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TMI Blog2012 (4) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Price Water House, submits that for the years 2001-2007, the audit of Satyam was conducted by one Mr. Gopalakrishnan, and the audit for the financial year 2007-08, and for the quarters ended 30.06.2008 and 30.09.2008 of the financial year 2008-09 were conducted by him. 3. On 07.01.2009, the then Chairman of Satyam, Mr. B. Ramalinga Raju informed the Board of Directors of Satyam of the systematic fudging of accounts of the said company by him. This disclosure, which was widely publicized, was acted upon as information against the petitioner under Section 21 of the Chartered Accountants Act, 1949 (CA Act). 4. The CID Hyderabad registered a criminal case under Section 120B read with Sections 406, 420, 467, 471 and 477A IPC as Crime No. 02/09 against the Chairman and Directors of Satyam and other accused persons, including the petitioner. The petitioner was arrested by the police on 23.01.2009. Thereafter, the case was transferred to the Central Bureau of Investigation (CBI) for investigation, and R.C. No.4(S)/2009 was registered against the petitioner and eight others by the CBI, Hyderabad. 5. The subject of misconduct of a chartered accountant is dealt with in Chapter V of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and when it considers necessary. (2) The Disciplinary Committee, while considering the cases placed before it shall follow such procedure as may be specified. (3) Where the Disciplinary Committee is of the opinion that a member is guilty of a professional or other misconduct mentioned in the Second Schedule or both the First Schedule and the Second Schedule, it shall afford to the member an opportunity of being heard before making any order against him and may thereafter take any one or more of the following actions, namely: - (a) reprimand the member; (b) remove the name of the member from the Register permanently or for such period, as it thinks fit; (c) impose such fine as it may think fit, which may extend to rupees five lakhs. (4) The allowances payable to the members nominated by the Central Government shall be such as may be specified." (Emphasis supplied). 7. The procedure to be adopted by the Disciplinary Committee is prescribed in Rule 18 of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 (referred to as the Rules). 8. Rule 18 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accountant or Company Secretary. (7) During the first hearing, the Committee shall read out the charge or charges to the respondent along with the summary of prima facie opinion arrived at by the Director, and ask the respondent whether he pleads guilty to the charge or charges made against him: Provided that if the respondent does not appear for the first hearing even after one adjournment, the reading out of charge or charges along with the summary of prima facie opinion shall be made in his absence and the case proceeded with in accordance with the provisions of this Chapter. (8) If the respondent pleads guilty, the Committee shall record the plea and take action as per provisions under rule 19. (9) If the respondent does not plead guilty, then the Committee shall fix a date for examination of witnesses and production of documents. (10) The Committee may, on application of the Director, issue notice for appearance to any of his witnesses directing him to attend or to produce any other document or material evidence. (11) On the date so fixed, the Committee shall proceed to take all such evidence as may be produced by the Director, including or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as a valid reason for adjournment of a hearing." (Emphasis supplied). 9. The Disciplinary Committee after considering the prima facie opinion dated 17.09.2009 in its meeting held on 23.09.2009, decided to proceed further in the matter under Chapter V of the Rules. 10. The respondent sent a letter dated 08.10.2009 to the petitioner, calling upon him to submit his written statement alongwith supporting documents, if any, and a list of witnesses, if any, that the petitioner may desire to examine under Rule 18(4) of the Rules. The petitioner did not respond to the said communication, presumably because he was still behind bars, and was granted bail by the Supreme Court only on 04.02.2010. 11. After the petitioner was released on bail, as aforesaid, he was served with a letter dated 06.04.2010, directing him to appear before the Disciplinary Committee on 18.04.2010. 12. The petitioner preferred a writ petition being W.P.(C.) No. 2505/2010 before this Court against the holding of the disciplinary enquiry, primarily on the ground that on the same subject matter the petitioner could not be simultaneously proceeded with in criminal proceedings and in disciplinary proceedings. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .07.2011 and the said request was rejected by the respondent on the same day. 18. On 09.07.2011, the petitioner appeared before the Disciplinary Committee through his authorized representative. During the hearing also, the representative of the petitioner sought deferment of the hearing, which was rejected by the respondent. The respondent proceeded with the examination of 12 witnesses and thereafter gave the counsel for the petitioner an opportunity to cross examine them. However, the counsel for the petitioner opted not to participate in the hearing and withdrew himself. 