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Northern India Regional Council vs The Institute Of Cost Accountants Of ... on 6 July, 2020

Author: Prathiba M. Singh

Bench: Prathiba M. Singh

                                                                                          SINDHU KRISHNAKUMAR

                                                                                          06.07.2020 22:33


                                $~8
                                *      IN THE HIGH COURT OF DELHI AT NEW DELHI
                                +      W.P.(C) 3947/2020 & CM APPLs. 14166/2020, 14167/2020,
                                       14168/2020
                                       NORTHERN INDIA REGIONAL COUNCIL              ..... Petitioner
                                                          Through:     Mr. Thakur Sumit, Advocate.

                                                          versus

                                       THE INSTITUTE OF COST ACCOUNTANTS OF
                                       INDIA                                   ..... Respondent
                                                     Through: Mr. Roopak Bansal, Advocate.

                                       CORAM:
                                       JUSTICE PRATHIBA M. SINGH
                                                    ORDER

% 06.07.2020

1. This hearing has been held through video-conferencing.

2. The present petition has been filed by the Northern India Regional Council (hereinafter 'NIRC') against the Institute of Cost Accounts of India (hereinafter 'ICAI'). The disputes appear to have arisen between the NIRC and ICAI owing to some allegations against one Mr. Vijender Sharma who is alleged to have misappropriated a sizeable amount of funds to the tune of Rs.41,44,422/-.

3. The allegations against Mr. Sharma were raised way back in 2015 and as per the ld. counsel for the Petitioner, Mr. Thakur, the same is part of the finalised accounts of the NIRC as well as the ICAI. Ld. Counsel further submits that as per the resolution passed by the ICAI itself, a debit note was raised which recorded the irregularities in respect of the said amount and the said accounts were placed before Parliament. Thereafter, the NIRC also filed Signature Not Verified Digitally Signed By:PRATHIBA M SINGH W.P.(C) 3947/2020 Page 1 of 6 Signing Date:06.07.2020 22:14 a suit, being Suit No.374/2017, before the ld. District Judge against Mr. Sharma seeking recovery of the said amount.

4. Mr. Thakur, ld. counsel, submits that recently, on 18th June, 2020, a notice was issued by the ICAI calling upon the NIRC to appear before the ICAI for a hearing in relation to alleged non-compliance of the directions issued under Regulation 145A of Cost and Works Account Regulations, 1959 (hereinafter 'CWA Regulations'). It is stated that the said hearing could not be attended by the NIRC's representative owing to the non- availability of records due to the COVID-19 lockdown. Deferment of the hearing was therefore sought by the NIRC on 26th June, 2020. However, despite this request, on 30th June, 2020, the ICAI has passed an order to the following effect:

"...

After detailed deliberations, the Council decided that since the NIRC has repeatedly violated the direction of Council issued under Regulation 145A of the Cost and Works Accountants Regulations, 1959, a strict action is required to be taken to ensure that the said directions are implemented in letter & spirit and also to ensure that the Accounts of the Northern India Regional Council show a True and Fair View. Accordingly following orders / directions were issued by the Council of the Institute in accordance with and under Section 15 (2) (1) of The Cost and Works Accountants Act, 1959, Regulation 93 (2) 93 (3) & 145 A of The Cost and Works Accountants Regulations, 1959.

Headquarters would take over the charge of Administration, Finance and Legal functions of NIRC until further orders. The accounts of NIRC are also be finalized under supervision of Headquarters.

Further, all officers and employees of NIRC would henceforth report directly to the Secretary of the Institute until further orders. The official email IDs of NIRC issued by the Headquarters are also to be suspended. The Head of Finance was authorized to take over the accounts of NIRC for FY 2019-20 and arrange for getting the same audited and the Secretary was authorized to sign the accounts and all other statements for the year 2019-20 and issue a notice for Annual General Meeting of NIRC.

It was also decided to file disciplinary case against the defaulting members of NIRC for violation of direction issued under Regulation 145A of The Cost and Works Accountants Regulation, 1959 and not appearing before the Council on due date. The Secretary was instructed to refer the case to Director (Discipline).

