Andhra HC (Pre-Telangana)
Council Of The Institute Of Chartered ... vs V.I. Oommen And Others on 26 October, 1995
Equivalent citations: AIR1996AP254, AIR 1996 ANDHRA PRADESH 254, (1996) 1 ANDHWR 105
Author: V. Rajagopala Reddy
Bench: V. Rajagopala Reddy
ORDER S. Parvatha Rao, J.
1. This is a case forwarded under sub-section (5) of Section 21 of the Chartered Accountants Act, 1949 ('the Act* for short) by the Council of the Institute of Chartered Accountants of India ('the Council' for short) for passing necessary orders in accordance with sub-section (6) of S.21 of the Act. The respondent is a member of the Institute of Chartered Accountants of India ('the Institute' for short). On a complaint dated 26-10-1979 by the Audit Bureau of Circulation Ltd. ('the Bureau' for short) against the respondent, the Council formed a priam facie opinion that the respondent has been guilty of misconduct and referred the case against the respondent to the Disciplinary Committee for inquiry. After inquiry the Disciplinary Committee gave its report dated 26-4-1981. On a consideration of the report after notice to the complainant, i.e. the Bureau, and to the respondent, and, after giving opportunity to them, which was not availed of by the respondent, the Council on 2-6-1989 found that the respondent was guilty of professional misconduct under clauses (5), (6) and (9) of Part I of the Second Schedule to ' the Act in so far as:
"a) he had failed to disclose a material fact known to him, (i.e., the fact of existence of unbanked receipts) which was not disclosed in the Incoming Certificates in respect of the 'Andhra Bhoomi', the 'Deccan Chronicle' and 'the Andhra Bhoomi Sachitra Vara Patrika' for the audit period January/June, 1978 as audited and certified by him but the disclosure of which was necessary to make the said Certificate not misleading;
b) he had failed to report a material mis statement known to him to appear in the above mentioned Certificates with which he was concerned in a professional capacity; and
c) he had failed to invite attention to a material departure from the generally accepted procedure of audit applicable to the circumstances of this case."
The Council recommends that the respondent be reprimanded.
2. Notice of hearing of the case was given to the respondent, i.e., Shri V. I. Oommen, Chartered Accountant, after posting the case for hearing on 20-9-f995. Mr. C. Malla Reddy has filed his appearance for the respondent. We heard him and the learned counsel for the Institute, Mr. A. V. S. Rama Krishnaiah, and Mr. P. Innayya Reddy for the Central Government.
3. At the outset it is necessary to have an idea about the Bureau and its functions. From the Bureau's booklet 'A Guide to ABC Audit' it is seen that the Bureau is a Co-operative Association of Publishers, Advertisers and Advertising Agencies, furnishing accurate reports of publication circulations. The Bureau has established a uniform procedure for obtaining the required information and that procedure fs known as 'the ABC Audit', i.e., standards and method of audit by which circulations are measured. These standards are uniformly applied to all publications in respect of which members are registered with the Bureau "with a view to providing both for the publisher and the advertiser an honest measure of circulations which can be accepted without reserve in any country". It is stated that "the essence of an ABC audit is that it is carried out on a uniform basis, rigidly and without the slightest variation in any respect". It is further stated as follows:
"An important aspect of the circulation audit is to check the cash received for copies purported to have been sold and to ensure it has been banked regularly and intact on the following day except on a bank holiday, in which case it is deposited on next working day. Similarly, in regard to newsprint purchases, wastage and disposal etc. it is essential that they are integrated with the financial records of the business as a whole."
The audit is entrusted to Chartered Accountants and they are furnished with the book-let. In the April, 1960 issue of 'the Chartered Accountant', which is an official journal of the Institute, the attention of the members of the Institute in respect of the ABC circulation audit was drawn in a note which, inter alia, states as follows:
"The Bureau has laid down an audit system known as 'ABC Audit' which is described in a pamphlet known as 'A Guide to ABC Audit'. The Auditor of the Publisher-members is given the following instructions:--
The auditor is required to certify in precisely defined and unvarying terms that these results have been obtained to the auditor's satisfaction strictly in accordance and full compliance with the ABC audit formula'.
Members would further note that their report forms the basis for the issue of ABC circulation certificates, the object of which is to provide an honest measure of reader-interest of publications from the advertiser's point of view which can be accepted without reserve in any country. It hence becomes amply clear that if certificates of circulation figures are incorrect on account of want of sufficient care and diligence on the part of the Auditor, the advertisers would be misled and the object of the Audit Bureau of Circulations would be lost."
