Madras High Court
R. Sunder And Ors. vs Institute Of Chartered Accountants Of ... on 28 July, 1998
Equivalent citations: [2001]103COMPCAS458(MAD)
JUDGMENT Mrs. T. Meenakumari, J.
1. The writ petitions are for the issue of writ of declaration declaring that the Chartered Accountants (Amendment) Regulation, 1988 and more particularly regulation 48 thereof are unconstitutional, illegal and without jurisdiction and ultra vires the Chartered Accountants Act, 1949 ("the Act") and that the petitioners are not obliged to pay the stipend as per the abovesaid provisions.
2. In all the writ petitions the facts are one and the same and hence, the following common order is passed.
3. The petitioners are practising chartered accountants at Madras. The Chartered Accountants Act, 1949 (38 of 1949) was intended to regulate the profession of chartered accountants and for that purpose, to establish the Institute of Chartered Accountants. Any person or association of persons desirous of carrying on the profession of chartered accountant is required to have his name entered in the register under the provisions of Section 3 of the Act. Under the provisions of the Act, every person, before having his name entered in the register, is required to pass minimum examinations, viz., the intermediate and final examinations. He is also required to undergo practical training for the period prescribed as an articled clerk in accordance with the provisions of para 10 of Schedule 8B of the Regulations and is required to produce a certificate showing that he has served as an articled clerk for the stipulated period. It is also stated that Section 15{2) of the Act sets out the duties of the Council which includes "the regulation and the engagement and training of articled and audit clerks". The Council is empowered under Section 30 to make regulations for the purpose of carrying out the objects of the Act. Matters in respect of which regulations could be made, include "training of articled and audit clerks, the fixation of limit within which premia may be charged from articled clerks and the cancellation of articles and termination of audit service for misconduct or for any other sufficient cause". It is also stated that in exercise of powers under the Act, the Council has made regulations known as the Chartered Accountants Regulations, 1964. Under the original regulation 34 the members of the Institute are entitled to train articled clerks. By an amendment dated March 30, 1964, regulation 31, dealing with premium from articled clerks, prohibited charging of such premium in respect of articled clerks entering service on or after July 10, 1964. By a notification dated May 24, 1975, the council amended the regulation by introducing a new regulation 32B. Regulation 32B reads as follows-see [1973] 43 Comp Cas (St.) 161 :
"32B. Stipend to articled clerks.--(1) Every member engaging an articled clerk on or after July 1, 1973, shall pay to such clerk a minimum monthly stipend at the rates specified in sub-regulation (2) or in sub-regulation (3) hereof, as the case may be.
(2) If the normal place of service of an articled clerk is situated in Bombay, Calcutta, Delhi, New Delhi, Kanpur or Madras, the following shall be the minimum rates of the stipend payable under sub-regulation (1)--
(a) in respect of the first year of articled training Rs. 60 per month.
(b) in respect of the second year of articled training Rs. 100 per month.
(c) In respect of the remaining period of articled training Rs. 150 per month.
(3) If the normal place of service of an articled clerk is situated in a place other than the places specified in sub-regulation (2) hereof, the minimum rates at which such employer shall pay stipend under sub-regulation (1) hereof shall be computed at 50 per cent. of the respective rates for the various stages of articled training specified in sub-regulation (2) hereof:
Provided that nothing contained in this regulation shall entitle an articled or audit clerk registered with effect from a date prior to July 1, 1973 to any stipend under sub-regulation (2) or (3) hereof.
Explanation.--For the purpose of determining the rate at which stipend is payable under sub-regulation (2) or sub-regulation (3) hereof the period of articled training of the clerk under any previous employer or employers (not being any such period prior to the 1st of July, 1973) shall also be taken into account."
4. It is also stated that a Division Bench of this court has dismissed the writ petition filed by some of the members of the Institute of Chartered Accountants wherein regulation 32B has been questioned as ultra vires the rule-making power under Section 30, read with Section 15(2} of the Act. That judgment is reported as Pichaikutty (V.) v. Council of the Institute of Chartered Accountants of India [1980] 50 Comp Cas 255. By the impugned notification the Council made the following amendments in the Chartered Accountants Regulations, 1988, namely-see [1990] 67 Comp Cas (St.) 307 :
(1) (i) These regulations may be called the Chartered Accountants (Amendment) Regulations, 1988.
(ii) They shall come into force on the 1st day of October, 1989.
(2) In the Chartered Accountants Regulations, 1988, for sub-regulation (1) of regulation 48, the following shall be substituted namely :
"(i) Every principal engaging an articled clerk shall pay to such clerk every month a minimum monthly stipend at the rates specified below depending on where the normal place of service of the articled clerk is situated :
Situation of the normal place of service of the articled clerk During the first year of training During the second year of training During the remaining period of training (1) (2) (3) (4)
(a) Cities/towns with a population of 20 lakhs and above Rs.225
Rs. 350 Rs.
450(b) Cities/towns having a popula-tion of 3 lakhs and above but less than 20 lakhs Rs. 150 Rs. 225 Rs.