19. The petitioner was again issued notice by the respondent on 18.07.2011 informing him that the next hearing had been fixed for 31.07.2011. In the meantime, on 25.07.2011, the petitioner preferred a Special Leave Petition being Special Leave Petition (C) No. 20915/2011 against the judgment in LPA No. 886/2010. Advance copy of the same was served on the respondent. The said Special Leave Petition was listed before the Supreme Court on 29.07.2011. However, one of the Hon'ble Judges on the bench recused himself from the matter. The matter was listed before another bench on 01.08.2011. 20. The petitioner then se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... witnesses had taken place. The request for supply of the aforesaid documents was reiterated. The respondent informed the petitioner's representative that the documents requested for would be supplied and that his submissions would be appropriately considered. However, at the same time, it rejected the request for cross examination, as it considered that adequate opportunities had been given to the petitioner, which were not availed of by him. 25. Vide notice dated 02.12.2011, the proceedings were again fixed on 18.12.2011. On 05.12.2011, the petitioner was served with documents running into more than 3000 pages. The petitioner was also provided transcripts of some of the hearings. 26. On 14.12.2011, the petitioner moved two applications before the Disciplinary Committee - the first to seek permission to cross examine the witnesses produced by the Director (Discipline) in the enquiry proceedings, and the second for identification of documents supplied by the Director (Discipline) to the petitioner. On 15.12.2011, the petitioner reiterated the prayers in these applications. 27. On 18.12.2011, the disciplinary proceedings were attended by the authorized representative of the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, and for identification of documents supplied by the Director (Discipline) to the petitioner. 31. Mr. Kaul submits that Rule 18(2)(b) specifically provides that the Disciplinary Committee, which shall be guided by principles of natural justice, shall "expeditiously cause to deliver to the respondent and the complainant, a copy each of the following, - (a) .... .... .... (b) particulars or documents relied upon by the Director, if any, during the course of formulation of prima facie opinion", if the Committee decides to proceed under Rule 9(2)(b), i.e. where the Committee agrees with the prima facie opinion of the Director (Discipline). 32. Mr. Kaul submits that Rule 18(2)(b) was not complied with as voluminous documents, relied upon for formation of the prima facie opinion, were not provided earlier, and were provided only after the recording of the evidence of the respondents witnesses. 33. Mr. Kaul further submits that the transcripts of the statement of the witnesses, whose statements were recorded on 09.07.2011 and 31.07.2011 were given to the petitioner only in December 2011. The denial of the same also handicapped the petitioner in effectively pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nesses. 37. Mr. Nigam submits that these witnesses are officers who have investigated the case, and they are posted all over the country in different positions. With great difficulty and at substantial costs, these witnesses could attend the hearing at Hyderabad. He submits that the proceedings were being conducted at Hyderabad only for the convenience of the petitioner, as he is based in Hyderabad and the criminal trial also is proceeding at Hyderabad. Mr. Nigam submits that Mr. A.Y.V. Krishna, Chief Investigating Officer in the Satyam trial is presently posted as D.I.G, Assam. He is not easily available looking to the disturbance in the said State. Even earlier he could appear before the Committee only after 2-3 adjournments. To require him, and the other witnesses to again appear before the Committee for their cross examination could indefinitely delay the conclusion of the disciplinary proceedings against the petitioner. 38. Mr. Nigam submits that the tenure of the present Disciplinary Committee would expire in February 2012. He submits that the President of the Disciplinary Committee constituted under Section 21B (1) would demit his office on 11.02.2012. This would lead to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal, in case the Disciplinary Committee decides to impose any of the penalties referred to in sub- section (3) of Section 21A, and subsection (3) of Section 21B. Mr. Nigam submits that all the issues raised by the petitioner in the present petition can also be raised before the appellate authority constituted under Section 22A of the C.A. Act. Mr. Nigam submits that the petitioner has an efficacious alternative remedy available to him and this Court should, therefore, not interfere with either the disciplinary proceedings or the report formulated by the Disciplinary Committee during the pendency of the writ petition, at this stage. Reliance is placed on the judgments of the Supreme Court in Chanan Singh v. Registrar, AIR 1976 SC 1821; State of Madhya Pradesh v. Nerbududda Valley, [2010] 7 SCC 751; Haryana Financial Corporation v. Kailash Chander Ahuja, 2008 (9) SCC 31; Kanhaiya Lal v. State of Maharashtra, Criminal Appeal Nos. 338- 340/2011 and of this Court in Akkhilesh R Bhargava v. The Institute of Chartered Accountants of India & Anr., W.P.