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TMI Blog2023 (10) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... ered to take action against its members for any misconduct as contemplated in the Act and relevant regulations framed thereunder. Section 21 of the Act prescribes the procedure to be followed with regard to an inquiry relating to the misconduct of the members of the Institute. As held in D.K. Agrawal vs. Council of the Institute of Chartered Accountants of India [2021] 131 taxmann.com 103 Committee ., report of the Disciplinary Committee will only contain a statement of the allegations, the defence entered by the members, the recorded evidence and the conclusions expressed by the Disciplinary The conclusions of the Disciplinary Committee are tentative and the same are not recorded as findings. It is only the Council which is empowered to find out whether the member is guilty of misconduct. The Council has to determine that a member is guilty of misconduct and the task of recording of the findings has been specifically assigned to the Council. After recording a finding that a member is guilty of misconduct, the Act moves forward to the final stage of penalisation. As held in D.K. AGRAWAL VERSUS COUNCIL OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA [ 2021 (10) TMI 526 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory auditors of N.H. Securities Ltd., as per the information, was that the Audited Accounts of N.H. Securities Ltd. for years 1997-98 and 1998-99 did not disclose the purchase and sales of shares and securities made and the opening and closing stock giving break up of shares and securities traded in by the company and also indicating the quantities thereof as required under Section 211 read with Schedule VI, Part II 3(ii)(2) of the Companies Act in case of a trading company. Respondent - Rajiv Khandelwal was the concerned partner of the audit firm M/s. Falod and Khandelwal, had not qualified the reports. It was only this charge that respondent was called upon by the Council to answer under Regulations 12 (7) read with Regulations 13 of the Chartered Accountants Regulations, 1988. 3. Based on this information, as the Council was prima facie satisfied that there was alleged misconduct under Clauses (7), (8) and (9) of Part I of the Second Schedule to the Act, the Disciplinary Committee was constituted under Section 21 of the Act. Three members, viz., one Mr. T.N. Manoharan, (Vice President of the Institute of Chartered Accountants of India) (the Institute), Mr. Manoj Fadnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guilty of professional misconduct, if he - (7) does not exercise due diligence, or is grossly negligent in the conduct of his professional duties; (8) fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion. 6. The first point which comes to our mind is that the information which the institute received/complaint that the institute received was only with respect to non-compliance of Section 211 read with Schedule VI Part II 3(ii)(2) of the Companies Act which is the first charge. The Disciplinary Committee has not found respondent guilty of that charge itself. Though the Department of Company Affairs did not raise any grievance, upon going through further documents received from the Ministry further charges have been framed. In our view, as the remaining charges did not form part of the information/complaint received from the Ministry of Corporate affairs, there is nothing to indicate how the scope of inquiry could be expanded to include those charges. Respondent was also called upon to reply under Regulations 12 (7) read with Regulations 13 only with regard to the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchase and sale of shares and securities made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the year Rs. 50,000 or more in respect of each party have been made at prices which are reasonable having regard to prevailing market prices for such shares and securities. (emphasis supplied) Therefore, respondent has formed an opinion on the basis of information and explanation that was received by him from the company, i.e., his client. 10. In the report of the Disciplinary Committee, the Committee has alleged that respondent was grossly negligent in conduct of his professional duties and has failed to obtain sufficient information to warrant the expression of an opinion. The report does not explain why respondent was grossly negligent and why he was not just negligent assuming he was. The report also does not explain what according to them was further information that respondent should have taken to form his opinion. It is a professional matter where one professional may form an opinion after receiving certain information where as another professional may ask for fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was amended on 08.08.2006 by Act 9 of 2006. However, since the alleged misconduct relates to the year 2002, we are concerned with the unamended Section 21 which reads as under : 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 if prima facie of opinion that an 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 the Council finds that the member of the Institute is guilty of any professional or other misconduct, it shall record a finding accordingly and shall proceed in the manner laid dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 1964 ( Regulation ) provides for the procedure of an inquiry before the Disciplinary Committee. Regulations 14 and 15 which are relevant for the purpose of this case are as under: 14. Report of the Disciplinary Committee (1) The Disciplinary committee shall submit its report to the Council. (2) The Council shall consider the report of the Disciplinary Committee and if, in its opinion, a further enquiry is necessary, shall cause such further enquiry to be made whereupon a further report shall be submitted by the Disciplinary Committee. (3) The Council shall, on the consideration of the report and the further report, if any, record its findings. (4) If the finding is that there is no case for passing one of the orders specified in clauses (a) or (b) of sub section (4) of section, the complainant and the respondent shall be informed accordingly. 15. Procedure in a hearing before the Council. (1) If the Council, in view of its findings, is of opinion that there is a case for passing one of the orders specified in clauses (a) or (b) of subsection (4) of Section 21, is shall (a) furnish to the respondent a copy of the report of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted by independent reasons. The recommendations, in our opinion, have been made mechanically by the Council. Recording of reasons is a principle of natural justice and every judicial/quasi judicial order must be supported by reasons to be recorded in writing. It ensures transparency and fairness in the decision making process. The person who is adversely affected wants to know as to why his submissions have not been accepted. Giving of reasons ensures that a hearing is not rendered as a meaningless charade. Unless an adjudicatory body is required to give reasons and make findings of fact indicating the evidence upon which it relied, there is no way of knowing whether the concerned body genuinely applied itself to and evaluated the arguments and the evidence advanced at the hearing. Giving reasons is all the more necessary because it gives satisfaction to the party against whom a decision is taken. It is a well known principle that justice should not only be done but should also be seen to be done. An unreasoned decision may be just, but it may not appear to be so to the person affected. A reasoned decision, on the other hand, will have the appearance of fairness and justice. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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