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R.S. PATHAK AND SABYASACHI MUKHARJI, JJ.
Civil Appeals Nos. 1911 and 1912 of 1980, D/-21-10-1986.
Institute of Chartered Accountants of India, Appellant
Versus
L.K. Ratna and others, Respondents.
Chartered Accountants Act, 1949 – Section 21(4), 21, 21(2), 21(3), 21(8), 6(l), 22-A, 17(3) - Minimum Wages Act in 1948 - Section 5(l), 5(l)(a) - Disciplinary Committee - Guilty Of Misconduct - Affairs of Institute are managed by a body known as Council of Institute, which is headed by a President and a Vice-President below him - There are three Standing Committees of Council, and one of them is Disciplinary Committee - Disciplinary Committee consists of President and Vice-President ex-officio of Council, two members elected by Committee from its members and a third member nominated by Central Government - Chapter V of Act contains provisions dealing with cases of misconduct of members of Institute - Section 21 provides for conducting equiries relating to such misconduct and penalties which may be imposed, and Section 22A provides for an appeal by a member against imposition of a penalty - Whether a member of Institute of Chartered Accountants of India is entitled to a hearing by Council of Institute after Disciplinary Committee has submitted its report to Council of its enquiry into allegations of misconduct against member - When Council proceeds to consider Report of Disciplinary Committee, is proceeding vitiated by presence of members of Disciplinary Committee who include President and Vice-President of Council and three other members of it - Whether it could send out letters to Auditor Firms apprising them of existence of Management Consultancy Service and whether it was forbidden from doing so by any rules of Institute - Whether member is guilty of misconduct - Whether law implies a hearing to member at that stage - Whether Council is obliged to give reasons for its finding that a member is guilty of misconduct – Held, There can be no dispute that function of Disciplinary Committee of holding an enquiry under S. 21(l) of Act into conduct of member calls for a recording of evidence by Committee - It must consider evidence and come to its conclusions - As S. 21(2) of Act plainly says, it must report " result of its enquiry" to Council - In absence of express or implied statutory intendment to contrary, it appears to us that members of such a Committee would be disqualified from participating in deliberations of Council when it proceeds to consider report in order to find whether member is guilty of misconduct - President would preside over meeting of Council, and would thus be in a position to control and possibly dominate proceedings during meeting – Court do not doubt that President and Vice-President, and also three other members of Disciplinary Committee, should find it possible to act objectively during decision-making process of Council - But to member accused of misconduct, danger of partisan consideration being accorded to report would seem very real indeed - Before court conclude, court may refer to a third point raised, point being whether Council is obliged to give reasons for its finding that a member is guilty of misconduct - It seems to court that it is bound to do so - In fairness and justice, member is entitled to know why he has been found guilty - Case can be so serious that it can attract harsh penalties provided - Moreover, member has been given a right of appeal to High Court under S. 22 A of Act - Exercise his right of appeal effectively he must know basis on which Council has found him guilty – Court have already pointed out that a finding by Council is first determinative finding on guilt of member - Conclusion of Disciplinary Committee does not enjoy status of a finding - Moreover, reasons contained in report by Disciplinary Committee for its conclusion may or may not constitute basis of finding rendered by Council - Council must, therefore, state reasons for its finding – Appeal Dismissed.
Judgment
PATHAK, J. :- These appeals raise some fundamental questions in regard to the conduct and procedure of disciplinary proceedings taken under the Chartered Accountants Act, 1949. Two of the questions are :-
1. "Whether a member of the Institute of Chartered Accountants of India is entitled to a hearing by the Council of the Institute after the Disciplinary Committee has submitted its report to the Council of its enquiry into allegations of misconduct against the member?
2. When the Council proceeds to consider the Report of the Disciplinary Committee, is the proceeding vitiated by the presence of the members of the Disciplinary Committee who include the President and the Vice-President of the Council and three other members of it?"
2. The appellant is the Institute of Chartered Accountants of India (the "Institute"). The Institute was created as a body corporate under the Chartered Accountants Act, 1949 (the "Act"), and its members are Chartered Accountants. The affairs of the Institute are managed by a body known as the Council of the Institute, which is headed by a President and a Vice-President below him. There are three Standing Committees of the Council, and one of them is the Disciplinary Committee. The Disciplinary Committee consists of the President and the Vice-President ex-officio of the Council, two members elected by the Committee from its members and a third member nominated by the Central Government. Chapter V of the Act contains provisions dealing with cases of misconduct of members of the Institute. Section 21 provides for conducting equiries relating to such misconduct and the penalties which may be imposed, and Section 22A provides for an appeal by a member against the imposition of a penalty. As the Sections are material, they may be set forth :-
S. 21. Procedure in inquiries relating to misconduct of members of Institute
(1) Where on receipt of information by, or of a complaint made to it, 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.
(2) If on receipt of such report the Council finds that the member of the Institute is not guilty of any professional or other misconduct, it shall record its finding accordingly and direct that the proceedings shall be filed or the complaint shall be dismissed, as the case may be.
(3) If on receipt of such report the Council finds that the member of the Institute is guilty of any professional or other misconduct it shall record a finding accordingly and shall proceed in the manner laid down in the succeeding sub-sections.
(4) Where the finding is that a member of the Institute has been guilty of a professional misconduct specified in the First Schedule, the Council shall afford to the member an opportunity of being heard before orders are passed against him on the case, and may thereafter make any of the following orders, namely:-
(a) reprimand the member;
(b) remove the name of the member from the Register for such period, not exceeding five years, as the Council thinks fit :
Provided that where it appears to the Council that the case is one in which the name of the member ought to be removed from the Register for a period exceeding five years or permanently, it shall not make any order referred to in Clause (a) or Clause (b) but shall forward the case to the High Court with its recommendation thereon.
(5) Where the misconduct in respect of which the Council has found any member of the Institute guilty is misconduct other than any such misconduct as is referred to in subsection (4), it shall forward the case to the High Court with its recommendations thereon.
(6) On receipt of any case under sub-section (4) or sub-section (5), the High Court shall fix a date for the hearing o
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