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TMI Blog2022 (12) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... notice. Section 21 thus clearly appears to be distinguishable from the various statutory provisions and the scheme of the respective statutes which formed the basis for the various decisions rendered on the subject and which were noticed hereinabove. None of them empowered the authorities to initiate action on the basis of information . Viewed in the aforesaid backdrop, this Court is of the considered opinion that Section 21 does empower the Institute to proceed suo moto and unhindered by the absence of a written complaint or allegation that may be submitted. A written complaint or allegation in writing cannot, in any manner, be understood to be a pre-requisite or a sine qua non for the initiation of action under Section 21. The Court also bears in mind the significant observations which were made by the Division Bench of this Court in P. Ramakrishna [ 2013 (3) TMI 367 - HIGH COURT OF DELHI] where while recognizing the intrinsic distinction between a complaint and information, the Court had aptly observed that information would include material that may be made available by a third person or even that which may come to the knowledge of the Institute. The Division Bench clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears to have transpired is of the news reports merely acting as a catalyst for the Institute to delve deeper into the massive fraud which had occurred and to examine whether any member had failed to abide by the SAs which applied. It was the material recorded and encompassed in the letter of 13 March 2018 which would constitute the foundation for testing the argument of the petitioner whether there was information which merited further enquiry - the Court is of the firm opinion that the Institute did have the requisite information as contemplated by Section 21 and which justified the initiation of the enquiry against the petitioners in the facts of the present case. While the Court is not called upon at this stage to return any definitive or final conclusions with respect to the alleged violation of the various SAs as well as SRE 2410, the material placed on the record would clearly belie the contention of the petitioners that the entire initiation of proceedings was based merely on news reports. This Court is of the considered opinion that the conclusions which stand recorded in Manubhai are clearly based on an extremely restrictive interpretation of Section 21 of the Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re its members and were employed with firms which were appointed as Joint Statutory Auditors of the Punjab National Bank (PNB). The writ petitioners assail the validity of the show cause notices which were issued as well as the Prima Facie Opinion which has been drawn by the Disciplinary Directorate and forwarded for the consideration of the Disciplinary Committee. The writ petitions also seek quashing of the disciplinary proceedings itself as initiated against the individual petitioners. A. ESSENTIAL FACTS 3. All the writ petitioners are stated to be members/partners of different chartered accountancy firms which had collectively been engaged by the PNB for conducting a limited review of its financial statements. The challenge essentially arises from the suo moto initiation of proceedings by the Institute with it being principally contended that neither the Act nor the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 (The Rules) empower the Institute to draw proceedings on its own motion. 4. The second principal ground of attack to the proceedings initiated by the Institute is based on the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Bureau of Investigation (CBI). 8. The minutes of the discussion also records that the liability which would arise would have to be decided based on further examination of the legality and genuineness of the various transactions which constituted the fraud. These minutes further record that since the fraud was detected in the current quarter of March 2018 and the financial statements which formed subject matter of the limited review related to December 2017, no provision was required to be made. In view of the aforesaid, PNB as well as the other members are stated to have opined that no provision was required to be made in the limited review results. These minutes further record that the amount of Rs.280.70 crores was not material as per the policy of the bank. On the conclusion of this discussion, the Joint Statutory Auditors are stated to have submitted their Limited Review Report (LRR) on 06 February 2018. 9. On 13 February 2018, PNB is stated to have lodged three separate criminal complaints for fraud amounting to Rs.6498.20 crores, Rs. 9.10 crores and Rs. 4886.72 crores against various firms and companies connected with Nirav Modi. Upon these complaints be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficers or employees. The provision of aforesaid section is re-produced herewith: 143(12) Notwithstanding anything contained in this section if an auditor of a company, in the course of the performance of his duties as auditor, has reason to believe that on offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter to the Central Government within such time and in such manner as may be prescribed. (b) SA 240- THE AUDITOR'S RESPONSIBILITIES RELATING TO FRAUD IN AN AUDIT OF FINANCIAL STATEMENTS casts a responsibility on an auditor that while conducting an audit in accordance with SAs he is responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. SA 240 inter alia states as under: the risk of the auditor not detecting a material misstatement resulting from management fraud is greater than for employee fraud, because management is frequently in a position to directly or indirectly manipulate accounting records, present fraudulent financial information or override con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving an opportunity to clarify your position in the matter. You vide your letters dated 27thFebruary, 2018 and 1st March, 2018 has submitted your response, but the same is found unsatisfactory. In view of the above, the matter has been treated as 'Information' within the meaning of Rule 7 of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007. A copy of the aforesaid Rules is also enclosed herewith for your ready reference. The aforesaid allegations, if proved, would fall within the purview of professional misconduct falling within the meaning of Clauses (5), (6), (7) and (8) of Part I of Second Schedule to the Chartered Accountants Act, 1949. Further, in accordance with the provisions of clause (a) of sub-rule (1) of Rule 8 read with Rule 11 of the aforesaid Rules, we are requesting you to submit your Written Statement duly signed, if any, in triplicate, within 21 days of the receipt of this letter. 12. The petitioner submitted a detailed response to the aforesaid communication by way of a letter dated 03 April 2018. By a subsequent letter of 21 May 2018, the respondents rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with the applicable financial reporting framework. The matters for such inquiry has been laid out in Paragraph 21 of SRE 2410 which also include - Significant changes in contingent liabilities including litigation or claims and Knowledge of any fraud or suspected fraud affecting the entity involving employees. Paragraph 26 and 29 defines obligation of the reviewer/ auditor to determine if any event requires adjustment or disclosure in the interim financial information when it states as follows: 26. The auditor should inquire whether management has identified all events up to the date of the review report that may require adjustment to or disclosure in the interim financial information. It is not necessary for the auditor to perform other procedures to identify events occurring after the date of the review report. 