2024 (11) TMI 1274 - HC - Indian Laws

Misconduct under the Chartered Accountants Act, 1949 - removal of respondent s name from the Register of Members for a period of six months - scope of the disciplinary proceedings - HELD THAT - The present disciplinary proceedings cannot be said to have been affected due to the absence of the complainant. Admittedly, respondent had purchased the shares in the year 1997, but denied having sold them to the complainant. Surprisingly, the signatures on the share transfer deed has been admitted by the respondent. He tried to render an explanation that an employee of the broker made him sign the blank transfer deed on the pretext that it was needed for some unrelated share delivery issue, which may have been fraudulently used for the purpose of selling shares to the complainant. However, the explanation given does not look probable, inasmuch as, respondent is a qualified Chartered Accountant and it is difficult to believe that he would sign blank transfer deed - Respondent has also failed to render any explanation for four years delay in applying for duplicate share certificates. No satisfactory explanation for four years delay in applying for duplicate share certificates has been put forth by the respondent. The continued receipt of dividends after the sale of certificates reflects an attempt on his behalf to take benefit from shares, he no longer owned. It is well settled that the scope of interference with the decision of any Authority under Article 226 of the Constitution of India is limited. Even though, it was contended on behalf of the respondent that the decision of the Disciplinary Committee was perverse and unreasonable, the said contention is found to be wholly bereft of any merit - the Disciplinary Committee found that respondent had failed to act in a bona fide manner and the said conduct was derogatory in nature and highly unbecoming of a Chartered Accountant and brought disrepute to the profession. The punishment awarded to the respondent is not unduly harsh. The recommendation of the Council to the effect that the name of respondent be removed from the Register of Members for a period of six months, accepted - Reference disposed off.

Issues Involved:

1. Allegations of misconduct against the respondent under the Chartered Accountants Act, 1949.
2. Findings of the Disciplinary Committee and the Council of the Institute of Chartered Accountants of India.
3. Respondent's defense and claims regarding the allegations.
4. Legal implications of the purported settlement between the complainant and the respondent.
5. Evaluation of the disciplinary proceedings in the absence of the complainant.
6. Determination of appropriate punishment for the respondent.

Issue-wise Detailed Analysis:

1. Allegations of Misconduct:
The primary allegation against the respondent, a Chartered Accountant, was that he sold 100 shares of Aban Loyd Chiles Offshore Ltd. to the complainant but continued to receive dividends and later obtained duplicate shares by misrepresenting facts. The Council of the Institute of Chartered Accountants of India found the respondent guilty of "other misconduct" under Section 22 read with Section 21 of the Chartered Accountants Act, 1949, and proposed removing his name from the Register of Members for six months.

2. Findings of the Disciplinary Committee and Council:
The Disciplinary Committee concluded that the respondent was guilty of misconduct as he failed to provide satisfactory explanations for his actions. Despite selling the shares, he remained the registered holder and continued to receive dividends. The Committee found his claims of theft of share certificates unsubstantiated due to the absence of a police report or FIR. The Council accepted the Committee's findings and recommended the respondent's name be removed from the Register of Members.

3. Respondent's Defense:
The respondent denied selling the shares and claimed that an employee of a brokerage firm made him sign a blank transfer deed, which was later misused. He also asserted that the matter was settled amicably with the complainant, who agreed to withdraw the complaint. However, the respondent failed to provide evidence of such a settlement or the terms thereof.

4. Legal Implications of Settlement:
The Court noted that under Section 21(8) of the Chartered Accountants Act, 1949, a complaint filed with the Disciplinary Directorate cannot be withdrawn. Therefore, any purported settlement between the parties does not affect the proceedings.

5. Evaluation of Disciplinary Proceedings:
The Court emphasized that disciplinary proceedings are primarily between the ICAI and its members, with the complainant acting as a relater party. The absence of the complainant does not invalidate the proceedings, as the focus is on maintaining professional standards and addressing misconduct.

6. Determination of Appropriate Punishment:
The Court found the Disciplinary Committee's findings to be based on cogent material and reasoning. The respondent's conduct was deemed derogatory and unbecoming of a Chartered Accountant, bringing disrepute to the profession. The Court upheld the recommendation to remove the respondent's name from the Register of Members for six months, emphasizing the need for integrity and probity in the profession.

The Reference was disposed of with the above observations, affirming the punishment recommended by the Council.

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