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TMI Blog2016 (9) TMI 714X X X X Extracts X X X X X X X X Extracts X X X X ..... ty with the impugned order. The next question is whether in the circumstances of the case, particularly having regard to the nature of evidence and the materials placed before it, the Council could have concluded that the respondent was guilty of cheating or indulging in fraud, causing loss to the complainant. No doubt, the complaint does mention the relative amounts, the challans, the amounts allegedly collected as due, and the amounts paid. However, the relative or corresponding demands from the Service Tax authorities or the assessment orders, or even the service tax returns, are not on the record. These would have substantiated to a large measure the complainant’s allegation. Likewise, there is no material to suggest that the amounts were deposited in some other concern’s account. Quite possibly the respondent has been charge criminally for an offence. However, that ipso facto does not transform into proof of such criminal misconduct; the prosecution or the complainant would have to establish his guilt. While disciplinary proceedings may not be in the nature of court proceedings, yet when a professional, such as a chartered accountant is arrayed for misconduct which has q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1949, seeking imposition of penalty against the respondent. 2. The facts relating to the reference are that in a complaint, duly verified on 21st March, 2005, one Dharam Vir Yadav of M/s. Nirvan Services/Nirvan Travels (referred to hereafter as the Complainant ) leveled the following allegations against Chartered Accountant, Deepak Jain, M/s. Jain Deepak Co. (the respondent, referred to as such, hereafter). The complainant had entrusted the job of depositing Service Tax to the Respondent for which he used to pay him the professional fees. The Respondent used to collect the amount of Service Tax in Cash/Pay Orders on behalf of the Complainant's Company i.e. Nirvan Services and Nirvan Travels to deposit in the Service Tax account for both the companies at Punjab National Bank, Lawrence Road, Delhi in the Service Tax Account No.DL-1/ST/M R/35/NS2003 (Nirvan Services) and DL-1/TO/648/ST//2001) (Nirvan Travels) at the end of the month. The Respondent also used to file returns of the Complainant on behalf of the Company. It was alleged that he always used to give photocopies of the Challans deposited in the Bank. The complainant had been demanding the Original Challans from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Taxation Department of Govt. of India to loss. The particulars of the complaint as filed in Complaint Form 8 have been filed as Annexure A to the complaint. The Council, on receipt of complaint, elicited the respondent s reply. 5. The Respondent in his Written Statement submitted in the matter that the dispute has been sorted out and an M.O.U. has already been signed and the matter is pending before the Punjab and Haryana High Court, for quashing of the F.I.R. The Complainant in his rejoinder on the said Written Statement of the Respondent stated that no compromise has been reached with the Respondent in respect of the instant complaint lodged with the Institute, although a Memorandum of Understanding has been signed mutually in order to recover the embezzled amount from the Respondent. The Complainant along with the said reply dated 22.08.2005 also enclosed a letter issued from the office of the Assistant Commissioner of Service Tax, which clearly stated that the Respondent has committed similar fraudulent activities with other parties as well. The said letter from the Office of the Assistant Commissioner of Service Tax dated 02.04.2005 has been written to the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 12.12.2005 has also been made available on record. It stated that some of the offences are non-compoundable in nature as a result of which the FIR could not be quashed. 7. The Committee held that the respondent was guilty of other misconduct . Its reasoning is as follows: The Committee noted that the Respondent used to collect amount of service tax cash/pay orders on behalf of the company to deposit in the service tax account for both the companies at Punjab National Bank, Lawrence Road, Delhi for which the Respondent used to give to the Complainant the copies of the service tax challans of the same amount as deposited. As per the Complainant, the DD/ pay orders were made favoring PNB Lawrence Road, Delhi on the advise of the Respondent. On receiving the original challans ,it was noticed that in the original service tax challans, the actual tax of much lower amount was paid and the same were tampered with by additions/amended figures and overwriting .The forged copies of the said original challans were given to the Complainant to justify the heavy amount so collected wrongly in form of cash/pay orders to cheat him .The said act of cheating and forgery is clearly evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cient opportunity has been granted to the Respondent to prove his defence but the Respondent instead failed to give duly verified Comments despite repeated reminders at the prima facie stage and thereafter failed to appear before the Disciplinary Committee despite the fact that the hearing fixed in June 2010 was adjourned at his instance to afford him another opportunity to submit his defence in the interest of natural justice. The Respondent, however, did not appear but sent his counsel who informed the Committee that the Respondent contacted him a day before the meeting itself and thus he needed time for preparation. The Committee apprised him of the M.O.U entered into by the Respondent with the Complainant stating that it leaves no room for further arguments. The Committee, however, offered the Counsel of the Respondent time till evening to study the papers and prepare the case, which he declined. Thereafter, the Committee directed the Counsel for the Respondent to give his defence in writing; to reach the Office of the Institute which shall be considered by the Committee while preparing its report in the matter. However till date nothing has been received from his end which its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns dated 16.10.2012 and the crucial arguments of the counsel for the Respondent. Further, the Petitioner also ignored and brushed aside the substantial submission made by the Complainant in its written reply dated 21.03.2013 wherein it was specifically admitted by the Complainant that he was under mistaken belief as to the conduct of the Respondent and that all the FIRs lodged were cancelled or quashed by the respective courts. Learned counsel stressed on the express terms of the compromise/MOUs dated 12.05.2005 and 16.04.2012 recorded between the parties, i.e., the complainant and the respondent stating that the latter was absolved of all allegations of wrongdoing and that the complainant withdrew such allegations. 