29. When a matter comes to the auditor's attention that leads the auditor to question whether a material adjustment should be made for the interim financial information to be prepared, in all material respects, in accordance with the applicable financial reporting framework, the auditor should make additional inquiries or perform other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (B30-830B)-. a That the quantum of fraud as per information available with the management on that date was Rs 280.70 crores and a further detailed investigation was in progress by the bank and CBI officials simultaneously. b. That as per Bank's Management, as on that date documentary evidence was not available to prove that these import transactions were bonafide trade transactions. c. That the liability arising out of these LOU'S on PNB would be decided based on the legality and genuineness of underlying transactions. d. That the fraud was detected during the current quarter i.e. March 2018 whereas financial statements under limited review relates to December 2017 and as per extant RBI guidelines provision would be required to be made in the quarter ending March 2018. As such, no provision was required to be made in December 2017 limited review results. e. That the above amount of Rs. 280.70 crores was not material as per the policy of the Bank. On the basis of said representation, the management was of the opinion that a disclosure regarding the above said fraudulent transaction and related provision, if any was not required in the Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material to the interim financial information. 31. misstatements which come to the auditor's attention, including inadequate disclosures , are evaluated individually and in the aggregate to determine whether a material adjustment is required to be made to the interim financial information for it to be prepared, in all material respects, in accordance with the applicable financial reporting framework ( emphasis supplied ). 33. The auditor may designate an amount below which misstatements need not be aggregated, because the auditor expects that the aggregation of such amounts clearly would not have a material effect on the interim financial information. In so doing, the auditor considers the fact that the determination of materiality involves quantitative as well as qualitative considerations, and that misstatements of a relatively small amount could nevertheless have a material effect on the interim financial information (emphasis supplied), 8.4.9 It is therefore, viewed that in order to assess the facts being presented by the Management, the auditors/reviewers were required to assess the then prevailing circumstances in view of their understanding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nks (Refer Illustrative Format of Condensed Financial Statements for a bank given in AS 25) which states as under: 16. An enterprise should include the following information, as a minimum, in the notes to its interim financial statements, if material and if not disclosed elsewhere in the interim financial report; (h) material events subsequent to the end of the interim period that have not been reflected in the financial statements for the interim period; .. As regards materiality, it is noted that Paragraph 21 of AS 25 also define materiality when it states as follows: In deciding how to recognise, measure, classify, or disclose an item for interim financial reporting purposes, materiality should be assessed in relation to the interim period financial data. In making assessments of materiality, it should be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (emphasis supplied). 8.4.13 It is noted that SRE 2410 read with AS 25 prescribes to disclose material events subsequent to balance sheet date The fraud occurred had devolved liabilities on the entity which ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Second Schedule to the Chartered Accountants Act. 1949. 8.6 It is also noted that the Respondent in his Written Statement (B21- B22) has submitted that the interim financial information was prepared by the management in accordance with the applicable financial reporting framework in keeping with the principles of materiality and that the report does not confirm the applicability of the various standards. It is further submitted that the said report was issued only to the Board of Directors of PNB and that too after the said Board had approved the interim financial statements in respect of which the report was issued. In this regard, it is observed that para 4 of the Limited Review Report (A3) for the said quarter states that nothing has come to our attention that causes us to believe that the accompanying statement of unaudited interim financial results together with the notes thereon, prepared in accordance with applicable accounting standards and other recognised accounting practice and policies, has not disclosed information required to be disclosed in terms of Regulation 33 of the SEB! (Listing Obligations and Disclosure Requirements) Regulations 2015 including the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber or a firm, received in person or by post or courier. However, the report of operation of MNAF in India and the judgment referred to in Paragraph No. 3 of the prima facie opinion, there is no reference to petitioner and therefore, question arises whether it would constitute the Information as per Rule 7 of the Rules-2007 or not. However, it appears from the material on the record that what is to be treated as Information within the meaning of Rule 7 of the Rules-2007 is missing because from the contents of the Paragraph No. 3 of the prima facie opinion, which is extracted herein above, it does not reveal any written allegation or allegations against the petitioner so as to treat the same as Information within the meaning of Rule 7 of the Rules-2007. The report of operation of MNAF in India and the judgment referred to in Paragraph No. 3 of the prima-facie opinion, it cannot consider as information withing the meaning of Rule 7 of the Rule-2007. Therefore, entire basis of formation of prima facie opinion is contrary to Rule 7 of the Rules-2007. The report of operation of MNAF in India and the judgment referred to in Paragraph No. 3 of the prima-facie opinion, it cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber or members who is/are answerable to the allegation/s and send a copy of the aforesaid Information letter along with its enclosures to the said member/members. Thereafter, the member/members answerable is/are required to forward his/her written statement, if any, in triplicate, within 21 days of the receipt of this letter. 27. On perusal of the above contents of the letter dated 05.04.2018, it emerges that the very basis to treat the material available on record and observations of the Supreme Court as the Information within the meaning of Rule 7 of the Rules-2007 for alleged violation of Section 25 and Section 29 of the Act-1949 cannot be considered as Information in absence of any written information containing allegation or allegations against the petitioner-firm as provided under Rule 7 of the Rules-2007. Therefore, merely on the basis of inference drawn by the respondent no. 2, and thereby, analyzing various terms of the representation agreement between the petitioner and the HLBI to form prima facie opinion is without any basis in absence of information as contemplated in Rule 7 of the Rules-2007. 28. On perusal of the prima-facie opinion recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for membership only then how this can be payable based upon the revenue of the respondent-firm. The respondent-firm has thus failed to bring in any corroborative evidences which may prove/substantiate that the firm has paid the amount on account of membership fee only and in no way this was a fee/profit sharing of professional fee based on referrals with HLB international. Thus, at this stage, the respondent-firm is prima facie guilty of professional misconduct falling within the meaning of item (2) of Part I of First Schedule to the Chartered Accountants Act-1949. 30. With regard to violation of item (2) of Part I of the First Schedule, following prima-facie opinion is arrived at:- 12.1 Thus, it has been observed that the firm is taking a plea that the none of the above provisions are applicable to his firm as they do not have a corporate as a partner in his LLP, they have not shared any fees or have paid for advertisement as stated in their explanation above. In this regard, it needs to be mentioned that HLBI is an English Company Limited by guarantee. The international entity is having a global presence with may firms being its member including non-CA firms. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under Rule 7 of the Rules-2007, the respondent no. 2 has formed prima facie opinion only to do fishing inquiry and investigation. The intention of prima facie opinion is not for initiating disciplinary inquiry for the purpose of investigating further to establish whether the petitioner-firm in collaboration with the international entity, HLBI was involved in encouraging surrogate practice in India as highlighted in the judgment of the Supreme Court or not. For such purpose, the petitioner-Firm which is in existence for more than 70 years cannot be put to rigors of disciplinary proceedings in absence of any specific allegation and in absence of any written information containing allegation as per Rule 7 of the Rule-2007. 