Important Point
Excessive restriction which is not required in public interest is not reasonable and hence is not saved by Article 19(1)(g) of Constitution of India.

Headnote:Constitution of India, 1950 – Article 14,19(1)(g) – Issuance of notification by Respondent Council of Institute of Chartered Accountants of India & Ors. Prohibiting all Chartered Accounts from joining a CFA course – Notification provided that Chartered Accountants would be deemed to be guilty of professional misconduct if they became members of ICFAI – Challenge there against – Contention of Respondent, that object of impugned notification was to avoid conflict of interest held unsustainable .as it suffered from a total misunderstanding of functions of a C.F.A. vis-‘-vis a C.A - Main function of C.F.A was to study and analyze financial markets and advise his clients accordingly, whereas main function of a C.A. was to do auditing of a firm’s (or company’s) balance sheet and profit and loss account - These were two altogether different functions- Notification went far beyond a reasonable restriction as it prohibited all C.As. from joining a C.F.A. course - Notification amounted to excessive restriction which was not saved by Article 19(1)(g) – Held strange that ICAI, renowned in its own field and with various statutory responsibilities, went out of its way to stop its members i.e. Chartered Accountants from enhancing their knowledge, training and ability by acquiring a ‘CFA’ qualification - Instead of appreciating aspirations of Chartered Accountants who seek to widen their know-how and horizons they were sought to be harassed and termed as being guilty of ‘professional misconduct - Difficult to understand how term ‘professional misconduct’ applied to a Chartered Accountant seeking additional training and qualification of CFA – Since impugned notification clearly and flagrantly violated fundamental rights of writ petitioners under Articles 14 and 19(1)(g) – Hence held liable to be quashed - Appeal allowed. (Paras 10 ,12 to 15)
       Facts of the case :
       A notification was issued by Respondent Council of Institute of Chartered Accountants of India & Ors. herein in the instant case prohibiting all Chartered Accounts from joining a CFA course. Notification provided that Chartered Accountants would be deemed to be guilty of professional misconduct if they became members of ICFAI.
       Present Appeal has been filed challenging said notification passed by respondent council.
       Findings of the Court :
       The Court held that Notification amounted to excessive restriction which was not saved by Article 19(1)(g). Held strange that ICAI, renowned in its own field and with various statutory responsibilities, went out of its way to stop its members i.e. Chartered Accountants from enhancing their knowledge, training and ability by acquiring a ‘CFA’ qualification. Instead of appreciating aspirations of Chartered Accountants who seek to widen their know-how and horizons they were sought to be harassed and termed as being guilty of ‘professional misconduct. Difficult to understand how term ‘professional misconduct’ applied to a Chartered Accountant seeking additional training and qualification of CFA. Since impugned notification clearly and flagrantly violated fundamental rights of writ petitioners under Articles 14 and 19(1)(g). Hence held liable to be quashed.

JUDGMENT

MARKANDEY KATJU, J.—

1.I have perused the judgment of my learned brother Hon’ble S.B. Sinha, J. and am in respectful agreement with the same. However, I wish to add some of my own reasons.

2.In recent years, the country has witnessed phenomenal growth in the field of financial markets. The funds raised by the corporate sector from the capital market have increased exponentially, the number of stock exchanges have increased, the investor community has multiplied. The structural developments in the markets are the inclusion of institutional and corporate members, of stock exchanges, and formation of the regulatory authority ‘SEBI’ to oversee the functioning of the capital market.

3.In recent decades the financial services industry has matured in our country. A large number of mutual funds have been set up by the banks, insurance companies and the corporate sectors, leasing and hire purchasing companies have grown in size, content and operations. Credit rating services have been launched. Venture Capital Funds have been set up to meet the requirements of diversified industrial, research and entrepreneurial enterprises. Reliance on international capital markets has become an important source for financing many other developments as well in the country. This makes it all the more important for India to have effective management, controls and practices in line with those in the international financial markets.

4.In view of these developments corporate financial management and controls have become very sophisticated and, therefore, demand highly specialized skills for planning, decision making and controls, consistent with the practices of the world’s leading financial markets.

5.Obviously, to meet the growing professional requirements of the financial industry, it became essential to set up an institute for education and training of professionals in accordance with the norms, content, practices and standards of the leading international markets. It is in this context that at the request of the Indian financial industry, some eminent professionals with extensive background in Finance/RBI/UTI/Stock Exchanges etc. promoted and helped establishing the Institute of Chartered Financial Analysts of India (in short ‘ICFAI’) in active collaboration with the Institute of Chartered Financial Analysts of USA.

6.This collaboration helped ICFAI in establishing educational standards in the field of financial analysis, training people, conducting examinations and awarding the qualification of ‘Chartered Financial Analyst’ (hereinafter referred to as ‘CFA’) - an internationally acclaimed qualification in the field of financial management.

7.Similar institutions have been established by many other countries, including Europe, Japan, Australia, Singapore etc. The profession of CFA is now internationally highly regarded and recognized as vital for modern and orderly development of financial markets. The response to the CFA programme in India has been enormous. This is confirmed by the large number of students who have been enrolled with the Institute. The students also include Chartered Accountants and professionals from other fields. The CFA programme does not give training to become Auditors or Accountants or Cost Accountants or Income Tax law or Direct or Indirect Laws advisers etc. These functions are performed and remain in the exclusive domain of Chartered Accountants (hereinafter referred to as “C.A.”) Cost Accountants, and lawyers (though it is true that the C.F.A. course includes some study of accountancy).

8.The submission of learned counsel for respondent no.1, Mr. Ganesh, is that the object of the impugned notification dated 3.8.1989 is to avoid conflict of interest. In our opinion this submission suffers from a total misunderstanding of the functions of a C.F.A. vis-‘-vis a C.A. The main function of the former is to study and analyze the financial markets and advise his clients accordingly, whereas the main function of a C.

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2007 Supreme(SC) 763

Important PointExcessive restriction which is not required in public interest is not reasonable and hence is not saved by Article 19(1)(g) of Constitution of India.

Cases Referred (2)

Important Point
Excessive restriction which is not required in public interest is not reasonable and hence is not saved by Article 19(1)(g) of Constitution of India.