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2025 Supreme(Guj) 1745
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
A.S. Supehia, Pranav Trivedi, JJ.
Council Of Institute Of Chartered Accountants Of India – Applicant
Versus
S.N. Valera, Fca M/S. S.N. Valera & Co. – Respondent
R/Chartered Accountant Reference No. 3 of 2006
Decided On : 19-11-2025
The Council must independently assess findings from a Disciplinary Committee regarding professional misconduct, ensuring proper application of mind and consideration of all representations before making recommendations.
Headnote:(A) Chartered Accountants Act, 1949 - Section 21(5), Multi State Cooperative Societies Act, 1984 - Professional misconduct - Respondent found guilty of serious irregularities during audit of the bank, leading to a recommendation for a five-year removal from the Register of Members by the Council - Disciplinary Committee reported 8 out of 16 charges proved against the respondent - Report lacked independent findings, constituting non-application of mind by the Council - High Court set aside the Council's recommendation for removal and remitted back for fresh consideration. (Paras 3, 35, 36)
(B) Duty of Council - The Council must independently assess the findings of the Disciplinary Committee, taking into account the representations submitted by the respondent before making any recommendations. (Paras 10, 32)
Facts of the case:
The respondent, a Chartered Accountant, failed to report material misstatements during audits of the bank involved in a notorious financial scandal. A total of 16 charges were presented, with 8 found guilty by the Disciplinary Committee. Subsequently, the Council recommended removal for five years based on these findings.
Findings of Court:
The Court concluded that the report by the Council demonstrated a lack of independent reasoning in upholding the Disciplinary Committee's findings without adequately addressing the respondent's submissions.
Issues: The primary issue focused on whether the Council applied its mind independently when assessing the report of the Disciplinary Committee and the representations submitted by the respondent.
Ratio Decidendi: The court determined that the Council's adoption of the Disciplinary Committee's report verbatim without independent analysis constitutes a defect in procedural fairness, mandating a re-evaluation of the findings.
Result: Recommendation of the Council set aside; the matter remitted for fresh consideration.
| Table of Content |
|---|
| 1. introduction to disciplinary proceedings against respondent. (Para 1 , 2 , 3 , 4) |
| 2. arguments in favor of council's recommendation. (Para 5 , 6 , 7 , 8) |
| 3. respondent's counterarguments against council's report. (Para 10 , 11 , 12) |
| 4. court's analysis of the council's powers and procedures. (Para 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20) |
| 5. court's elaboration on the necessity of independent findings. (Para 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28) |
| 6. critique of council's findings and application of mind. (Para 29 , 30 , 31 , 32 , 33 , 34) |
| 7. conclusion directing council for reconsideration. (Para 35 , 36) |
JUDGMENT :
A.S. SUPEHIA, J.
1. Present reference under section 21(5)of the Chartered Accountants Act, 1949 (for short “the Act”) in respect of the respondent viz. Shri S.N.Valera, Chartered Accountant, has been made by the Council of Institute of Chartered Accountants of India(herein after referred as Council).
BRIEF FACTS
2. The respondent was empaneled by the Central Registrar of the Madhavpura Mercantile Cooperative Bank Ltd., Ahmedabad (for short “the Bank”), which is registered under the Multi State Cooperative Societies Act, 1984. There was a huge scam, which is well known as MMCB scam in the year 2001. The Registrar of Cooperative Societies, Gujarat State upon instructions from the Central Registrar had allotted re-audit of the bank for the year 1999-2000. During the re- audit, it was found that the respondent had not disclosed and reported serious irregularities in the accounts of the Bank and he failed to disclose the material misstatements known to him in the financial statement. It was alleged that the respondent failed to report material misstatements known to him to appear in the financial statements of the Bank, with which he is concerned in his professional capacity, and thus, had shown gross negligence in performing his professional duties. The charges levelled against the respondent, as per the complaint were very serious in nature. The relevant dates in the present reference are as under:
| Date | Event |
| 19.09.1999 Early 2001 | Respondent was appointed as Auditor of Madavpura Mercantile Cooperative Bank (MMCB) for FY 1999-00 u/s 67 of the Multi state Co- operative Societies Act and order of Registrar Re-audit of MMCB was carried out under the order of Registrar dated 20.04.2001 which revealed severe irregularities. |
| 06.03.2002 | Jt. registrar Co-operative Societies made complaint against the Respondent |
| 08.04.2002 | Complaint was sent by the Council to the Respondent for his response |
| 06.07.2002 | Respondent filed written statement and submission |
| 17.08.2002 | Complainant submitted rejoinder |
| 06.01.2003 | Respondent submitted his comments |
| 2-5.02.2003 | ICAI framed prima facie opinion finding the Respondent as guilty |
| 07.05.2003 to 25.10.2004 | Proceedings took place before the Disciplinary Committee Questions put to parties and their replies thereto |
| 16.11.2004 | Disciplinary Committee submitted its report to the Council |
| 31.12.2004 | report of the Committee forwarded to both parties |
| 17.01.2005 20.01.2005 | Submission by the Complainant |
| 17.03.2005 | Respondent submitted written representation |
| 24.03.2005 | Council arrived at the finding and made recommendation to the Hon’ble High Court for removal of name of the respondent for a period of 5 years |
3. There were 16 charges framed against the respondent and out of them, the disciplinary committee submitted its report on 16.11.2004 holding the respondent guilty in 08 charges. The details of which are as under:
| Sr. No. | Charge | Verdict by the Council | Second Schedule Part 1 Clause |
| 1 | Bank did not maintain CRR and SLR ratio | Not Guilty | |
| 2 | Bank did not invest 15% of SLR funds into Govt. Securities as per RBI circular | Not Guilty | |
| 3 | Irregularities in advances against hypothecation | Not Guilty | |
| 4 | Necessary documents not obtained by the bank while issuing loans | Guilty | (5),(6), (7),(8), (9) |
| 5 | Bank has advanced in excess of Rs.10 lakhs against security of shares in violation of RBI circular | Guilty | (5),(6), (7),(8), (9) |
| 6 | Margin Money of loanee against shares were | ||
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