(C )No. 4809/2011; Jagmal Singh v. Delhi Transport Corporation, 59 [1995] DLT 604 (DB); and Arun Kumar Nigam v. DIG. GENL. Central Indus. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbers of Disciplinary Committee Rs. 2,50,000 B. Expenses on the travelling, boarding and Lodging of the staff of Disciplinary Directorate Rs. 2,00,000 C. Expenses on the travelling, boarding and Lodging of witnesses @ Rs. 30,000 per head Rs. 3,60,000 D. Other Misc Expenses including recording and Incidental costs Rs. 50,000 Rs. 8,60,000" 43. Having heard learned counsel for the parties, perused the provisions of the C.A. Act and the rules framed thereunder, the record of the case and considered the submissions of the parties, in the interest of justice, I am inclined to grant one, and only one opportunity to the petitioner to cross examine all the witnesses examined by the respondent, however subject to the conditions mentioned hereinafter. 44. I may observe at this stage itself that strictly speaking the petitioner is not entitled to the said relief in respect of the witnesses whose examination-in-chief was recorded on 09.07.2011, and the petitioner is solely responsible for landing himself in the present state. However, since the petitioner has agreed to bear the expenses that wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aul that the petitioner was not provided with the documents relied upon by the Director (Discipline) while forming the prima facie opinion dated 17.09.2009 does not appear to be correct. Inter alia, the said documents were provided, as aforesaid, by the respondent vide letter dated 15.06.2011. 49. Firstly, I may note that It is the categorical case of the respondents that the only document relied upon by the Director (Discipline) while forming the prima facie opinion were, firstly the charge sheet filed by the CBI and the SEBI investigation report along with the balance sheets. Pertinently, even at the stage of formation of the prima facie opinion, the petitioner was given repeated opportunities. However, he did not participate in these proceedings and did not seek any document from the respondent. He repeatedly sought adjournments which only delayed the proceedings. The submission of the petitioner that the Director (Discipline) had only provided copies of the SEBI investigation report and the CBI charge sheet and supplementary charge sheets, and not the documents which formed the basis of the said investigation report and the charge sheets has no merit. The Director (Discipline) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... linary Committee on 31.07.2011, the petitioner was clearly handicapped, because the petitioner was not possessed of the statements of the witnesses, whose evidence had been recorded on 09.07.2011 and also of the documents which the said witnesses (12 in number) had exhibited. Without the said witnesses statements and copies of the exhibits, the petitioner could not have effectively cross examined the last witness, Sh. A.Y.V. Krishna on 31.07.2011. 51. To that extent, the grievance of the petitioner appears to be justified and the petitioner should be granted an opportunity to cross examine the last witness Sh. A.Y.V. Krishna, to prevent the breach of the principles of natural justice. 52. The submission of Mr. Nigam that on account of the expiry of the tenure of the President of the Disciplinary Committee in January 2012, the proceedings before the Disciplinary Committee would have to commence de novo does not appear to be correct. The petitioner has demonstrated that, from time to time, the constitution of the Disciplinary Committee has undergone changes. The proceedings in a case continue, irrespective of the changes that may come about with the passage of time in the Disciplin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milarly in Nerbududda Valley (supra) writ petition had been preferred against order passed by the Nazul Officer, rejecting the application for grant of No Objection Certificate (NOC) to raise construction on the leased land after changing the land use from industrial purpose to commercial purpose. The writ petitions, in both these cases, came to be dismissed on account of existence of alternate efficacious remedy of appeal. However, it is relevant to note, that in neither of these petitions, was the plea of violation of the principles of natural justice considered by the Court. 57. In Akkhilesh R Bhargava (supra) this Court, unlike the present case, dealt with the Act as it stood prior to the 2006 amendment wherein the Council was required to forward the case to the High Court along with its recommendation under Section 21 (5) [as it stood then], when it found any member of the Institute guilty of Misconduct upon receipt of a report of the Disciplinary Committee. The Petition had been preferred on the ground of violation of principle of natural justice by the Disciplinary committee. The same came to be dismissed as premature since the Council had till then not acted upon the repor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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