2014 (11) TMI 1288 - HC - Indian Laws

Guilty of other misconduct falling under Section 22 read with Section 21 of The Chartered Accountants Act, 1949, as it stood prior to the amendment with effect from 17th November, 2006 - respondent No.1 despite opportunity failed to represent against the report of the either of the two Disciplinary Committees and also failed to participate in the 324th meeting of the petitioner Institute, in which both the reports were taken up for consideration - Violation of principles of natural justice - time limitation - HELD THAT - Though the jurisdiction of this Court under Section 21(6) of the Act is wide, without any restriction but in our opinion, the findings of the members of the Disciplinary Committee of the petitioner and the views of the petitioner Council are entitled to great weight in light of the fact that they are the experts with regard to the matters pertaining to profession of chartered accountants and know the intricacies of the profession on account of their personal experience. Moreover, the said bodies have been created to maintain a high standard of conduct and discipline amongst the members of the petitioner institute. Thus, unless gross violation or disregard of the provisions of the Act or the Regulations made thereunder or of the principles of natural justice and fairness is to be found, this Court would be slow to interfere with the finding of such professional bodies. At the time of issuing notice of both the petitions had brought the said fact to the notice of the Advocate for the petitioner Institute. It is also found that other references are also being filed after such long delay and without any explanation given therefor. Though no limitation appears to have been prescribed for filing such reference (though a perusal of The Chartered Accountants (Procedure of Investigation of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 and the Chartered Accountants Regulations, 1988 brought into force since then contain some tentative time limits) but the petitioner Institute which is a professional body also empowered to discipline its members ought not to so delay dealing with the complaints against its members and which delay not only enables the erring members to continue with their erring activities, to the prejudice of the persons dealing with them, but we are of the opinion that such delays on the part of the petitioner Institute is also prejudicial to the members against whom complaints are directed. Such members of the petitioner Institute in the interregnum continue to grow and build their reputations. A punishment at an early stage in the career can have vitally different consequence than a punishment at a time when the professional is at the peak. The petitioner Institute is called upon to introspect into the said aspect and to in future ensure that the complaints are dealt with in a time bound manner. It is accepted that the recommendation of the petitioner Institute in both the cases and remove the respondent No.1 from the membership of the petitioner Institute for a period of five years in each of the two cases and which period shall run separately, in accordance with law. The references are disposed of.

Summary

Issues Involved:

1. Determination of professional misconduct by a Chartered Accountant under Section 22 read with Section 21 of The Chartered Accountants Act, 1949.
2. Examination of procedural delays in the disciplinary process by the Institute of Chartered Accountants of India.
3. Consideration of whether the penalties imposed should run concurrently or consecutively.

Issue-wise Detailed Analysis:

1. Professional Misconduct:

The core issue in both petitions was the determination of professional misconduct by the respondent, a Chartered Accountant, as defined under Section 22 read with Section 21 of The Chartered Accountants Act, 1949. The complaints against the respondent involved serious allegations of misconduct. In the first case, the respondent was found guilty of incorporating a company by forging signatures and acting against professional instructions, which tarnished the reputation of the profession. The Disciplinary Committee concluded that the respondent's actions constituted professional and/or other misconduct. In the second case, the respondent was implicated in a fraudulent public issue, with SEBI finding him instrumental in misstatements and concealment of material facts. The Disciplinary Committee again found the respondent guilty of "other misconduct."

2. Procedural Delays:

The judgment highlighted significant delays in the disciplinary process by the Institute of Chartered Accountants of India. There were unexplained delays in inviting the respondent's response to the complaints and in forming a prima facie opinion. Such delays were noted from the initial complaint dates to the time when the respondent was asked to respond, and further delays occurred in filing the references with the court. The court expressed concern over these delays, noting that they could be prejudicial both to the complainant and the respondent. The court called upon the petitioner Institute to ensure future complaints are handled expeditiously to maintain the integrity of the disciplinary process.

3. Consecutive vs. Concurrent Penalties:

The court examined whether the penalties imposed on the respondent should run concurrently or consecutively. The petitioner Institute recommended the removal of the respondent's name from the Register of Members for five years in each case. The court noted that the recommendation did not specify whether the penalties should run concurrently. Given the gross nature of the misconduct in both complaints, the court accepted the petitioner's counsel's statement that the penalties should not run concurrently. Consequently, the removal from membership would run separately for each case, reflecting the severity of the misconduct.

In conclusion, the court upheld the findings of the Disciplinary Committees and accepted the recommendations of the petitioner Institute, emphasizing the importance of maintaining high professional standards and the need for timely disciplinary procedures. The respondent was removed from membership for a total of ten years, with each five-year penalty running consecutively. The judgment serves as a reminder of the critical role of professional bodies in regulating conduct and ensuring accountability within the profession.