10. It is urged that the Council fell into error in holding that the burden of proving innocence was placed on the respondent, which is contrary to established canons of procedure. It is also argued that the charges alleged against the respondent were not proved beyond reasonable doubt. Being quasi criminal proceedings the result of which can severely affect the professional reputation of a chartered accountant, the higher burden of proof was required. Here reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining serious allegations of fraud is allowed to be withdrawn simply because monetary disputes between the accountant member and the complainant are settled, it would render the disciplinary mechanism of the Act meaningless. Analysis and Conclusions 14. The relevant provision of the Act, dealing with procedure to deal with misconduct, reads as follows: 21. Procedure in inquiries relating to misconduct of members of Institute (1) Where on receipt of information by, or of a complaint made to it, the Council is prima facie of opinion that any member of the Institute has been guilty of any professional or other misconduct, the Council shall refer the case to the Disciplinary Committee, and the Disciplinary Committee shall thereupon hold such inquiry and in such manner as may be prescribed, and shall report the result of its inquiry to the Council. (2) If on receipt of such report the Council finds that the member of the Institute is not guilty of any professional or other misconduct, it shall record its finding accordingly and direct that the proceedings shall be filed or the complaint shall be dismissed, as the case may be. (3) If on receipt of such report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with it as if the case had been forwarded to it by the Council. 15. It is evident that misconduct has been defined under Section 21, read with the Schedule. Those species of misconduct are different and specific. What the respondent was charged with was other misconduct of a general category, i.e., conduct unbecoming of one engaged in the profession of a chartered accountant. The gist of the charges leveled against the respondent was that though he received amounts and claimed that they were duly deposited, to discharge the Service tax liabilities, yet the sums actually payable (or deposited) were less and that he abstracted or misappropriated, for his own purposes, the balance amounts. These, according to the complainant, were to the tune of ₹ 47,34,278/-. 16. This court would first deal with the respondent s objection as to maintainability of the complaint, on the ground that the disputes were settled between him and the complainant. He relies on two judgments. In the first, K.K. Sindhwani, the Punjab and Haryana High Court observed that: It is seen that the complainant did not appear either before the disciplinary committee or before the Council. Thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laint in this respect. 17. In the present case, the complainant appeared before the Committee - on 19.01.2011 and explained the circumstances under which the agreement, embodied in the MOU, were entered into. The complainant, in fact did not withdraw his allegations; he also deposed that the criminal proceedings against the respondents continued and that the amounts agreed to be paid to him had not been in fact paid. The complainant relies on a subsequent MOU, the terms of which appear to be different, inasmuch as the complainant did absolve the respondent of all misconduct and withdraw the allegations. These facts, i.e. the parties appearing to have entered into another MOU on 16.04.2012 were material and had to be investigated. The impugned order does not take that into consideration at all. Whatever the truth of that document, the Council should have gone into it and called the complainant to depose before it, in the light of the later development. This, in the Court s opinion, is a serious infirmity with the impugned order. 18. The next question is whether in the circumstances of the case, particularly having regard to the nature of evidence and the materials placed bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfy itself that the basis of the complaint, i.e., that amounts were appropriated and lower amounts were paid into the accounts of Service tax authorities, were established objectively through documentary material. The findings recorded - from the state of the record, are such that they cast a slur on the professional integrity of the respondent, without proof of essential foundational facts. 22. In the light of the above discussion, this court is of opinion that the matter requires to be gone into afresh by the Council. Having regard to the gravity of the allegations, it is but appropriate that the Council considers all the relevant materials, including the documents and the deposition of the complainant before preparing a fresh report. Accordingly, this court hereby in exercise of its jurisdiction, under Section 21 (6) (d) refers the case to the Council for further inquiry and report. The Council shall complete its task expeditiously and in any case within 6 months. The respondent is directed to present himself before the Council for further proceedings within three weeks from today. The Council shall complete the task, firstly by summoning the complainant, recording his d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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