16. Upon arriving at the aforesaid conclusions, the learned Judge proceeded to allow the writ petition and quash the communication issued by the Institute impugned therein. It would be pertinent to note that the aforesaid judgment has been stayed by a Division Bench of the Gujarat High Court in Letter Patents Appeal No.383/2020 . While placing the said decision in abeyance, the Division Bench in its interim order has provided as follows: - List for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation or complaint. According to learned Senior Counsel, the meaning to be ascribed to the word information would have to necessarily be gathered from the manner in which it has been treated and explained under the Rules since the Act fails to independently define the said expression. 20. Taking the Court through the provisions pertaining to the registration of a complaint and the treatment of information contained in Chapter II of the Rules, it was submitted that Rules 3 and 7 contemplate and envisage information being provided or a complaint being submitted in writing. The submission essentially was that since both a complaint under Rule 3 and information under Rule 7 is envisaged to be material that may be submitted to the Institute in writing against a member, this would establish that neither the Act nor the Rules contemplate a suo moto power being exercised by the disciplinary authority. 21. Elaborating on the aforesaid issue, Mr. Nandrajog submitted that in terms of Rule 3, a complaint against a member or a firm has to be filed in Form-I before the Directorate. That complaint has to be duly accompanied with the requisite fee as prescribed. The complaint once receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 7 would lead one to the irresistible conclusion that the Institute cannot arrogate to itself a power to initiate proceedings on its own motion since both a complaint as well as information is understood under the statute to be written material that may be received against a member laying specific allegations with respect to an act of professional misconduct. 23. Mr. Nandrajog laid stress on the fact that in order to commence an inquiry with respect to the alleged misconduct of a member or a firm, the complaint or the information must necessarily be specific and disclose an identified act of misconduct that may be leveled against a member or a firm. Learned Senior Counsel submitted that neither the Act nor the Rules can be interpreted as empowering the respondents to initiate proceedings based on an unsubstantiated statement that may appear in a newspaper. Mr. Nandrajog further underlined the fact that even the newspaper reports on the basis of which cognizance was taken by the Institute neither referred to nor named the petitioner specifically. 24. Learned Senior Counsel then drew the attention of the Court to the provisions contained in the Chartered Accountants, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prima facie case is made out against a member or a firm, as the case may be. (6) In case a prima facie case is made out for any professional or other misconduct mentioned in the First Schedule, the Director (Discipline) shall submit the preliminary examination report to the Board of Discipline and where prima facie case is made out for any professional or other misconduct mentioned in the Second Schedule or in both the First Schedule and the Second Schedule, he shall submit a preliminary examination report to the Disciplinary Committee: Provided that a complaint or information filed by any authorised officer of the Central Government or a State Government or any statutory authority duly supported by an investigation report or relevant extract of the investigation report along with supporting evidence, shall be treated as preliminary examination report: Provided further that where no prima facie case is made out against the member or the firm, the Director (Discipline) shall submit such information or complaint with relevant documents to the Board of Discipline and the Board of Discipline may, if it agrees with the findings of the Director (Discipline), close the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses. 3. The Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Bill, 2021 proposes to further amend The Chartered Accountants Act, 1949, the Cost and Works Accountants Act, 1959 and the Company Secretaries Act, 1980, inter alia, to- (i) strengthen the disciplinary mechanism by augmenting the capacity of the Disciplinary Directorate to deal with the complaints and information and providing time bound disposal of the cases by specifying the time limits for speedy disposal of the cases against members of the Institutes; (ii) address conflict of interest between the administrative and disciplinary arms of the Institute: (iii) provide for a separate chapter on registration of firms with the respective Institutes and include firms under the purview of the disciplinary mechanism; (iv) enhance accountability and transparency by providing for audit of accounts of the Institutes by a firm of chartered accountants to be appointed annually by the Council from the panel of auditors maintained by the Comptroller and Auditor-General of India: (v) provide for autonomy to the Council of the respective Institutes to fix vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the occurrence of the alleged misconduct. Proceedings can, therefore, clearly be initiated consequent to receipt either of information or a complaint . However, significantly, the CA Act does not condescend to define either of the said expressions, namely information or complaint . This is a clear lacuna, which the legislature would do well to plug. 36. Complaints , under Section 21 of the Act, have, as per Rule 3(1) of the 2007 Rules, necessarily to be filed in Form I annexed to the 2007 Rules, in triplicate, before the Director, in person or by post or by courier, and are required to be acknowledged, under Rule 3(6), by the Directorate, by ordinary post along with an acknowledgement number. Rule 4 requires the complaint to be accompanied by a fee. Rule 5(1) contemplates registration, by the Director, or by officers/ officers authorised by him, of the date on which the complaint is presented to the Director, by way of endorsement on the complaint itself, accompanied by the signature of the Director or officer/officers. Sub- rule (2) of Rule 5 requires the complaint to be scrutinised by the Director, or by the authorised officer/officers and, if it is found in ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners contend, the proceedings before the Committee are actually bad for want of jurisdiction, or have been commenced in a manner foreign to the scheme contained in the 2007 Rules, it would be a travesty of justice to require them to suffer the said proceedings. 29. Upon recordal of the aforesaid prima facie conclusions, the learned Judge framed the following operative directions: - 44. As has already been noted herein above, the petitioners had taken a preliminary objection, before the Disciplinary Committee, to the effect that the entire proceedings are vitiated ab initio, not having been initiated in accordance with Rule 7 of the 2007 Rules. In my opinion, it would be appropriate, before this Court arrives at a prima facie view regarding the said objection, to have, before it, the opinion of the Disciplinary Committee thereon. I am, therefore, of the opinion that, in the interests of justice, the Disciplinary Committee ought to be directed to address the preliminary submission, by the petitioners, that the enquiry proceedings being conducted by, and before, it, are unsustainable ab initio, not having been commenced on the basis of any information , as would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew procedures in order to reduce to a moderate level the risk of expressing an inappropriate conclusion when the interim financial information is materially misstated. 8. The objective of a review of interim financial information differs significantly from that of an audit conducted in accordance with International Standards on Auditing (ISAs). A review of interim financial information does not provide a basis for expressing an opinion whether the financial information gives a true and fair view, or is presented fairly, in all material respects, in accordance with an applicable financial reporting framework. 9. A review, in contrast to an audit, is not designed to obtain reasonable assurance that the interim financial information is free from material misstatement. