2021 (5) TMI 531 - HC - Indian Laws

Disciplinary proceedings against Chartered Accountant (CA) - Initiation of parallel proceedings to challenge the sanction of merger by Karnataka High Court - case of petitioner is that petitioner is a public spirited citizen and has noticed that the reports that were submitted to the Karnataka High Court were not correct and accordingly filed a complaint before the Institute of Chartered Accountants of India for taking disciplinary action against respondent No. 3 - HELD THAT - Since the petitioner has no connection or locus and in fact counsel for the petitioner has himself sought to challenge the scheme of merger which was rejected by the Karnataka High Court by its order dated 17.03.2021, there are no ground to permit petitioner to start parallel proceedings to challenge a scheme of merger which has been sanctioned by the Karnataka High Court, before this Court or indirectly challenge the same by way of asking the Institute of Chartered Accountants to return a finding on the reports submitted by respondent No.3 before the Karnataka High Court and acted upon by it. There are no infirmity in the view taken by the Disciplinary Committee of the Institute of Chartered Accountants that as respondent No.3 was appointed by Karnataka High Court and reports were submitted to the Karnataka High Court, it is only the High Court of Karnataka, which could take a view on the reports submitted by respondent No.3. The Petition is dismissed with costs, which is quantified at ₹ 50,000/-.

Issues:
1. Impugned order by the Institute of Chartered Accountants of India dismissing the complaint against respondent No. 3.
2. Petitioner's connection with the companies audited by respondent No. 3.
3. Dismissal of the Letters Patent Appeal regarding the order dated 08.02.2021.
4. Imposition of costs on the petitioner by the Division Bench.
5. Challenge to the reports submitted by respondent No. 3 before the Karnataka High Court.
6. Jurisdiction of the Disciplinary Committee of the Institute of Chartered Accountants in the matter.

Analysis:

1. The petitioner challenged the order of the Institute of Chartered Accountants dismissing the complaint against respondent No. 3 for professional misconduct. The Disciplinary Committee held that as respondent No. 3 was appointed by the Karnataka High Court and reports were submitted for merger sanction, only the High Court could pass judgment on the reports. The petitioner, not being associated with the companies or respondent No. 3, was not granted permission to challenge the merger scheme indirectly through the Institute of Chartered Accountants.

2. The petitioner failed to establish any connection with the companies audited by respondent No. 3, leading to the dismissal of the Letters Patent Appeal. The Division Bench imposed costs on the petitioner, which were to be deposited with the Delhi State Legal Services Authority within a specified timeframe. The petitioner's failure to deposit these costs resulted in restrictions on registering any further petitions until the costs were paid.

3. The Division Bench highlighted various cases where costs were imposed on the petitioner for failing to comply with court orders. The petitioner's counsel and the petitioner were accused of instigating litigation and harassing respondent No. 3. The Division Bench emphasized the importance of complying with court orders and paying imposed costs to avoid restrictions on filing future petitions.

4. The Karnataka High Court dismissed an application challenging the merger scheme, citing lack of locus standi of the applicant. The court also noted that the applicant, represented by the petitioner's counsel, engaged in an abuse of legal process. The Division Bench further upheld the dismissal of the application on appeal, emphasizing the need for parties with a genuine interest to participate in legal proceedings.

5. The judgment underscored that the reports submitted by respondent No. 3 were scrutinized and accepted by the Karnataka High Court for the merger sanction. Any challenge to these reports or the merger scheme fell under the jurisdiction of the High Court, not the Disciplinary Committee. The petitioner's attempt to initiate parallel proceedings was deemed unwarranted and lacking merit.

6. In conclusion, the High Court upheld the decision of the Disciplinary Committee, emphasizing the exclusive authority of the Karnataka High Court over the merger reports. The petition was dismissed with costs imposed on the petitioner. The judgment reiterated the importance of respecting court decisions and complying with legal procedures to avoid unnecessary litigation and costs.

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