2016 (9) TMI 714 - HC - Indian Laws

Charges against a chartered accountant - professional misconduct - Held that - In the present case, the complainant appeared before the Committee - on 19.01.2011 and explained the circumstances under which the agreement, embodied in the MOU, were entered into. The complainant, in fact did not withdraw his allegations; he also deposed that the criminal proceedings against the respondents continued and that the amounts agreed to be paid to him had not been in fact paid. The complainant relies on a subsequent MOU, the terms of which appear to be different, inasmuch as the complainant did absolve the respondent of all misconduct and withdraw the allegations. These facts, i.e. the parties appearing to have entered into another MOU on 16.04.2012 were material and had to be investigated. The impugned order does not take that into consideration at all. Whatever the truth of that document, the Council should have gone into it and called the complainant to depose before it, in the light of the later development. This, in the Court s opinion, is a serious infirmity with the impugned order. The next question is whether in the circumstances of the case, particularly having regard to the nature of evidence and the materials placed before it, the Council could have concluded that the respondent was guilty of cheating or indulging in fraud, causing loss to the complainant. No doubt, the complaint does mention the relative amounts, the challans, the amounts allegedly collected as due, and the amounts paid. However, the relative or corresponding demands from the Service Tax authorities or the assessment orders, or even the service tax returns, are not on the record. These would have substantiated to a large measure the complainant s allegation. Likewise, there is no material to suggest that the amounts were deposited in some other concern s account. Quite possibly the respondent has been charge criminally for an offence. However, that ipso facto does not transform into proof of such criminal misconduct; the prosecution or the complainant would have to establish his guilt. While disciplinary proceedings may not be in the nature of court proceedings, yet when a professional, such as a chartered accountant is arrayed for misconduct which has quasi criminal overtones, the Council has to be circumspect; some modicum of objective evidence- both documentary and oral (and not only the say of the complainant- possibly the relative bank records and relevant statement of bank officers, too have to be considered) evidence is necessary. The cumulative picture which emerges is that the Council appears to have acted with haste and great dispatch. While its zeal to complete proceedings is understandable, one is reminded of an aphorism Swift justice demands more than just swiftness (Justice Potter Stewart, US Supreme Court). It was obligatory on the part of the Council not only to investigate the truth of the later MOU, but also satisfy itself that the basis of the complaint, i.e., that amounts were appropriated and lower amounts were paid into the accounts of Service tax authorities, were established objectively through documentary material. The findings recorded - from the state of the record, are such that they cast a slur on the professional integrity of the respondent, without proof of essential foundational facts. In the light of the above discussion, this court is of opinion that the matter requires to be gone into afresh by the Council. Having regard to the gravity of the allegations, it is but appropriate that the Council considers all the relevant materials, including the documents and the deposition of the complainant before preparing a fresh report. Accordingly, this court hereby in exercise of its jurisdiction, under Section 21 (6) (d) refers the case to the Council for further inquiry and report. The Council shall complete its task expeditiously and in any case within 6 months. The respondent is directed to present himself before the Council for further proceedings within three weeks from today. The Council shall complete the task, firstly by summoning the complainant, recording his deposition, and, thereafter proceeding to inquire into the material documents.

Summary

Issues Involved:
1. Allegations of professional misconduct by the respondent.
2. Validity of the complaint and its withdrawal.
3. Evidence and proof of misconduct.
4. Procedural fairness and adherence to principles of natural justice.

Detailed Analysis:

1. Allegations of Professional Misconduct by the Respondent:
The complainant accused the respondent, a Chartered Accountant, of failing to deposit the correct amounts of Service Tax collected from the complainant’s companies, Nirvan Services and Nirvan Travels. The respondent allegedly provided forged Service Tax challans and deposited the collected amounts into the account of M/s. Shakti Agencies, owned by his brother, causing a loss of ?47,34,278 to the government. The disciplinary committee found the respondent guilty of "other misconduct" under Section 22 read with Section 21 of the Chartered Accountant Act, 1949, due to the fraudulent activities and embezzlement of funds.

2. Validity of the Complaint and Its Withdrawal:
The respondent argued that the complaint should be dismissed due to a Memorandum of Understanding (MOU) signed with the complainant, which purportedly settled the dispute. The complainant initially did not withdraw the allegations despite the MOU. However, a subsequent MOU dated 16.04.2012, which absolved the respondent of all misconduct, was not considered by the Council. The court found this to be a significant oversight and a serious infirmity in the Council's proceedings.

3. Evidence and Proof of Misconduct:
The Council’s findings were based on the complainant's testimony and the MOU, which indicated the respondent's admission of the fraudulent act. However, the court noted the absence of corroborative documentary evidence, such as Service Tax returns or bank statements, to substantiate the allegations. The court emphasized the need for objective evidence, especially in quasi-criminal proceedings involving professional misconduct.

4. Procedural Fairness and Adherence to Principles of Natural Justice:
The respondent contended that the Council did not consider his written submissions and the complainant’s withdrawal of allegations. The court highlighted that the Council should have investigated the truth of the subsequent MOU and ensured that all relevant materials were considered. The respondent's casual approach and failure to defend himself adequately were noted, but the court stressed the importance of a fair and thorough inquiry.

Conclusion:
The court concluded that the Council acted hastily and did not adequately investigate the subsequent MOU or corroborate the allegations with objective evidence. The matter was referred back to the Council for a fresh inquiry, directing it to consider all relevant materials, including the complainant's deposition and documentary evidence, within six months. The respondent was instructed to present himself before the Council for further proceedings. The reference was returned on these terms without any costs.