Further, it was decided that the legal expenses borne in any court case filed/ defended by NIRC shall be recovered from the past & present members of NIRC who approved the same, in view of decision taken by Council at its 299 th meeting held on 21st May, 2016, which is as follows:

"It was also decided that legal expenses, if any, incurred by Regional Council or Chapter without approval of the Headquarters shall be debited to the concerned sanctioning authority of the Regional Council or Chapter." "

5. It is this order dated 30th June, 2020 which is impugned in the present writ petition. The submission of Mr. Thakur is two-fold. One, that the dispute regarding the misappropriation of funds is now the subject matter of Signature Not Verified Digitally Signed By:PRATHIBA M SINGH W.P.(C) 3947/2020 Page 3 of 6 Signing Date:06.07.2020 22:14 a civil suit and the NIRC could not have been asked to withdraw the debit note raised in this regard. Secondly, it is submitted that as per Regulations 145 and 145A, any action can be taken by the ICAI against the NIRC only after affording NIRC a hearing. Since NIRC had sought deferment of the hearing, in effect, there has been no hearing in this matter. Accordingly, he prays that the impugned order be stayed and a hearing be granted by the ICAI.

6. Mr. Roopak Bansal, ld. counsel appearing for the ICAI submits that the notice for hearing was adequate and was given to the NIRC. Moreover, as a preliminary ground he submits that the NIRC has no independent existence outside the ICAI and cannot even file a writ petition or a suit as per the applicable statutes and regulations. He further submits that the ICAI has no objection to giving NIRC a hearing.

7. Mr. Bansal, ld. counsel, has also brought to the notice of this Court the order dated 3rd July, 2019 in W.P.(C) 6030/2016 which was filed by Mr. Vijender Sharma against the ICAI. The said order reads as under:

"1. The petitioner has filed the present petition, inter alia, challenging the audited accounts of the respondents inasmuch as it includes an entry debiting the account of the petitioner by a sum of ₹41.44 lakhs. The petitioner claims that the said amount is not recoverable and the accounts are erroneous to that extent. It is the petitioner's case that no opportunity was provided to the petitioner to contest the aforesaid entry.

2. Mr Kalra, learned counsel appearing for respondent no.1 has drawn the attention of this Court to an affidavit filed on behalf of respondent no.1 enclosing therewith the minutes of the meeting of the Council held on 10.12.2018. It is Signature Not Verified Digitally Signed By:PRATHIBA M SINGH W.P.(C) 3947/2020 Page 4 of 6 Signing Date:06.07.2020 22:14 affirmed that the Council for respondent no.1 has passed a Resolution resolving that the debit note raised on the petitioner has no merit and is nullified, cancelled and stands withdrawn.

3. The learned senior counsel appearing for the petitioner submits that in view of the aforesaid affidavit, the petitioner's grievance does not survive and he seeks to withdraw the present petition.

4. The petition is dismissed as withdrawn. The pending application is disposed of"

8. A perusal of the above order shows that the merits of the decision of the council dated 10th December, 2018 was not gone into by the said Court. The writ petition filed by Mr. Sharma was simply withdrawn. Thus, insofar as the disputes between the NIRC and the ICAI is concerned, the prima facie view of this Court is that the same was not adjudicated in the said writ petition. The claim of NIRC against Mr. Sharma is also to be adjudicated in the civil suit that is pending.

9. Considering the overall facts, at this stage, without going into the merits of whether the impugned order passed on 30 th June, 2020 is as per the statute and the Regulations, it is directed as under:

i) The NIRC shall be afforded a hearing by the ICAI on 22nd July, 2020 at 2:00 pm. The NIRC is permitted to file any written response to the notice issued by the ICAI on or before 18 th July, 2020. The ICAI, after affording a hearing to the NIRC, shall pass a detailed order in this regard;

ii) The operation of the order dated 30th June, 2020, by which the administration, finance and legal functions of the NIRC have been taken over by the ICAI, shall stand stayed. Both NIRC and the ICAI Signature Not Verified Digitally Signed By:PRATHIBA M SINGH W.P.(C) 3947/2020 Page 5 of 6 Signing Date:06.07.2020 22:14 shall continue to perform their respective activities as they were performing prior to the passing of the order dated 30th June, 2020.

10. Any order that is passed by the ICAI shall be filed on record along with its counter affidavit which shall be filed on or before 14th August, 2020. Rejoinder, if any, be filed within two weeks thereafter.

11. List on 31st August, 2020.

PRATHIBA M. SINGH, J JULY 06, 2020 Rahul/T Signature Not Verified Digitally Signed By:PRATHIBA M SINGH W.P.(C) 3947/2020 Page 6 of 6 Signing Date:06.07.2020 22:14