2020 (3) TMI 518 - HC - Indian Laws

Guilty of Professional Misconduct against Chartered Accountant (CA) - recording of reason of the complaint and disclosure of the same - whether the respondent is required to communicate reasons for closing the inquiry against its member that has been initiated on a Complaint filed visa-a-vis on an Information received? HELD THAT - Rules 7(2)(c) of the Rules provides that where the inquiry is initiated only on an Information, the Institute will be under no obligation to inform the sender of the progress made in respect of the Information received, including the final orders. In terms of Rule 5(7)(a), the order of closure of the complaint is passed by the Board of Discipline where the Complainant fails to rectify the defect in the complaint within the time allowed and an order for closure is also mandatory under Rule 9(3)(a) where Board of Discipline agrees with the prima facie opinion of the Director (Discipline) that the member is not guilty of any misconduct. Thus, where the inquiry is initiated on a complaint filed under Rule 3 of the Rules, the Complainant is entitled to receive a copy of the order closing such inquiry against the member. Order would necessarily include the reasons for the same. The Rules having themselves created this right in favour of the Complainant, it cannot be accepted that the Complainant would only be supplied with the Information of the closure of the complaint. Various judgments emphasize the requirement of recording reasons to obviate arbitrary and non-considered decisions even by the administrative authorities. Communication of such reasons to the concerned party is, therefore, essential to achieve this objective of the rule of natural justice. In absence of such communication of reasons, the objective of prescribing a condition for recording reasons may itself fail. It must be held that unless the legislature specifically or by necessary implication exempts the Authority from communicating reasons for its decision, such reasons must be communicated to the affected parties - In the present case, no such exemption is prescribed or can be inferred in the Act. Thus, it is held that the respondent no. 1 is under an obligation to provide reasons to the complainant for its prima facie conclusion of the member being not guilty of any misconduct on the complaint made by a Complainant. At the same time, it is clarified that such reasons need not be elaborate and would not widen the scope of interference of the Courts while exercising powers of judicial review - present petition is accordingly allowed directing the respondent no. 1 to communicate the reasons for its decision that was communicated to the petitioner vide the Impugned Communication dated 09.04.2018, within a period of two weeks of receipt of this order.

Summary

Issues Involved:
1. Whether the respondent is required to communicate reasons for closing the inquiry against its member initiated on a complaint filed by the petitioner.

Issue-wise Analysis:

1. Non-pressing of Prayer 'a':
The petitioner initially sought a writ of mandamus directing the respondent to act on Complaint No. 230/2014. However, since this complaint is being adjudicated before the Disciplinary Committee under the Chartered Accountants Act, 1949, the prayer 'a' was disposed of as not pressed.

2. Requirement to Communicate Reasons for Closing Complaint (Prayer 'b'):
The core issue debated was whether the Board of Discipline must communicate reasons for closing a complaint against a member to the complainant. The petitioner argued that reasons must be conveyed, citing a Kerala High Court judgment (T.O. Aleyas v. ICAI & Ors.). Conversely, the respondent contended that the proceedings are between the Institute and its members, not private disputes, and thus reasons need not be communicated to the complainant. The respondent cited judgments from the Delhi High Court and the Supreme Court to support their stance.

3. Relevant Provisions of the Chartered Accountants Act and Rules:
- Section 21 of the Act: Establishes the Disciplinary Directorate for investigating complaints.
- Section 21A(4): Directs the Director (Discipline) to submit complaints with no prima facie case to the Board of Discipline, which can either close the matter or advise further investigation.
- Rules 3, 4, 5, 7, 8, and 9 of the Rules: Outline the procedure for filing and handling complaints, including the steps the Director (Discipline) must follow upon receiving a complaint.

4. Analysis of the Rules and the Requirement to Communicate Reasons:
- Rule 7(2)(c): States that the Institute is not obligated to inform an informant of the progress or final orders.
- Rule 9(3)(a): Mandates the Board of Discipline to pass an order for closure if it agrees with the Director (Discipline) that there is no prima facie case.
- Rule 14(1): Prescribes summary disposal procedures for the Board of Discipline.

5. Right to Receive Reasons:
The court emphasized that the complainant is entitled to receive a copy of the order closing the inquiry, which includes reasons. This right is inherent in the Rules and is essential for ensuring transparency and fairness, preventing arbitrariness, and allowing the complainant to make informed decisions.

6. Principles of Natural Justice:
The court underscored that recording and communicating reasons are fundamental to the principles of natural justice. The judgments cited by the respondent did not exempt the obligation to communicate reasons. The court referenced several Supreme Court judgments to reinforce the necessity of providing reasons to affected parties.

7. Conclusion and Directions:
The court held that the respondent must provide reasons to the complainant for its prima facie conclusion of no misconduct. The reasons need not be elaborate but must be communicated to ensure fairness and transparency. The petition was allowed, directing the respondent to communicate the reasons within two weeks of receiving the order.

8. Costs:
No order as to costs was made.