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review may bring significant matters affecting the interim financial information to the auditor s attention, but it does not provide all of the evidence that would be required in an audit. 33. Mr. Nandrajog submitted that the disciplinary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the written submissions tendered on behalf of the petitioners also alludes to the Position Paper on Regulation of Accountancy Profession and Oversight Mechanismin India (Position Paper) published by the Institute in 2018 and which had made the following suggestions for the consideration of the Union Government:- An appropriate amendment to be made in Section 21 of the Chartered Accountants Act, to enable the Institute to initiate either suo motu or on a reference made to it by the Central Government or by any other Government agency in any matter of professional or other misconduct committed by any member or firm of Chartered Accountants except as provided in Section 132 of the Companies Act. 2013 and Rules framed thereunder 38. It would be pertinent to note that the aforesaid recommendation essentially sought the Institute being conferred a power identical to that which stood vested in the NFRA in terms of Section 132(4) of the 2013 Act. 39. The petitioners in their written submissions have further asserted that a suo moto power must be specifically spelt out and conferred by the statute itself before the authority may be considered as vested with the power to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nary view must necessarily be based on an assumption of jurisdiction by an authority which is either ex facie illegal or where proceedings are initiated by an authority which patently lacks jurisdiction or the power to initiate action. According to Mr. Srinivasan, the lack of jurisdiction which would justify a challenge being entertained under Article 226 of the Constitution must necessarily be patent, stark and self-evident. According to learned Senior Counsel, the instant challenge clearly fails to meet the aforesaid parameters viewed in light of the information on the basis of which the Institute had initiated proceedings against the petitioners. 42. Mr. Srinivasan submitted that the tests that stand judicially formulated for a writ court to entertain a challenge to a show cause notice or proceedings relating to disciplinary action are fairly well settled. It was his submission that unless it is established that the proceedings drawn suffer from an apparent or an inherent lack of jurisdiction or authority, courts would be slow, hesitant and circumspect before interdicting proceedings at a nascent stage. This more so when the statute may provide for an adequate and efficacious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to cases where a third party were to make a complaint or submit information. 45. According to learned Senior Counsel the word information in light of the above is liable to be viewed as being unmistakably distinguishable from the word complaint . It was submitted that while a complaint may relate to a particular grievance which an individual may have against a member or a firm, information on the other hand would include any material or fact that may be placed for the consideration of the Institute or may otherwise come to its knowledge. Mr. Srinivasan submitted that an informant may not necessarily have an individual grievance or seek redressal against a member or a firm. However, any material or fact that such an informant may choose to place before the Directorate would also clearly fall within the ambit of Section 21 and if found sufficient to initiate an enquiry, be taken into consideration. 46. Learned Senior Counsel submitted that the suo moto power that is available with the Institute is one which was recognised even by the Division Bench of the Court in Institute of Chartered Accountants of India VS. P. Rama Krishna (2011 SCC OnLine Del 4253) as would be evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncil. The word complaint as used in Section 21D does not refer to the complaints made by third parties but also information whether made available by a third person or comes to the knowledge and has been considered by the Institute/Council. The word complaint in Section 21D has to be given a broader and a wider meaning to give full effect to the legislative intent behind Section 21D. In common parlance also the word complaint means and refers to a pending matter before the prescribed authority authorized to make enquiry into the allegations. The source of information may not be relevant. 47. Learned Senior Counsel in support of his submissions also placed reliance on a decision rendered by a learned Judge of the Court in Walmart India Pvt. Ltd. vs. Central Vigilance Commission (2018 SCC OnLine Del 11005). In Walmart, the Court was called upon to consider the scope of Section 8(1)(d) of the Central Vigilance Commission Act 2003 and the word complaint as occurring therein. The question which arose for consideration was whether a newspaper report could be considered as falling within Section 8(1)(d). While dealing with the aforesaid question, the learned Judge in Wal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d observations submitted that the Act as well as the Rules when holistically read would clearly belie the submissions addressed in this regard on behalf of the petitioners. It was further contended that if the provisions of the Act and the Rules were to be interpreted in the manner suggested by the petitioner and be restricted to the Disciplinary Directorate being empowered to act only upon the receipt of a written complaint or information, it would not only denude it of the regulatory and supervisory role which are assigned to it, but also whittle down the powers that otherwise stands vested on that authority. Mr. Srinivasan submitted that the Institute is statutorily vested with powers to permanently remove the name of errant members and that the maintenance of discipline is a salutary function invested in the Institute and a necessary concomitant to the objective of maintaining public confidence in members of the Institute. According to Mr. Srinivasan, reading down the scope and width of the authority conferred on the Institute in any other fashion would clearly be deleterious to the primary objective of maintaining discipline and holding members to the standards of professional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Srinivasan submitted that the assertion of the petitioners that the Institute proceeded against them solely on the basis of some news reports is factually incorrect. Taking the Court through the show cause notice as well as the information on the basis of which the proceedings against the petitioner were formally initiated, it was submitted that the news reports only acted as a trigger for the Directorate to examine the allegations relating to the scam and to evaluate the role discharged by the auditors of PNB. It was pointed out that the letter of 13 March 2018 would clearly establish that after the news reports had come to be published and a response obtained from the petitioners, the Directorate scrutinized the LRR dealing with the quarterly results of PNB and undertook due examination of whether the petitioners had adhered to the SAs which applied. It was submitted that the LRR was duly obtained, examined and evaluated on the anvil of the SAs which apply and it was on the culmination of the aforesaid exercise that a decision to initiate disciplinary proceedings was ultimately taken by the Institute. 52. Learned Senior Counsel laid stress on the fact that despite the aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducted in accordance with the Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. We have not performed an audit and accordingly, we do not express an audit opinion. 4. Based on our review as aforesaid, subject to limitation in scope as mentioned in Para3 above, nothing has come to our attention that causes us to believe that the accompanying statement of unaudited interim financial results together with the notes thereon, prepared in accordance with applicable accounting standards and other recognized accounting practices and policies, has not disclosed the information required to be disclosed in terms of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including the manner in which it is to be disclosed, or that it contains any material misstatement or that it has not been prepared in accordance with the relevant prudential norms issued by the Reserve Bank of India in respect of income recognition, asset classification, provisioning and other related matters. 