4. The relevant facts necessary for the disposal of the present case are as follows: The Telugu daily 'Andhra Bhoomi' and the English daily 'Deccan Chronicle' were being published from Secunderabad originally by a partnership firm (hereinafter referred to as 'the Original Publishers). The Original Publishers were enrolled as member of the Bureau in respect of the said two dailies. M/s. V.K. Madhava Rao & Co., was retained by the Original Publishers to carry out the audit of the circulation figures in respect of the said two dailies. The members of the Bureau are required to submit half-yearly circulation figures (i.e. January to June and July to December) in respect of their publications for which they are registered with the Bureau, in the prescribed form called 'Incoming Certi-' ficate' after due audit and certification by their auditors. While applying for membership the publishers and their auditors should file with the Bureau necessary confirmations regarding maintenance of essential books and records required for proper ABC audits and their compliance with the Bureau's Rules and procedure of audit. The Original Publishers gave the necessary confirmations and were submitting Income Certificates for each half-yearly audit period certified by their Auditors M/s. V.K. Madhava Rao & Co. By letter dated 29-8-1977 the Original Publishers informed the Bureau that as from 9-1-1977 the proprietorship of the said two dailies was transferred by them to one Mr. T. Chandra' sekhar Reddy (hereinafter referred to as 'the Publisher'). It is stated that under the provisions of the Bureau's Articles of Association, the Privileges of its membership are not transferable and therefore the Publisher, i.e. Mr. T, Chandrasekhar Reddy, was advised to file fresh applications in respect of the said two dailies for membership of the Bureau. The Publishers submitted Incoming Certificates in respect of 'Andhra Bhoomi' and 'Deccan Chronicle' for the half-yearly audit period January-June, 1977 duly audited and certified by M/s. V.K. Madhava Rao & Co. without any qualifying report and therefore they were certified by the Bureau in the normal course. By letter dated 18-9-1977 the Publisher informed that he had appointed M/s. Oommen & Mouli Chartered Accoun- tants, as his auditors to carry out the audit of his circulation figures and certification of Incoming Certificates in place of M/s. V.K. Madhava Rao & Co. Thereafter the Publisher submitted his Incoming Certificates for the said two dailies for the half-yearly period July-December, 1977 after audit of their circulation figures and certification by M/s. Oommen & Mouli. In Oct. 1977 the Publisher applied for membership of the Bureau in respect of his new publication 'Andhra Bhoomi Sachitra Vara Patrika', as a weekly. As required by the Bureau he also forwarded two confirmations duly signed by him and his Auditors M/s. Oommen & Mouli regarding books and records maintained by them in respect of the said publication with his letter dated 2-11-1977. The Publisher was advised by the Bureau that according to its procedure his membership in respect of the weekly would be confirmed only after a satisfactory admission audit by the Bureau's Auditor for the audit period January-June, 1978. The Publisher's Incoming Certificates in respect of the two dailies and the weekly for the audit period of January-June, 1978 as audited and certified by M/s. Oommen & Mouli were forwarded to the Bureau by them with their letter dated 29-8-1978. In this context M/s. Oommen & Mouli advised the Bureau that they had not been able to verify the details regarding Publisher's newsprint consumption for the said half-yearly period, but later the Publisher confirmed by his letter dated 13-9-1978 that his Auditors had subsequently carried out verifications of his newsprint stocks and consumption records and this was followed by letter dated 19-9-1978 from his Auditors M/s. Oommen & Mouli to the Bureau confirming the same. There were no other qualifying remarks by M/ s. Oommen & Mouli relating to the Publisher's books and records and his compliance with the Bureau's rules. It is the case of the Bureau that the Incoming Certificates for the half-yearly audit period January-June, 1978 in respect of the said two dailies and the weekly certified by M/s. Oommen & Mouli, inter alia, stated as follows:
"The Publisher's cash receipts from all sources including the circulation receipts, advertisement receipts, receipts in respect of sister publications and miscellaneous receipts of whatsoever nature were regularly banked intact as per the Bureau's rule."
