2017 (10) TMI 565 - HC - Indian Laws

Disciplinary proceedings instituted against petitioners Chartered accountants - Eligibility of subsequent action - Held that - Merely because the petitioners have now acquired further information pursuant to their request under the RTI - which, at best, provides them with additional pleas in support of their earlier challenge - does not mean that the subject matter of the present petition was not included in the matter before the Bombay High Court. The petitioners had challenged the formation, interalia, challenging that the prima facie opinion was not valid. The present petition seeks to re-agitate the same issue albeit on the basis of additional information claimed to be have been received subsequently. Plainly, the petitioners cannot be permitted to do so. This Court is of the view that the petitioners contention that they had recently acquired the information as to how the prima facie opinion was formed is a mere ruse intended to delay and obstruct the disciplinary proceedings, which cannot be permitted.

Issues Involved:
1. Quashing of disciplinary proceedings and Show Cause Notice.
2. Validity of prima facie opinion formed by ICAI.
3. Jurisdiction of the Disciplinary Committee.
4. Compliance with procedural requirements and natural justice.
5. Res judicata and constructive res judicata principles.

Detailed Analysis:

1. Quashing of Disciplinary Proceedings and Show Cause Notice:
The petitioners sought a direction to quash the disciplinary proceedings and the Show Cause Notice dated 06.12.2006 issued by the Institute of Chartered Accountants of India (ICAI). They argued that the proceedings were invalid due to the lack of a valid prima facie opinion by the ICAI Council. The petitioners, chartered accountants with Price Waterhouse & Co., were implicated in the statutory audit of Global Trust Bank Limited for the year ended 31.03.2003, which was found to have discrepancies in provisioning for non-performing assets (NPAs).

2. Validity of Prima Facie Opinion Formed by ICAI:
The petitioners contended that the prima facie opinion formed by the ICAI Council, which led to the initiation of disciplinary proceedings, was not legally valid. They argued that the opinion lacked substantial evidence and was not supported by a detailed record of how it was formed. The petitioners emphasized that the formation of a prima facie opinion is a jurisdictional condition under Section 21(1) of the Chartered Accountants Act, 1949, and in the absence of a valid prima facie opinion, the disciplinary proceedings were invalid.

3. Jurisdiction of the Disciplinary Committee:
The petitioners challenged the jurisdiction of the Disciplinary Committee on the grounds that the prima facie opinion was not valid. They argued that without a valid prima facie opinion, the Disciplinary Committee did not have the jurisdiction to conduct an inquiry against them. This issue was raised multiple times in various writ petitions filed by the petitioners.

4. Compliance with Procedural Requirements and Natural Justice:
The petitioners alleged that the Disciplinary Committee failed to adhere to the prescribed procedure and principles of natural justice. They claimed that the Committee recorded evidence in the absence of relevant documents and did not provide a fair opportunity for the petitioners to present their case. The Bombay High Court had previously directed the Committee to ensure that the procedure adopted was just and fair, and to provide a fair hearing to the petitioners.

5. Res Judicata and Constructive Res Judicata Principles:
The court observed that the issues raised by the petitioners in the present petition had already been the subject matter of earlier writ petitions before the Bombay High Court. The principle of constructive res judicata precludes the petitioners from re-agitating the same issues in subsequent proceedings. The court noted that the petitioners had already challenged the validity of the prima facie opinion and the show cause notice in previous petitions, and the present petition was an attempt to delay and obstruct the disciplinary proceedings.

Conclusion:
The court dismissed the petition and the pending applications, holding that the petitioners' contention regarding the recent acquisition of information about the formation of the prima facie opinion was a mere ruse intended to delay and obstruct the disciplinary proceedings. The court emphasized that the principle of constructive res judicata barred the petitioners from re-agitating the same issues that had already been decided in previous proceedings.

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