54. The LRR and the Review of Interim Financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial information to require a material adjustment for it to be prepared, in all material respects, in accordance with the applicable financial reporting framework. An attitude of professional skepticism means that the auditor makes a critical assessment, with a questioning mind, of the validity of evidence obtained and is alert to evidence that contradicts or brings into question the reliability of documents or representations by management of the entity. Objective of an Engagement to Review Interim Financial Information 7. The objective of an engagement to review interim financial information is to enable the auditor to express a conclusion whether, on the basis of the review, anything has come to the auditor s attention that causes the auditor to believe that the interim financial information is not prepared, in all material respects, in accordance with an applicable financial reporting framework. The auditor makes inquiries, and performs analytical and other review procedures in order to reduce to a moderate level the risk of expressing an inappropriate conclusion when the interim financial information is materially misstated. 8. The objective of a review ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal inquiries or perform other procedures to enable the auditor to express a conclusion in the review report. For example, if the auditor s review procedures lead the auditor to question whether a significant sales transaction is recorded in accordance with the applicable financial reporting framework, the auditor performs additional procedures sufficient to resolve the auditor s questions, such as discussing the terms of the transaction with senior marketing and accounting personnel, or reading the sales contract. 58. The Policy framed by PNB in respect of Materiality and referable to the 2015 Regulation and more particularly Part B of Schedule III in Para 5A makes the following provisions: - 5A. Para C of Part A of Schedule III of the LODR deals with any other information/event viz. major development that is likely to affect business, e.g . emergence of new technologies, expiry of patents, any change of accounting policy that may have a significant impact on the accounts, etc brief details thereof and any other information which is exclusively known to the Bank which may be necessary to enable the holders of securities of the Bank to appraise its position and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows:- The practice of accountancy is in the nature of a public service. Apart from the statutory responsibilities to report on the accounts to the shareholders, it is the duty of every member of the Institute to ensure that he fulfils the high ideals set before him amidst all the pressures and temptations of the day . I am glad to know from your address that you are fully alive to your responsibilities. It is only the watchful eyes of the members of your profession which can make any measures that Government may take to curb malpractices in trade and business, really effective. You have referred to the moral standard of the accountancy profession. I welcome your assurance that the deterioration of standards in this profession is certainly not of that aggravated character which may be found elsewhere as a result of the war conditions. I trust you will not misunderstand me if I utter a word of warning against complacency in this respect. It is essential to be ceaselessly vigilant about this, all the more so because of the greatly enlarged sphere of your activities. The Institute of Chartered Accountants should continue to exercise unceasing vigilance in seeing tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his aspect assumes significance in the backdrop of every developed economy, businesses and enterprises as well as other stake holders having the right of access to a mature and reliable financial reporting system. The executive summary takes due notice of the accountancy function subserving larger public interests, of promoting an investment climate of trust as also being the source of reliable information and data which may be accessed by all stakeholders. It also takes note of the extended role which accountants today may be called upon to discharge in the sense of not being restricted to the performance of a limited role in aid of the requirements of corporate entities but also making contributions to the Government itself and various other financial regulators. 64. It would be pertinent to observe that the various reports and documents which come to be published under the seal of a member or a firm of the Institute are trusted and accepted starting from a small common investor to Governments, corporate bodies and regulators situate not just within the country but even outside. It is to subserve the aforesaid purposes and to maintain a high quality of service that various sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Naresh Chandra Committee that appropriate provisions were thereafter introduced in the Act including the adoption of provisions for an institutionalised disciplinary mechanism, the creation of the office of Disciplinary Directorate, the establishment of the Disciplinary Directorate and the constitution of a Board of Discipline. The aforesaid amendments also led to the establishment of Quality Review Boards and saw the expansion of Chapter 5 in the Act which deals with the subject of misconduct. F. INFORMATION COMPLAINT SEMANTIC CONNOTATION UNDER SECTION 21 66. The fundamental challenge which stands raised in the instant writ petition turns upon the provisions of Section 21 in the principal Act and the Rules relating to the submission and treatment of complaints and information. Section 21(1) stipulates and provides for the establishment of a Directorate for making investigation in respect of any information or complaint that may be received by it. For the purposes of investigation sub section (4) stipulates that the Director (Discipline) shall follow such procedure as may be prescribed. In terms of Section 21(2), the Director (Discipline) on receipt of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing of that category of cases. This clearly flows from Clauses (a), (b) and (c) of Rules 7(2). 69. In fact unlike a complaint case and as is manifest from a reading of Rule 7(2)(c), the Institute is also not obliged to apprise the sender of the progress that may have been made with respect to the information tendered. Rules 7(3) in unambiguous terms provides that anonymous information shall not be entertained by the Directorate. Rule 7 deals with a situation where the sender of the information is either an individual, the Union Government, State Government or any other statutory authority. 70. The procedure of investigation of a complaint is governed by Rules 8 and 9. Rule 11 makes the following salient provisions:- 11. Certain provisions relating to complaint also to be applicable for information relating to misconduct of members.- The procedure laid down for dealing with complaints in sub-rule (6) of rule 3, sub-rules (1), (2), (3) and (4) of rule 5, sub-rules (1), (2), (3) and (5) of rule 8, rule 9 and rule 10 shall also apply to information received by the Director relating to misconduct of members. 71. Rule 12 reads as under:- 12. Time limit on ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 7(1). The only category of information which in terms of the Rules need not be taken cognisance of is that which may be received by the Institute anonymously. 74. The trial of the complaint is, thereafter, governed by Rule 8. The parity which stands accorded to complaints and information is only with respect to the contents of Rule 3(6), sub-rules 1, 2 and 3 of Rule 5 and sub-rules 1, 2, 3 and 5 of Rule 8 coupled with Rules 9 and 10. Insofar as Rules 3 and 5 are concerned, they are merely procedural and relate to the acknowledgment and registration of complaints and information while Rules 8, 9 and 10 deal with the procedure of investigation and examination of complaints and information that may be received. 75. As would be evident from the aforesaid discussion, the word complaint is not defined under the Act. Going by the plain meaning of the two words as well as how lexicons have chosen to define them, the Court finds that the expression information has been accorded a far wider meaning than the word complaint . This position would clearly emerge from the meaning and scope of the two words as explained in the two seminal works which are noticed hereinbelow. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income Tax v. Shree Jagan Nath Maheswary, AIR 1957 Punj 226, 229. [Income-tax Act (11 of 1922), S. 34] The expression 'information' mean instruction or knowledged derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment. Commissioner of Income tax v. A. Raman and Co., AIR 1968 SC 49,51. The term information' means instruction or knowledge concerning facts or particulars, derived from an external source relating to a matter bearing on the assessment. It influences the determination of an issue by the mere circumstance of its relevance. [ Sterling Machine Tools v. CIT, (1980) 122 ITR 926 (All)] The term 'information' as used in Section 147(b) of the Act means instruction or knowledge. The term information as used in Section 147(b) of the Act means information as to the law created by a formal source. Any statement by a person or body not competent to create or define the law cannot be regarded as law. [ CIT v. Union Carbide Corporation, (1994) 206 TTR 402 (Cal). See also Munna Lal Sons v. CIT. (1991) 187 ITR 378 (All) [Income-tax Act (43 of 1961), S. 147(b)] The e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lars. It has been further explained to include knowledge acquired from investigation, study or instruction. The word inform has been understood to mean to impart knowledge, knowledge concerning a matter and the power of an authority to act on any information that may be received. The word information as used in Section 17(1)(d) of the Wealth Tax Act, 1957 was interpreted to be of the widest amplitude and to include knowledge of any fact that may be derived from either an external source or from material already on record. 78. The Oxford English Dictionary, Second Edition defines the word information to mean the action of informing a matter, communication of knowledge, news of some fact or occurrence and the action of telling or the fact of being told something. The following extracts from the aforesaid authoritative work would be of relevance insofar as the issues which arise in the present case are concerned:- 2. The action of informing (in sense 5 of the verb); communication of the knowledge or news of some fact or occurrence; the action of telling or fact of being told of something. 3. a. Knowledge communicated concerning some particular fact, subject, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 107, Cr.PC., 1973 (2 of 1974), is not a complaint where there is merely an allegation that a breach of the peace is likely. AIR 1925 Oudh 138. The action of complaining; an utterance of grievance [Ss. 95 and 499, ill. to 8th excep, I.P.C. (45 of 1860)]; a formal accusation in a Court of law [S. 2(6), Cr.P.C., 1973 (2 of 1974)]; an ailment or disease of the body. COMPLAINT : ACCUSATION. Both these terms are employed in regard to the conduct of others, but a complaint is mostly made in matters that personally affect the complainant; an accusation is made of matters in general but especially those of a moral nature. A complaint is made for the sake of obtaining redress; an accusation is made for the sake of ascertaining a fact or bringing to punishment. A complaint may be frivolous; an accusation false. People in subordinate stations should be careful to give no cause for complaint, the most guarded conduct will not protect any person from the unjust accusations of the malevolent. 80. The Oxford English Dictionary, Second Edition defines the word complaint as follows: - 3. Outcry against or because of injury; representation of wrong suffered; utterance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 3. However, the aforesaid is confined to what is prescribed by Rule 7 and which salvages written complaints which may not conform to the norms of Rule 3. 83. However, if the word information be correctly understood, and appreciated and as the dictionaries have defined it to be, as the mere communication of knowledge or news of some factual occurrence, it would clearly stand on a pedestal distinct and different from a complaint. Information need not necessarily be or relate to the grievance or injury suffered by a particular individual. It could in that sense include the communication of any particular fact, subject or event to the Institute. It could also and consequently include any information or intelligence which the Institute may itself derive from an external source. G. ANY AS THE OPERATIONAL PREFIX TO INFORMATION 84. The Court further takes into consideration the significance of the prefix any to the word information as occurring in Section 21 of the 1949 Act. The use of the word any before information in Section 21 clearly appears to be a conscious attempt by the authors of the statute to confer an expansive meaning upon the word and not confine or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d impede the regulatory function that it is obliged to perform under the Act. 87. The Court thus comes to the firm conclusion that the words information and complaint appear to have been consciously used and placed in Section 21 in order to enable the Institute to proceed against a particular member unfettered by the absence a written complaint being provided to the Institute. If Section 21 were to be interpreted as conferring jurisdiction on the Institute to proceed against a member only upon receipt of a written complaint, it would clearly fetter and impede the larger public function that it is obliged to perform and the statutory duties that stand placed upon it. H. ICAI AND ITS POWER TO INITIATE PROCEEDINGS SUO MOTO 88. That then takes the Court to consider the question whether the Institute could be recognised to proceed suo moto under the provisions of the Act. The principal contention addressed on behalf of the petitioners was that the power to proceed suo moto must necessarily stand conferred by the Act. According to the petitioners in the absence of a specific conferral of power, the Institute cannot be recognised to have the jurisdiction to move on its ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the phrase grievances and allegations as appearing in the Preamble of the said Act, the High Court held that the language of the statute clearly implied or presupposed that there would be a person aggrieved or a person levelling an allegation. It was in that backdrop that it came to hold that the commission could not initiate a suo moto enquiry. 92. The issue of a suo moto power being exercised by statutory authorities also fell for consideration before this Court in Praveen Chhabra vs. Real Estate Appellate Tribunal (2022 SCC OnLine Del 1568). In the said decision, the Court was called upon to consider whether the Real Estate Regulatory Appellate Authority could be recognised to have the power to proceed suo moto. While dealing with the aforesaid question this Court observed as follows:- 17. In order to appreciate, the challenge which stands raised in the present petition, it would at the outset be relevant to contrast the power and jurisdiction which the Appellate Tribunal and the Authority are conferred with under the provisions of the Act. As is evident from a reading of Sections 43 and 44, it is manifest that the Appellate Tribunal has been constituted as a foru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wers which may be exercised by the Appellate Tribunal and thus amplifies and provides content to the mandate of Section 53(4)(g). 19. On a consideration of the aforesaid provisions as made and incorporated in the Act, it is manifest that the Appellate Authority cannot possibly be recognized as conferred with the power to initiate proceedings suo moto or on its own motion. This is evident from a reading of the provisions engrafted in the statute and which enumerate and circumscribe the jurisdiction of the Appellate Tribunal. The Appellate Tribunal, it must be remembered, is a creation of statute. It is not an authority which may be recognised as being vested with inherent powers. Regard must also be had to the fact that the Appellate Tribunal is not part of the hierarchy of traditional judicial institutions which constitute the judicial system of our country. It is an appellate forum whose origin and formation stems from the provisions of the Act. It is in that sense an adjudicatory authority which owes its existence and authority to a special statute. Viewed in that light it is manifest that it can neither assume nor arrogate to itself a power or authority which may otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 21 thus clearly places the extent of the power vested on the Institute on a clearly distinct pedestal. It appears to be guided by the intent of the Legislature to enable and empower the Institute to proceed on any