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HIGH COURT OF CALCUTTA
CHAKRABARTI, K. C. DAS GUPTA
CONTROLLER OF INSURANCE - Appellant
Versus
H. C. DAS - Respondent
Matter 71 Of 1956
Decided On : JANUARY 4, 1957
CHARTERED ACCOUNTANTS ACT, 1949 - Section 21 - Reference by the Institute of Chartered Accountants against an Accountant for alleged irregularities in the audit of an Insurance Company - Findings of the Disciplinary Committee and the Council accepted - Accountant held guilty of misconduct under items (q) and (r) of the Schedule to Section 22 of the Act - Suspension from membership and practice for one year imposed.
Fact of the Case:
The Institute of Chartered Accountants made a reference to the Court under Section 21 of the Chartered Accountants Act, 1949, against an Accountant named Mr. H. C. Das, a member of the firm of Accountants carrying on profession under the name and style of H. C. Das and Co. The firm acted as auditors of an Insurance Company, called the Bhagya Lakshmi Insurance Company from 1936 up to 1951. The enquiry against the Accountant concerned the audit made by him of the accounts of the Insurance Company on behalf of his firm and the statutory certificates he granted in that connection.
Finding of the Court:
The Court accepted the findings of the Disciplinary Committee and the Council that the Accountant had been guilty of misconduct as contemplated by items (q) and (r) of the Schedule to Section 22 of the Act. The Court found that the Accountant had failed to exercise reasonable care and skill in the conduct of his professional duties and had failed to obtain sufficient information to warrant the expression of an opinion.
Issues: Whether the Accountant was guilty of misconduct under the Chartered Accountants Act, 1949.
Ratio Decidendi: The Court held that the Accountant had been guilty of misconduct under items (q) and (r) of the Schedule to Section 22 of the Act. The Court found that the Accountant had failed to exercise reasonable care and skill in the conduct of his professional duties and had failed to obtain sufficient information to warrant the expression of an opinion. The Court stated that an Auditor is the servant of the shareholders and that it is his duty to examine the books of the company and report to them his findings. The Court held that the Accountant had failed to discharge his duty to the shareholders and that he had been guilty of misconduct.
Final Decision: The Court directed that the Accountant and Auditor, Mr. H. C. Das, be suspended from the membership of the Institute and from practice for a period of one year from the date of the order. There was no order as to costs.
( 1 ) THIS is a Reference under Section 21 of the Chartered Accountants Act, made by the Institute of Chartered Accountants against an Accountant named Mr. H. C. Das who is a member of the firm of Accountants carrying on profession under the name and style of H. C. Das and Co. That firm acted as auditors of an Insurance Company, called the Bhagya Lakshmi Insurance Company from 1936 up to 1951. The enquiry against the Accountant concerns the audit made by him of the accounts of the Insurance Company on behalf of his firm and the statutory certificates he granted in that connection.
( 2 ) IT appears that the Central Government came to form the opinion that the administration of the Bhagya Lakshmi Insurance Company was not being carried out in a satisfactory manner and consequently by an order made on the 27th of December, 1952, under Section 52a of the Insurance Act, they appointed Mr. S. C. Roy, a person well known in the insurance world, to act as Administrator of the company. On assuming office, Mr. Roy had certain accounts of the company audited by a different firm of Auditors, namely, Mr. Mukherjee and Co. , who reported several irregularities. Mr. Roy brought those irregularities to the notice of the Central Government by a letter dated the 30th of September, 1953, which he addressed to the Assistant Controller of Insurance. The report of Messrs. M. Mukherjee and Co. was annexed to Mr. Roy's letter. On receipt of that letter, the Government decided that a complaint should be made against the Auditors to the Institute of Chartered Accountants and they issued the necessary certificate on the 2nd of August, 1954. The actual complaint, however, was not made till the 12th August next.
( 3 ) THE Controller of Insurance incorporated certain of the allegations made by the new Auditors in his complaint and asked for an enquiry in regard to the alleged irregularities. As the com-plaint was by the Central Government, no preliminary examination of the facts by the Council of the Institute was either possible or permissible. Accordingly, on receipt of the complaint, the Council referred it under Section 21 of the Act to the Disciplinary Committee for the purposes of an enquiry. Prior thereto, the Council had asked Messrs. H. C. Das and Co. to disclose the name of the particular partner of the firm who had been actually concerned in the audit of the Insurance Company. The firm had disclosed the name of Mr. H. C. Das.
( 4 ) THE allegations made in the petition of complaint were made out by the Disciplinary Committee into five charges. After Mr. K. C. Das had filed his written statement, a full and exhaustive enquiry was made. At the end of the enquiry, the Disciplinary Committee, by their report dated the 12th of September, 1955, informed the Council that they found the first charge proved in respect of only the year 1951, the fourth charge wholly proved and the fifth charge proved in part and that they had also found that the second and the third charges had not been proved. On receipt of the report, the Council considered the same and accepted the findings of the Disciplinary Committee. Those are the findings which have been forwarded to this Court in order that the Court may make such order as it may deem fit to make. The- Council, after having found that three of the fixed charges have been proved to the extent mentioned, have further found that the Accountant has been guilty of misconduct, as defined in Section 22 of the Chartered Accountants Act in relation to the charges proved against him.
( 5 ) THIS Court has pointed out to the Council on several occasions that merely to say that an Accountant has been guilty of misconduct within the meaning of Section 22 of the Act is not to make a complete finding. The general description of misconduct as contemplated by the Act is "conduct which, if proved, will render a person unfit to be a member of the Institute," taut such conduct is said to be constituted by acts
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