BIREN VAISHNAV, J.

1. This is a Reference made under Section 21(5) of the Chartered Accountants Act, 1949 (“The Act” for short). The Reference has been made by the Council of the Institute of Chartered Accountants of India (“Council” for short) in respect of a disciplinary proceeding held against the Respondent, a Professional Chartered Accountant. The Council, on consideration of the report of the Disciplinary Committee, found him guilty of certain misconduct and decided to recommend to this Court that the name of the respondent be removed from the Register of Members for a period of two years.

2. The Reference arises in the following background of facts:

2.1 The case pertains to an audit carried out by the firm of the respondent with regard to the Madhavpura Mercantile Cooperative Bank Ltd.(‘MMCB’ for short). The Madhavpura Mercantile Cooperative Bank is registered under the Multi State Cooperative Societies Act, 1984. Audit for the Year 1998- 1999 was allotted by the Registrar of Societies to the respondent firm in order to see whether the affairs of the Bank were carried out in accordance with the Multi State Cooperative Societies Act,1984, rules thereunder and the provisions of the Banking Regulation Act and the guidelines of Reserve Bank of India. The audit was assigned to the respondent as he was empanelled by the Central Registrar for this purpose.

2.2 As a result of a scam at the MMCB, the Registrar of Cooperative Societies, Gujarat State on instructions of the Central Registrar carried out a re-audit of the Bank for the year 1998-1999. Based on the re-audit Report, the Registrar found that the respondent had neither disclosed nor reported serious irregularities in the accounts of the Bank and that the respondent had failed to disclose material mis-statements which were not disclosed also in the financial statement of the Bank though they were known to him. Accordingly, according to the Report, the respondent had shown gross negligence in performing his professional duties and had failed to obtain sufficient information to warrant the expression of opinion. The Registrar was also of the opinion that the respondent had failed to invite the attention to material departures from the generally accepted procedure of audit applicable to the Banks.

2.3 As many as 19 Charges were framed against the respondent listing charges of misconduct. After exchange of written representations and opportunity of hearing a report was submitted by the Disciplinary Authority. On consideration of the report of the Disciplinary Authority, the Council decided to accept the report of the Disciplinary Committee. Of the 19 charges, the Disciplinary Committee held the respondent guilty of professional misconduct with respect to Charge 1(iv) and Charge 13 within the meaning of Clauses(8) & (9) of Part I of the Second Schedule to the Chartered Accountants Act, 1949. The Disciplinary Authority also found the respondent guilty of Charges 2 and 12 within the meaning of Clauses (5), (7), (8) & (9) of Part I of the Second Schedule to the Chartered Accountants Act, 1949. Further for Charge No.10, the respondent was found guilty within the meaning of Clause (5), (6), (7), (8) & (9) of the Second Schedule to the Chartered Accountants Act, 1949.

2.4 The Charges on which the respondent was found guilty, in a nutshell are as under:

Charge 1(iv) : Contravention of Section 60 of the Multi State Cooperative Societies Act,1984.

Charge 2 : Non-compliance of RBI guidelines for Individual and Group Borrowers.

Charge 10 : Regarding defects in loan documents for advances against shares aggregating to Rs.46,67,48,615.

Charge 12 : Regarding sanctioning of the Temporary Overdraft (TOD) in contravention of RBI Circular,

Charge 13 : Regarding advance against lands and buildings.

3. We shall deal with the factual aspects and the material considered by the Disciplinary Aut