material or fact that may either come to its attention or be brought to its notice. Section 21 thus clearly appears to be distinguishable from the various statutory provisions and the scheme of the respective statutes which formed the basis for the various decisions rendered on the subject and which were noticed hereinabove. None of them empowered the authorities to initiate action on the basis of information . Viewed in the aforesaid backdrop, this Court is of the considered opinion that Section 21 does empower the Institute to proceed suo moto and unhindered by the absence of a written complaint or allegation that may be submitted. A written complaint or allegation in writing cannot, in any manner, be understood to be a pre-requisite or a sine qua non for the initiation of action under Section 21. This since the authority conferred on the Institute relates to both a complaint as well as information. Information, as has been found by this Court, would extend to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disqualified for being chosen as and for being a member of a municipality- *** (c) if he has more than two living children: Provided that a person having more than two children on or after the expiry of one year of the commencement of this Act, shall not be deemed to be disqualified. (emphasis supplied) 88. This Court while observing, that the amendment was clarificatory in nature, held thus: ( Zile Singh case [Zile Singh v. State of Haryana, (2004) 8 SCC 1], SCC pp. 9-12, paras 14-22 14. The presumption against retrospective operation is not applicable to declaratory statutes . In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is to explain an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended . An amending Act may be purely declaratory to clear a meaning of a provision of the principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been payable, occasioned the amendment made by the subsequent Act: but that had reference to the former statute as soon as it passed, and they must be taken together as if they were one and the same Act; (Price at p. 392) 17. Maxwell states in his work on Interpretation of Statutes (12th Edn.) that the rule against retrospective operation is a presumption only, and as such it may be overcome, not only by express words in the Act but also by circumstances sufficiently strong to displace it (p. 225). If the dominant intention of the legislature can be clearly and doubtlessly spelt out, the inhibition contained in the rule against perpetuity becomes of doubtful applicability as the inhibition of the rule is a matter of degree which would vary secundum materiam (p. 226). Sometimes, where the sense of the statute demands it or where there has been an obvious mistake in drafting, a court will be prepared to substitute another word or phrase for that which actually appears in the text of the Act (p. 231). 18. In a recent decision of this Court in National Agricultural Coop. Mktg. Federation of India Ltd. v. Union of India [National Agricultural Coop. Mktg. Federation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd. v. State of Bihar, (1955) 2 SCR 603 : AIR 1955 SC 661] , AIR p. 674, para 22) 22. It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon case [Heydon case, (1584) 3 Co Rep 7a : 76 ER 637] was decided that- for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered- 1st. What was the common law before the making of the Act. 2nd. What was the mischief and defect for which the common law did not provide. 3rd. What remedy Parliament hath resolved and appointed to cure the disease of the Commonwealth, and 4th. The true reason of the remedy; and then the office of all the Judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro private commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico. 21. In Allied Motors (P) Ltd. v. CIT [Allied Motors (P) Ltd. v. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime when the prior Act was passed. 98. Learned counsel had also sought to draw sustenance for the aforesaid submission from the following principles as were laid down by the Supreme Court in CIT vs. Podar Cement (P) Ltd. (1997) 5 SCC 482:- 53. A Constitution Bench of this Court in Keshavlal Jethalal Shah v. Mohanlal Bhagwandas [(1968) 3 SCR 623 : AIR 1968 SC 1336], while considering the nature of amendment to Section 29(2) of the Bombay Rents, Hotel and Lodging House Rates Control Act as amended by Gujarat Act 18 of 1965, observed as follows: The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. The power of the High Court to entertain a petition for exercising revisional jurisdiction was before the amendment derived from Section 115, Code of Civil Procedure, and the Legislature has by the Amending Act attempted to explain the meaning of that provision. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. (emphasis supplied) 54. From the circumstances narrated above and from the memorandum explaining the Finance Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andate of the I B Code and continuing with the proceedings, has brought out the 2019 Amendment so as to cure the said mischief. We therefore hold that the 2019 Amendment is declaratory and clarificatory in nature and therefore retrospective in operation. 100. Similarly, in Podar Cement, the Supreme Court ultimately found that the amendments were clarificatory in nature. This is clearly evident from what stands recorded in para 54 which has been extracted hereinabove. 101. While on this issue, it may also be noted that the petitioners had contended that the Institute had never acted suo moto prior to the initiation of proceedings against the petitioners here and that being indicative of their own understanding of the width of the power that stood conferred upon them. It must in this context be noted that the mere fact that a particular power was not exercised in the past cannot be determinative of the question whether that power stands conferred or exists. The answer to the question whether a particular power stands conferred under statute must necessarily be answered on a reading of the statute and on discernment of its scope. The meaning to be conferred upon a statute cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation must be a written complaint that may be received by the Institute albeit non-compliant with Form-I as prescribed in Rule 3. 104. The Court finds itself unable to sustain the aforesaid submission for the following reasons. Firstly, and on a fundamental plane, it will be wholly incorrect to either interpret or construe a provision placed in the principal enactment on the basis of what may be contained in a subordinate piece of legislation, as in this case the Rules. A rule cannot possibly be understood or held to be determinative of the scope or content of a provision placed in the parent enactment. Rules, as is well settled, cannot be interpreted in a manner which may curtail the powers that may be vested or be available to be exercised by virtue of the parent enactment. They essentially supplement and are ancillary to the principal provisions contained in the Act. However, they cannot possibly be interpreted in a manner which would either scuttle the parent provision or extract or delete something therefrom. If the Court were to accord a judicial imprimatur to such a submission, it would amount to virtually recognizing a right existing in the delegate to control or even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em. Mr. Nandrajog submitted that, under the scheme of the Act, information must necessarily constitute material which prima facie establishes an act of professional or other misconduct committed by a member. According to learned Senior Counsel, a news report which may have referred to financial irregularities which had taken place in the PNB cannot possibly meet the aforesaid requirement. 