350(c) Cities/towns having a population of less than 3 lakhs Rs. 125 Rs. 175 Rs. 250 Provided that an additional stipend of Rs. 100 per month shall be paid to the articled clerk on his passing the intermediate examination, under these regulations, from the first day of the month following the date of declaration of the result, irrespective of above classification of rates of stipend with reference to cities/towns ;
Provided further that nothing contained in this regulation shall entitle an articled or audit clerk registered with effect from a date prior to July 1, 1973 or for any excess leave taken to any stipend under this regulation.
Explanation 1--For the purpose of determining the rates at which stipend is payable under this regulation, the period of articled training of the clerk under any previous principal or principals (not being any such period prior to July 1, 1973) shall also be taken into account.
Explanation 2.--For the purpose of this regulation, the figures of population shall be taken as per the last published Census Report of India".'
5. The above amendment has come into force from October 1, 1989. The same has been impugned in this writ petition as ultra vires, unreasonable and violative of Article 14 of the Constitution. It is argued on behalf of the petitioner that stipulation for payment to articled clerks caused hardship to the chartered accountants as the articled clerks are yet in the process of learning and they are students. They are not even constantly or regularly available for being' of service to the chartered accountants under whom they are serving. The impugned notification is its total failure to make any distinction from case to case and in effect forces an onerous term upon non-consenting parties, and prohibits the right to carry on the profession by imposing conditions likely to strain financially the chartered accountants. The chartered accountants cannot be forced to pay the stipend as stipulated in the impugned notification and the impugned regulation has to be declared to be applicable only to apprentices who are taken on and after the impugned amendment comes into force and it cannot retrospectively alter a commitment of the chartered accountants who have already taken apprentices under the prevalent provisions. It is also argued that the impugned regulation makes a discrimination with regard to the rate of stipend based on the places classified by population. It is further argued that the respondents are not right in taking the population into account for fixing the stipend to the articled clerks as there is no reasonable nexus for this object to be achieved. Hence, the impugned regulation is violative of Article 14 of the Constitution. It is also argued that by directing the petitioners to pay the fee as prescribed under the amended regulation an unreasonable restriction has been imposed on the petitioners, thereby they are not in a position to carry on the trade and it is violative of Article 19(1)(g) of the Constitution. The learned counsel for the petitioners has relied upon the judgment of this court dated July 13, 1998 in W P. Nos. 5925 and 5926 of 1989-K. Bhagavatheeswaran v. Institute of Chartered Accountants of India [1998] 93 Comp Cas 625 (Mad). By the impugned notification, the Council of the first respondent has classified partnership of chartered accountants in the manner prescribed, in the impugned notification it is also the case of charging of fee by the auditors.
6. In this case, it could be seen that regulation 32B has already been upheld by a Division Bench of this court reported in Pichaikutty's case [1980] 50 Comp Cas 255, wherein this court held that the power of the Council to regulate the engagement and training of such articled clerks and, hence, any regulation relating to the same will be within the regulation-making' power of the Council. The idea of payment of stipend to the articled clerk cannot be said to be opposed to or foreign to the relationship of the member and the articled clerk or the purpose of the training. In that case, the stipend has been fixed on the basis of the places where the articled clerks were working. It was also argued in that case that fixing the stipend basing on the places is discriminatory or violative of Article 14 of the Constitution. The Bench did not agree with that contention and upheld that the classification made in the regulation is an intelligible differentiation and rationale to the objects sought to be achieved and as such reasonable and, therefore, does not violate Article 14 of the Constitution. In this case, the respondents have fixed the stipend basing on the situation of the normal place of service of the articled clerks. It is argued that the above fixation based on the population is ultra vires the Constitution and has no reasonable nexus to the objects sought to be achieved. Now it has to be seen whether fixing up the stipend on the basis of the population is discriminatory and violative of Article 14 of the Constitution. A reading of the regulation shows that the provision was intended to enable the articled clerks to meet a portion of their pocket expenses and to remunerate them for the services rendered as such articled clerks. The object also is to enable bright students to take up the training in accountancy. The stipend is, thus, related to the expenses incurred by the articled clerk as also the services rendered by him. It could be seen that the stipend is fixed based on the population of the cities and towns. The provision is intended to serve an important public purpose. It does not restrict the right of the petitioner to get the training", but it obliges the chartered accountant to pay stipend. The obligation is on the chartered accountant though there is a corresponding right on the member. That obligation imposed by the statute has to be performed and, hence, it could not be said that it is discriminatory and violative of Article 14 of the Constitution. It could also be seen that the amendment has come into force from October 1, 1989, and it did not have the retrospective effect. In this case, the petitioners' counsel in support of his contention was not able to produce any material before this court to show that he hired the articled clerks on contract. In the absence of such material, it cannot be said that the petitioners are not bound by the regulations.
It is to be seen that fixation of the stipend based on the population will not affect the financial capacity of the petitioners. Hence, the contention of the petitioners' counsel that fixing the stipend based on the population is discriminatory and violative of Article 14 of the Constitution is not tenable. In view of the above position and relying upon the judgment of this court in Pichaikutty's case [1980] 50 Comp Cas 255, the writ petitions are dismissed, No costs. Consequently, connected WMPs are dismissed.