues:
1. Reference under Section 21(5) of the Chartered Accountants Act, 1949 regarding proposed penalty for professional misconduct.

Analysis:
The judgment involves a reference under Section 21(5) of the Chartered Accountants Act, 1949, concerning a penalty proposed for professional misconduct. The complainant alleged that the respondent, a Chartered Accountant, sold shares to him in 1999 but lodged the transfer deed in 2004 after receiving dividends and obtaining duplicate share certificates. The Disciplinary Committee found the respondent's conduct unworthy of a Chartered Accountant due to attempts to cheat the complainant. The key issue was whether the respondent's actions constituted professional misconduct subject to disciplinary proceedings.

The Court analyzed Sections 21 and 22 of the Act to determine the scope of professional misconduct. Section 22 defines professional misconduct to include acts specified in the Schedules, with the power to inquire into any member's conduct. Part I of the First Schedule lists professional misconducts deemed inclusive. The Court emphasized that misconduct outside the Schedule would be conduct frowned upon by society, but not necessarily all kinds of conduct. The legislative intent behind the Act's establishment in 1949 was highlighted to understand the regulatory framework for Chartered Accountants.

The judgment delved into the definition of a Chartered Accountant under Section 2, emphasizing that being in practice involves specific activities for remuneration. The Court referenced Regulation 78, allowing Chartered Accountants to act in various capacities. A precedent case illustrated that misconduct must relate to actions performed as a Chartered Accountant for remuneration. The Court clarified that actions unrelated to professional practice, like a personal commercial transaction, do not constitute professional misconduct under the Act.

Ultimately, the Court concluded that the respondent's actions in selling shares were not in the capacity of a Chartered Accountant, and he was not discharging professional duties. As a result, the Court answered the reference by declaring the law accordingly and refrained from imposing any penalty on the respondent. The judgment provided a detailed analysis of the Act's provisions, regulatory framework, and the specific circumstances under which professional misconduct could be established, ensuring a comprehensive understanding of the legal principles applied.