108. Appearing for the Institute, Mr. Srinivasan, learned Senior Counsel, had argued that the aforesaid submissions are addressed overlooking the fact that the Institute had not commenced proceedings against the petitioners based on news reports alone. According to Mr. Srinivasan, the newspaper reports only constituted the trigger for the initiation of proceedings. It was submitted that on the publication of the news reports, the quarterly results of PNB were duly perused and the LRR also taken into consideration. Mr. Srinivasan pointed out that in terms of the initial show cause notice which had been issued, the anomalies which were noticed by the Directorate were duly conveyed to the petitioners and their comments invited. It was pointed out that ultimately it was the reasons and facts record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid discussion took place, the financial fraud had already been unearthed and complaints made to the investigating agencies and information also provided to other statutory regulators. It is in the aforesaid context that the respondents have referred to the various provisions made in SRE 2410 and which according to them place an obligation and a liability upon the Joint Statutory Auditors to make appropriate notes in the review report in respect of all events identified up to the date of its submission. It was also contended that, while conducting the review, SRE 2410 obliged the Joint Statutory Auditors to make requisite enquiries and to perform the review with an attitude of professional scepticism and recognising the existence of circumstances that may warrant a material adjustment being made in the interim financial information. 113. Mr. Srinivasan had laid great stress upon the provisions of SRE 2410 which obliged the Joint Statutory Auditors to undertake the review independently and objectively and the requirement to make a critical assessment, with a questioning mind, of the validity of evidence obtained . According to the respondent, the LRR could not have been drawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isual news platform, can at best be understood as being an external source from which the Institute may gather or derive knowledge of a particular fact or incident. However, since the initiation of disciplinary action clearly has serious repercussions, the decision to initiate disciplinary action would necessarily have to rest on more cogent and dependable material, data and facts. The initiation of an enquiry would necessarily have to be preceded by due application of mind, evaluation of the veracity of the reports and consideration of whether circumstances warrant the initiation of an enquiry. In the facts of the present case, the Court has come to conclude, for reasons aforenoted, that the said tests stood satisfied. 117. The Court had in the preceding parts of this decision noticed the judgment rendered by a learned Judge of the Gujarat High Court in Manubhai. The learned Judge had on a consideration of the Act and the Rules essentially come to the conclusion that Rule 7 mandates information to be in the written form containing allegation or allegations against a member or a firm which may be received in person or by post or courier. It was based on the aforesaid conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of the petitioners that the aforesaid order would have persuasive value. While interim orders passed by a coordinate Bench of the Court in pending proceedings may have a bearing or relevance on interim directions that may be warranted or be framed in identical situations, they cannot possibly have any bearing on a final decision which the Court is called upon to render upon due contest. K. CONCLUSIONS 121. In view of the aforesaid discussion, the Court proceeds to record the following conclusions: - A. The Court finds that a complaint as well as information is treated distinctively under the rules. A complaint in terms of Rule 3 must necessarily comply with Form-I. The Rules further prescribed the complaint to be submitted along with the fee fixed by the Institute under its regulations. The Rules further and more particularly in Rule 5(5) stipulate that a complainant may be placed on notice to remove defects which are noticed on scrutiny. In terms thereof, the Directorate is empowered to return the complaint for rectification and resubmission. Rule 5(6) then prescribes that if a complainant fails to rectify all defects within the time allowed under sub-ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived by the Institute in writing although not in accordance with the format prescribed in terms of Rule 3. The aforesaid is confined to what is prescribed by Rule 7 and which salvages written complaints which may not conform to the norms of Rule 3. G. However, if the word information be correctly understood, and appreciated [and as the dictionaries have defined it to be], as the mere communication of knowledge or news of some factual occurrence, it would clearly stand on a pedestal distinct and different from a complaint. Information need not necessarily be or relate to the grievance or injury suffered by a particular individual. It could in that sense include the communication of any particular fact, subject or event to the Institute. It could also and consequently include any information or intelligence which the Institute may itself derive from an external source. H. The Court further takes into consideration the significance of the prefix any to the word information as occurring in Section 21 of the 1949 Act. The use of the word any before information in Section 21 clearly appears to be a conscious attempt by the authors of the statute to confer an expansive m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssional conduct of its members untrammelled by rigours of form. O. On an overall consideration of the aforesaid, this Court is of the considered view that the word information as appearing in Section 21 cannot be narrowly construed to mean only those facts which may be specifically provided to the Institute. The Act and the Rules have consciously attempted to treat the two separately and distinctively. The phrase any information would thus cover within its ambit not only written complaints that may be received, albeit not compliant with Form-I, but also any material or fact that may come to the notice of the Institute pertaining to the professional conduct of a member and which on due examination and evaluation may merit an enquiry being initiated. P. A written complaint or allegation in writing cannot, in any manner, be understood to be a pre-requisite or a sine qua non for the initiation of action under Section 21. This since the authority conferred on the Institute relates to both a complaint as well as information. Information, as has been found by this Court, would extend to any material or fact that may come to the notice of the Institute and from which it may d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to both a complaint as well as information. Information, as has been found by this Court, would extend to any material or fact that may come to the notice of the Institute and from which it may derive knowledge. That material need not necessarily be in the written form or be interpreted as being confined to something which an individual may choose to bring to the notice of the Institute. Acceptance of a submission to the contrary would amount to restricting the width and amplitude of the power conferred by Section 21 which enables the Institute to proceed on the basis of any information . U. The Court also bears in mind the significant observations which were made by the Division Bench of this Court in P. Ramakrishna where while recognizing the intrinsic distinction between a complaint and information, the Court had aptly observed that information would include material that may be made available by a third person or even that which may come to the knowledge of the Institute. The Division Bench clearly held that in case of information, action may be initiated either suo moto or even on the basis of material that may be provided by a third party who may for a variety of reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at may be derived from an external source or be restricted only to information that may be submitted before it in writing. Z. In the facts of the present case, the Court comes to conclude that the impugned action was not based on mere newspaper reports. In fact, those reports could not have possibly and on their own constituted material at all since they did not carry any allegation against the petitioners here. What appears to have transpired is of the news reports merely acting as a catalyst for the Institute to delve deeper into the massive fraud which had occurred and to examine whether any member had failed to abide by the SAs which applied. It was the material recorded and encompassed in the letter of 13 March 2018 which would constitute the foundation for testing the argument of the petitioner whether there was information which merited further enquiry. AA. Viewed in that light the Court is of the firm opinion that the Institute did have the requisite information as contemplated by Section 21 and which justified the initiation of the enquiry against the petitioners in the facts of the present case. BB. While the Court is not called upon at this stage to ret ..... X X X X Extracts X X X X X X X X Extracts X X X X
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