2017 (1) TMI 1111 - HC - Indian Laws

The transitional provision of Section 21D of the CA Act, 1949 - misconduct - Held that - The word complaints in Section 21D was read to include information as well. Meaning thereby if information pertaining to an alleged misconduct was pending before the Council, further proceedings have to continue as per the unamended Act. The facts we need to note in the instant case are that a complaint was received by the Council on November 06, 2002. Correspondences ensued between the council and Megha & Associates, the firm of Chartered Accountants. Clarifications sought not being granted, the matter was treated as information and in accordance with regulation 12(6) of the Chartered Accountants Regulations 1988, a letter was issued by the Council on December 30, 2005 calling upon the firm of chartered accountants to disclose the name of the members answerable to the charges. The respondent submitted his written statement of defences on July 25, 2006 i.e. much before the Act was amended on November 17, 2006. We accordingly hold the reference to be maintainable for the reason that matter would have to be decided as per the Chartered Accountants Act 1949 and not as amended by the Chartered Accountants (Amendment) Act, 2006.The application is dismissed.

Summary

Issues: Interpretation of transitional provision under Section 21D of the Chartered Accountants Act, 1949.

Detailed Analysis:

Issue 1: Interpretation of Section 21D transitional provision
The judgment addresses the interpretation of the transitional provision under Section 21D of the Chartered Accountants Act, 1949. The Division Bench's decision in the case of The Institute of Chartered Accountants of India & Ors vs. P. Rama Krishna & Anr. was cited to support the petitioner's case. The key focus was on distinguishing between cases pending before the Council based on complaints or information and applying the amended provisions to fresh complaints while retaining the unamended Act for pending cases. The court emphasized that the word "complaint" in Section 21D includes "information" cases, ensuring that if information regarding alleged misconduct was pending before the Council, proceedings must continue under the unamended Act.

Issue 2: Application of Section 21D to the case
In the specific case discussed in the judgment, a complaint was received by the Council in 2002, leading to correspondences with the firm of Chartered Accountants involved. The Council treated the matter as "information" and requested clarifications. The respondent submitted a written statement of defenses in 2006 before the Act was amended in 2006. The court held that the reference in this case must be decided under the Chartered Accountants Act, 1949, not as amended by the Chartered Accountants (Amendment) Act, 2006. This decision was based on the timeline of events and the application of Section 21D to the proceedings.

Issue 3: Disciplinary proceedings and proposed penalty
Another aspect of the judgment involved disciplinary proceedings against the respondent, who was accused of misconduct during an audit. The Disciplinary Committee absolved the respondent of some allegations but found him guilty of claiming AC First Class fare for rail travel while actually traveling in a lower class. The Committee recommended removing the respondent's name from the Register of Members for one month. However, the court deemed this penalty disproportionate to the gravity of the offense, considering the circumstances of the case. The court decided to drop the proceedings against the respondent without imposing any penalty, emphasizing the prolonged duration of the proceedings and advising the respondent to be more careful in the future.

In conclusion, the judgment provides a detailed analysis of the interpretation of the transitional provision under Section 21D of the Chartered Accountants Act, 1949, applying it to the specific case discussed. Additionally, it addresses the disciplinary proceedings against the respondent and the decision regarding the proposed penalty, highlighting the importance of proportionality and the need for careful consideration in such matters.