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TMI Blog2022 (9) TMI 612X X X X Extracts X X X X X X X X Extracts X X X X ..... on of opinion in this regard may rest on either a difficulty in securing evidence or even where it be found that the time lag between the commission of the misconduct and the making of the complaint would place the member under an unreasonable burden of collecting material and evidence which may be required to proffer a wholesome defense. The Court thus finds itself unable to accept the contentions advanced on behalf of the petitioner that the complaint proceedings must be interdicted merely because seven or more years have elapsed since the commission of the misconduct. The Court notes that before proceeding to reject that objection, it was incumbent upon the respondent to have duly considered whether the petitioner was in fact severely handicapped from submitting a response to the allegations levelled in the complaint as also whether there was material and evidence available on the basis of which the enquiry could be proceeded with. It was, in the considered opinion of this Court, incumbent upon the respondent to have recorded cogent reasons in support of its conclusion that the objection taken with reference to Rule 12 was unfounded or unjustified. Petition allowed. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged commission of offences under Sections 227 and 233 of the Companies Act, 1956, Sections 143 and 147 of the 2013 Act and Sections 21 and 22 of the Chartered Accountants of India Act, 1949. The petitioner was subsequently summoned in those proceedings by the Special Judge. His bail application came to be rejected by the Special Judge on 24 May 2019. However, the petitioner was granted regular bail by this Court on 31 May 2019. SFIO based on the material gathered during the course of its investigation, is, thereafter stated to have filed a complaint before the Institute on 15 April 2021. On 04 June 2021, the Disciplinary Directorate issued notice to the petitioner calling upon it to file its written statement in terms of the relevant rules. Responding to the same, the petitioner submitted what was styled as a Preliminary Reply/Objections on the maintainability of the complaint. The petitioner essentially asserted that since the complaint was based on audits conducted more than seven years prior thereto, the complaint was barred by Rule 12 of the 2007 Rules. It was principally contended that Rule 12 places a rule of limitation of seven years on the expiry of which, no cogniza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end of the relevant assessment year. Reliance was also placed on the provisions contained in Section 128(5) of the 2013 Act to submit that even an audited company is not liable to retain financial records beyond a period of eight years from the end of the relevant financial year. It is in the aforesaid light that the petitioner has contended that the continuance of proceedings is wholly without jurisdiction and illegal. Learned counsel for the petitioner also placed reliance on a decision rendered by a learned Judge of the Court in Wholesale Trading Services P. Ltd. v. Institute of Chartered Accountants of India and Others 2019 SCC OnLine Del 9543, where upon a consideration of the provisions made under Rule 12 of the 2007 Rules, the Court had observed as follows:- 15. A plain reading of the aforesaid Rule indicates that there are several grounds on which the Director (Discipline) would refrain from entertaining any complaint made more than seven years after the same is alleged to have been committed. The Director (Discipline) would reject the complaint if he is satisfied that it would be difficult for securing proper evidence of the alleged misconduct. The second ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o error has also been committed by the learned Single Judge in appreciating Rule 12 of the Rules, 2007, while dismissing W.P. (C) 8081/2019 by order dated 1 August, 2019 (Annexure A-1). We are in full agreement with the reasons given by the learned Single Judge. The complaint of this appellant was absolutely time barred and also, it has created a lot of difficulty for the chartered accountant - Respondent No. 3, against whom the complaint is filed, looking to the written statement filed by the said chartered accountant (Annexure A-7). (viii) Counsel appearing for the appellant has submitted that law does not require locus. Looking to the peculiarity of the present case, it appears that the present appellant (original petitioner) has nothing to do with the aforesaid seven companies. Moreover, this appellant has no specific authorization, as required under Rule 3(4) of the Rules, 2007. A complaint for improper audit for the year 2005-06 is filed in the year 2016. Similarly, for the year 2006-07, for the year 2007-08, and for the year 2008-09, the complaint is filed in the year 2016, i.e., after several years. Looking to the written statement filed by chartered accountant Sh. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director or an officer or officers authorized by the Director, within sixty days of the receipt of a complaint under rule 3, shall, (a) if the complaint is against an individual member, send particulars of the acts of commission or omission alleged or a copy of the complaint, as the case may be, to that member at his professional address; (b) if the complaint is against a firm, send particulars of the acts of commission or omission alleged or a copy of the complaint, as the case may be, to the firm at the address of its head office, as entered last in the Register of Offices and Firms maintained by the Institute, with a notice calling upon the firm to disclose the name or names of the member or members concerned and to send particulars of acts of commission or omission or a copy of the complaint, as the case may be, to such members: Provided that while disclosing the name or names of the member or members, the firm shall also send a declaration signed or, as the case may be, jointly signed by the member or members concerned to the effect that he or she or they shall be responsible for answering the complaint and that the particulars of acts of commission or omissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter. 8. The procedure pertaining to formation of a prima facie opinion by the Director on the examination of the complaint, the written statement and any other additional particulars or documents which may be placed before it, is set out in Rule 9 of the 2007 Rules, which reads as follows:- 9. Examination of the Complaint (1) The Director shall examine the complaint, written statement, if any, rejoinder, if any, and other additional particulars or documents, if any, and form his prima facie opinion as to whether the member or the firm is guilty or not of any professional or other misconduct or both under the First Schedule or the Second Schedule or both. (2) (a) Where the Director is of the prima facie opinion that:- (i) the member or the firm is guilty of any misconduct under the First Schedule, he shall place his opinion along with the complaint and all other relevant papers before the Board of Discipline; (ii) the member or the firm is guilty of misconduct under the Second Schedule or both the First and Second Schedules, he shall place his opinion along with the complaint and all other relevant papers before the Committee. (b) If the Boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the impugned order which reads thus:- This has reference to your letter dated 26th August, 2021, in the captioned complaint matter. On perusal of the contents of the aforesaid letter, it has been observed that you are stating that the matter being more than eight years old, you are unable to trace the relevant records pertaining to the matter at your end. The papers available on record in the instant matter have been perused by the competent authority and it is noticed that your statement in the matter has been recorded in 2017 by the Complainant department and in view of the same, your request regarding applicability of Rule 12 cannot be acceded to. Accordingly, you are once again called upon to submit your final written statement, if any, on merits of allegations, within 7 days of receipt of this communication. Please note that in case no reply/written statement is received from you within the specified time schedule, your reply dated 26th August, 2021 would be taken on record as your final written statement and the matter shall be processed further in terms of the provisions of The Chartered Accountants (Procedure of Investigations of Professional and Other Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt it is found that it pertains to an act of misconduct committed more than seven years ago. Rule 12 confers a power on the Director to examine and weigh into consideration whether the lapse of time since the commission of the alleged misconduct renders the holding of the enquiry reasonably impracticable. The formation of opinion in this regard may rest on either a difficulty in securing evidence or even where it be found that the time lag between the commission of the misconduct and the making of the complaint would place the member under an unreasonable burden of collecting material and evidence which may be required to proffer a wholesome defense. The Court thus finds itself unable to accept the contentions advanced on behalf of the petitioner that the complaint proceedings must be interdicted merely because seven or more years have elapsed since the commission of the misconduct. 14. However, that still leaves the Court to consider the validity of the impugned order passed by the respondents in terms of which the objection taken by the petitioner based on Rule 12 has been summarily rejected. The Court is of the considered opinion that the respondent was clearly unjustified ..... X X X X Extracts X X X X X X X X Extracts X X X X
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