2018 (3) TMI 715 - HC - Indian Laws

Validity of order dated 26th July, 2017 - lack of Quorum - Petitioner submits that the Appellate Authority constituted under Section 22A of the Chartered Accountants Act, 1949 must consist of five (5) members - interpretation of Section 22A of the CA Act. Held that - In the present case no vacancy has arisen which can be filled up as the said fifth member has neither resigned nor has been removed. There is no provision in the enactment to fill up vacancy by recusal in a particular case by any other mode. Temporary absence or recusal of a member in a particular appeal, would not make the Appellate Tribunal dysfunctional till a new member is appointed, which as recorded above as per the CA Act is impermissible. The rationale behind the Rule is that the litigation cannot be a non sequitur. In other words, there cannot be a litigation system in which it is impossible to litigate a given case. It is on the aforesaid principle that we have examined the statutory provisions of the CA Act and the effect of recusal of one member of the five-members of the Appellate Authority and held that recusal will not stall hearing and decision of the appeal. Contention of lack of quorum on account of recusal of one member of the five member Appellate Authority for the aforesaid reasons fails and is rejected. The Appellate Authority of four members can hear and decide the appeal, in spite of recusal of one of the members, namely, Mr. Sunil Goyal - petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Quorum requirement for the Appellate Authority under Section 22A of the Chartered Accountants Act, 1949.
2. Validity of Rules 13 and 16 of the 'Procedure to be Followed for Appeals by the Appellate Authority, 2013'.

Detailed Analysis:

Quorum Requirement for the Appellate Authority:

The petitioner challenged the order dated 26th July 2017 by the Appellate Authority, arguing that the Appellate Authority must consist of five members as mandated under Section 22A of the Chartered Accountants Act, 1949 (CA Act). The petitioner contended that the recusal of one member (Mr. Sunil Goyal) rendered the four-member Appellate Authority incomplete and thus, incapable of hearing the appeal.

Section 22A of the CA Act stipulates the constitution of the Appellate Authority as a five-member body, including a Chairperson who is or has been a judge of a High Court, two members from the Council, and two members nominated by the Central Government with expertise in law, economics, business, finance, or accountancy.

The court examined whether the absence or recusal of one member creates a vacancy that requires filling. It was noted that recusal does not amount to resignation or removal, and the member continues to be part of the Appellate Authority. The court referred to various precedents where temporary absence or recusal of a member did not invalidate the proceedings of multi-member tribunals or committees, provided the majority of members were present.

The court cited decisions such as Kwality Restaurant & Ice Cream Co. v. The Commissioner of VAT, Trade and Tax Department, and others, where it was held that the absence of a member did not impede the tribunal's functioning. Similarly, in Kavita Meena & Ors. v. Government of National Capital Territory of Delhi & Ors., it was held that the presence of the majority of members constituted a valid quorum in the absence of specific quorum rules.

The court concluded that the CA Act does not prescribe a minimum quorum for the Appellate Authority. Therefore, the recusal of one member does not invalidate the proceedings as long as the majority of the members are present. The contention that all five members must be present to constitute a valid quorum was rejected.

Validity of Rules 13 and 16:

The petitioner also challenged the validity of Rules 13 and 16 of the 'Procedure to be Followed for Appeals by the Appellate Authority, 2013', arguing that they were repugnant to the provisions of the CA Act. However, the court did not delve into this issue in detail, as it was satisfied that the Appellate Authority of four members could hear and decide the appeal despite the recusal of one member.

Conclusion:

The court upheld the order dated 26th July 2017 by the Appellate Authority, rejecting the plea of lack of quorum. It was determined that the Appellate Authority could validly function with four members in the case of recusal by one member. Consequently, the writ petition was dismissed with no order as to costs.