2013 (3) TMI 304 - HC - Companies Law

Chartered Accountants Act, 1949 - Guilty of professional and other misconduct - submission of forged and fabricated income-tax returns to induce the complainant-bank to extend loan to him. - Code of Conduct - Held that - Council has found the Chartered Accountant guilty of misconduct and has decided to refer the case to the disciplinary committee for inquiry. - Council decided to recommend to this court that the name of the respondent be removed from the register of members for a period of two years.- The court has directed that the respondent be removed forthwith from the membership of the Institute for a period of five years. Whether there is any misconduct committed by the respondent being member of the Institute or not - the contention was that he not a member of ICAI during the relevant period as his membership was cancelled due to non payment of fees - held that - he was not a member of the Institute from August 1, 1987 to May 1, 2002, but he continued to be in practice which is proved by his own visiting card/business card which was affixed on an application form for loan. - it is proved from the visiting/business card that he had offered to perform his services as chartered accountant and had held himself out to the public as accountant. - Therefore, as per section 2(2), under these circumstances, he was deemed to be in practice. The facts of the present case reveal that the respondent has proved himself to be capable of infamous conduct. The recommended punishment of removal of his name for two years would, be a mockery of the proceedings in view of the serious nature of misconduct. - Taking into consideration his age as 58 years as per documents submitted before the income-tax office, in our opinion, the interest of justice will be met if the respondent is removed forthwith from the membership of the Institute for a period of five years.

Issues Involved:
1. Allegation of forged and fabricated income-tax returns.
2. Respondent's failure to submit a written statement.
3. Respondent's professional misconduct.
4. Respondent's defense and representation.
5. Council's recommendation for removal from the register of members.
6. Legal interpretation of "in practice" and "other misconduct."

Detailed Analysis:

1. Allegation of Forged and Fabricated Income-Tax Returns:
The complainant-bank sanctioned a loan of Rs. 1.84 lakhs based on income-tax returns submitted by the respondent, which were later confirmed by income-tax authorities as neither filed nor authentic. The respondent was accused of intentionally submitting these forged documents to induce the bank to extend the loan.

2. Respondent's Failure to Submit a Written Statement:
Upon receiving the complaint, the Council of the Institute of Chartered Accountants of India requested the respondent to submit a written statement. Despite reminders, the respondent did not comply. Consequently, the Council proceeded with the inquiry in the absence of the respondent's written statement.

3. Respondent's Professional Misconduct:
The Disciplinary Committee found the respondent guilty of "other misconduct" under sections 21 and 22 of the Chartered Accountants Act, 1949, and clause (11) of Part I of the First Schedule to the Act. The respondent's actions were deemed unbecoming of a member of the Institute, violating principles of integrity and truthfulness.

4. Respondent's Defense and Representation:
The respondent claimed that a Direct Selling Agent (DSA) obtained his signature on blank applications and submitted false documents to secure the loan. He admitted to providing other documents but denied enclosing the forged income-tax returns. The respondent also mentioned his non-membership period from 1987 to 2002, during which he was not practicing as a chartered accountant.

5. Council's Recommendation for Removal from the Register of Members:
The Council recommended the respondent's removal from the register of members for two years, considering the gravity of the misconduct. The Council emphasized that the respondent's conduct was against professional ethics and required disciplinary action to maintain the profession's integrity.

6. Legal Interpretation of "In Practice" and "Other Misconduct":
The court examined section 2(2) of the Chartered Accountants Act, defining "in practice" as engaging in accountancy or offering related services. Despite the respondent's non-membership period, his actions, including maintaining a business card as a practicing chartered accountant, indicated he held himself out to the public as an accountant. The court also interpreted "other misconduct" to include any unethical behavior not explicitly listed in the Schedule but falling under the Council's jurisdiction to maintain professional standards.

Conclusion:
The court upheld the Council's finding of misconduct and extended the punishment from two to five years, emphasizing the need for high standards of integrity and professional behavior in the accountancy profession. The respondent's actions were deemed serious enough to warrant a stricter penalty, reflecting the profession's zero tolerance for misconduct. The reference was disposed of with no order as to costs.

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