IMPORTANT POINT
The main legal point established in the judgment is that the issuance of a false and misleading search report by a Chartered Accountant does not necessarily constitute professional misconduct under the Chartered Accountants Act if the report is based on registered documents available at the office of the Registrar of Companies and there is no evidence of gross negligence.

JUDGMENT :

BHARGAV D. KARIA, J.

1. Heard learned advocate Mr. B.S. Soparkar with learned advocate Ms. Swati Soparkar for the applicant – Council of the Institute of Chartered Accountants of India, who has made this Reference, in its 267th meeting held on 10th and 11th April, 2007 at New Delhi against the respondent – Shri Bhupesh Kumar R. Patani, by drawing the statement of his case under Section 21(5) of the Chartered Accountants Act, 1949 (hereinafter referred to as “the Act”).

2. This Court, vide order dated 20th June 2009, issued notice to the respondent. It appears that the notice was not served upon the respondent on the returnable date i.e. 17th July 2009. Therefore, the applicant was directed to take steps to serve notice upon the respondent before the next date of hearing. The cause title shows that thereafter, the notice was served upon the respondent and therefore, the matter is taken up for hearing.

3. Notice is also published in the newspapers of India and Canada in the year 2009. The affidavit of publication dated 27th October 2009 filed by the applicant states that notice of publication was served upon Shri Bhupesh Kumar R. Patani vide Electronic Mail dated 13th October 2009. A copy of publication is annexed with the affidavit.

4. The applicant – Institute has drawn the statement of case narrating the facts of the case and the proceedings conducted by the Disciplinary Committee and the decision of the Council of the Institute of Chartered Accountants accepting report of the Disciplinary Committee holding that the respondent – Chartered Accountant was guilty of professional misconduct within the Clauses (5), (6) and (7) of Part – I of the Second Schedule read with Section 21 of the Act. The Council, therefore, decided to recommend to the High Court that the name of the respondent be removed from the register of members for a period of six months.

5. The disciplinary inquiry was initiated against the respondent under Section 21 of the Act on the basis of the complaint of Dr. Jayatilal Manilal Shah, Chairman, Rahil Housing Ltd. (hereinafter referred to as “the complainant”) making various allegations against Shri Bhupesh Kumar R. Patani - respondent, Chartered Accountant, Proprietor of M/s. Bhupesh Patani and Company.

6. In the complaint dated 16th July 2004 filed by the complainant, following allegations were made against the respondent:

“1.1 The Respondent has deduced and incorporated a false and misleading conclusion at the end of his General Search/Inspection report dated 13.11.2003 taken by him, with intent to misinform, mislead, unjustly confuse Dyaneshwar CHS Ltd (Sale Agreement Company on 8.6.95) third parties and persons who are dealing with the Complainant.

1.2 The Respondent disregarded the Form No. 32 duly signed by the Chairman, Dr. Jayantial M. Shan at document entry No. 34, which from the record appears as lodged on 12.5.2003 registered on 22.5.03 pertaining to the cessation of his client, Shri Bhogilal Atmaram Patel as a Director of the Company with effect from 30.4.2003 by the Complainant due to misleading and misconduct of affairs done by the said Shri Bhogilal Patel with the Rahil Housing Ltd (hereinafter referred to as Company) for his ulterior motives.

1.3 The Respondent regarded the subsequent pre-dated (27.11.98) Form No.25C (where by the said Bhogital A. Patel is allegedly so called appointed as Managing Director but there was no board meeting held on 7.1.98 and passed any such resolution at document entry No.35 which appears from his own search report and recorded as lodged on 22.5.2003 registered on 27.5.2003 and signed by the then Director Shri Shantial P Kachalia (since removed) as being valid. He was questioned specifically about the fact that his very same search report cogently bears out a previous document entry No.34, the fact that the said Shri Bhogial A Patel ceased to be the Director of the Company with effect from 30.4.2003.

1.4 The Respondent has regarded the document at entry No. 37 lodg