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2016 Supreme(Del) 2996
IN THE HIGH COURT OF DELHI AT NEW DELHI
PRADEEP NANDRAJOG, PRATIBHA RANI, JJ.
Council of the Institute of Chartered Accountants of India - Appellant
Versus
Gurvinder Singh & Anr. - Respondents
Chat A. Ref. 4 of 2012
Decided On : 16-08-2016
Advocate Appeared:
For the Respondent: Mr. Rakesh Aggarwal, Mr. Pulkit Agarwal
The central legal point established in the judgment is that for an act to be considered professional misconduct under the Chartered Accountants Act, it must be related to the offender acting as a Chartered Accountant and rendering services for remuneration.
Headnote:
Chartered Accountants Act - Misconduct - Section 21, Section 22
Fact of the Case:
The case involved a complaint against a Chartered Accountant who sold shares to a complainant and continued to receive dividends on the shares, leading to a dispute. The Disciplinary Committee found the conduct of the Chartered Accountant unworthy and proposed a penalty of removal from the Register of Members for six months.
Finding of the Court:
The court analyzed the provisions of the Chartered Accountants Act, particularly Sections 21 and 22, to determine whether the conduct of the Chartered Accountant constituted professional misconduct. It concluded that the respondent's conduct did not fall under the category of professional misconduct as defined by the Act and therefore did not warrant a penalty.
Issues: The main issue was whether the conduct of the Chartered Accountant constituted professional misconduct under the Chartered Accountants Act.
Ratio Decidendi: The court emphasized that for an act to be considered professional misconduct under the Act, it must be related to the offender acting as a Chartered Accountant and rendering services for remuneration. The court also highlighted the importance of the specific activities and functions performed by a Chartered Accountant in determining professional misconduct.
Final Decision: The court answered the reference by declaring that the respondent's conduct did not amount to professional misconduct under the Act and therefore did not impose any penalty on the respondent.
Pradeep Nandrajog, J.
1. This is a reference under Section 21(5) of the Chartered Accountants Act, 1949. The penalty proposed is removal of respondent No.1’s name from the Register of Members for a period of six months.
2. The complainant Mohit Gupta claimed that respondent No.1, a Chartered Accountant by profession, sold 100 shares of Aban Lyod Chiles Offshore Ltd. to him in November 1999 but he lodged the transfer deed for transfer of the shares on November 04, 2004. In the interregnum, respondent No.1 continued to receive dividends and in July 2004 obtained duplicate share certificates in his name by misrepresenting that the original share certificates were lost. The complainant made good his complaint before the Disciplinary Committee of the Institute of Chartered Accountants. The respondent No.1 claimed not to have sold any shares to the complainant but settled the dispute with the complainant by agreeing that the owner of the shares would be the complainant.
3. The view taken by the Disciplinary Committee is that the conduct of respondent No.1 evinces that he sold the shares to the complainant and since he continued to receive dividends declared by the company which obviously was because the complainant did not lodge the shares for transfer of shares in his name for five years he thought that he could cheat the complainant. The conduct of respondent No.1 has been found to be unworthy of a Chartered Accountant.
4. We have asked Mr. Rakesh Aggarwal, whether the conduct of respondent No.1 would attract disciplinary proceedings against him because it is not the case of the complainant that respondent No.1 was discharging functions as a Chartered Accountant when he sold the shares to him. Howsoever deplorable may be the conduct of respondent No.1, question would be : Would the conduct be subject to disciplinary control by the Council.
5. Learned counsel states that harmoniously read, Section 21 and 22 of the Chartered Accountants Act, 1949 would make liable the offending act of respondent No.1 as an actionable misconduct.
6. Section 21 of the Act prescribes the procedure to be followed when a complaint concerning misconduct of a member of an Institute is received. Section 22 defines misconduct. It reads as under:-
“22. Professional misconduct defined
For the purpose of this Act, the expression “professional misconduct” shall be deemed to include any act or omission specified in any of the Schedules, but nothing in this section shall be construed to limit or abridge in any way the power conferred or duty cast on the Council under sub-Section (1) of Section 21 to inquire into the conduct of any member of the Institute under any other circumstances.”
7. Part I of the First Schedule enumerates conducts deemed to be professional misconduct. The use of the word ‘deemed’ in Part I of the First Schedule would make it clear that the professional misconducts enumerated therein are inclusive i.e. the ones enumerated in the Schedule would be deemed to be professional misconducts. Sub-Section (1) of Section 21 reads as under:-
“(1) Where on receipt of information by, or for a complaint made to the Council is prima facie of opinion that any 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.”
8. Thus, a professional misconduct enumerated in the First Schedule of the Act would be a category by itself and other misconduct contemplated by Sub-Section (1) of Section 21 would have to be looked outside Part I of the First Schedule. It would be a conduct which any reasonable member of the society would frown upon. But, would it be all kinds of conduct?
9. It would thus be necessary to examine the scheme of the material provisions of the Act. The Act came into force in 1949 and it was passed beca