It is stated by the Bureau that relying on the said certificates signed by M/s. Oommen & Mouli, the Bureau issued in good faith corresponding "ABC's Certificates" in respect of 'Andhra Bhoomi' and 'Deccan Chronicle' for January-June, 1978 on 30-9-1978 confirming the figures of net paid sales certified by the Auditors the figures in respect of 'Andhra Bhoomi Sachitra Vara Patrika's were however referred to Bureau's Auditor's, M/s. Brahmayya & Co for the required admission audit. Meanwhile 'Andhra Bhoomi' and 'Deccan Chronicle' were selected by the Bureau's Council of Management for re-check audit for the period January-June, 1978 under the normal four-year' cycle and these were also referred to Bureau's Auditor's for the required re-check audit. On a scrutiny of the Publisher's records for January-June, 1978 the Bureau's Auditor observed that the Publisher had failed to comply with the Bureau's essential rule relating to banking of daily cash collections intact and regularly during the said half-yearly period of audit, and in their reports dated 16-1-1979 expressed their inability to certify the Publisher's figures in respect of his two dailies and the weekly as in accordance with the Bureau's standard procedure. When asked to explain the reason for failure to comply with the Bureau's essential rule requiring banking of daily cash collections intact and regularly during the said period of audit, the Publisher, in his letters dated 27-2-1979 and 17-4-1979 stated that due to disputes between himself and the erstwhile partners of the Original Publishers he was prevented by his bankers, i.e. Canara Bank, Secunderabad, from operating the accounts maintained with them and that he opened a separate account with Vijaya Bank, Secunderabad on 11-7-1977 and that his cash collections were not deposited into the Vijaya Bank account "in apprehension of an action by the erstwhile partners of the publications to bring about an attachment thereon". M/s. Oommen & Mouli also addressed a letter dated 25-4-1979 to the Bureau, wherein they explained the non-compliance of the Bureau, essential rule relating to the banking of daily cash collections during the said period of audit as follows:
"During the audit we had taken up the matter with the Deccan Chronicle Management whose explanations for non-banking according to our opinion was acceptable in view of the fact that there was no wilful departure from the established procedures; because they were prevented from the banking procedure due (to) the unforeseen and abrupt freezing of the banking account with the Canara Bank, Secunderabad."
The Bureau took the view that "M/s. Oommen Mouli had failed in their professional obligation by issuing incorrect certificates" for the half-yearly period January-June, 1978 and therefore was guilty of professional misconduct and therefore complained to the Council by complaint dated 26-10-1979.
5. The complaint made by the Bureau was against M/s. Oommen & Mouli, Chartered Accountants, who were, at the relevant time, the Auditors of the Publishers. The Dicipli-nary Committee observes in its report dated 26-4-1981 that whilst these Incoming Certificates had been signed by Shri C.B. Mouli, a partner in the firm of M/s. Oommen & Mourli, a partner in the firm of' M/s. Oommen & Mouli, Chartered Accountants, the respondent herein, another partner of the said firm, filed written statements dated 9-5-1980 and 2-6-1980, and that when asked by the Disciplinary Committee as to which partner was answered to the charge made by the Bureau, the respondent stated that Sri C.B. Mouli had signed the relevant certificates on behalf of the respondent and that he would take full responsibility for the said certificates, and that it was under these circumstances that the Disciplinary Committee proceeded with the enquiry against the respondent herein alone as he took the responsibility for giving the certificates in question.
6. It is not in dispute that during the said period of audit, i.e. January-June, 1978,' the respondent herein was employed as General Manager, Financial & Personnel, by the Publisher and was also corresponding with the Bureau in that capacity on behalf of the Publisher. This was admitted by the respondent in the enquiry by the Disciplinary Committee.
7. The main contention of the respondent before the Disciplinary Committee was that even in the ABC audit an auditor could exercise his judgment and therefore could satisfy himself whether the Publisher wilfully failed to keep the cash receipts unbanked, and that in the predicament faced by the Publisher at the relevant time the Publisher had to take the step of not banking the receipts although the ABC audit did envisae banking of ay receipts intact.
8. After examining all the material comprehensively the Disciplinary Committee found as follows:
"The most significant part of the ABC Audit report is that the certification is required in unvarying terms. Indeed, it is clearly brought out in the ABC's Booklet 'A Guide to ABC Audit'. The respondent admitted that he was quite aware of the contents of this Guide. The Committee put it to the respondent that in coming to a conclusion about the copies indicated in the Incoming Certificate, he may perhaps be entitled to exercise judgment. But when it came to the question of making a positive affirmation to the effect that cash receipts from all sources have been banked intact, he must know that by including an unqualified positive assertion in that behalf he would mislead the users or that certificate. As a matter of fact, the standard form of the incoming certificate includes this positive affirmation in the following form:--
"Cash receipts from all sources including circulation receipts, advertisement receipts, receipts in respect of sister publications and miscellaneous receipts of whatsoever nature have been regularly banked intact and that payments are made from withdrawals from the Bank on imprest basis or otherwise.' The standard form lays emphasis on the adjective 'all' by printing it in block letters. Also, the standard form uses the words 'regularly banked intact'. These aspects leave no option to a person but to refrain from making a positive assertion, when, to his knowledge, at least some receipts had not been banked. Indeed, in the case of ABC Ltd. v. M.L. Nanda, this is what the Bombay High Court observed at page 748 of Volume IV:
'The essence of an ABC audit is that it is carried out on a uniform basis, rigidly and without the slightest variation in any respect. The auditor is required to certify in precisely defined and unvarying terms that the results have been obtained to the auditor's satisfaction strictly in accordance and lull compliance with the ABC audit formula.' The Court further observed:--
'The auditor's certificate must be uncondi tional, and he is instructed not to make any cancellations, amendments or additions to the certificate as printed on the prescribed form.
The Disciplinary Committee also held that the compelling circumstances under which the publishers had to take decisions to keep the receipts unbanked was not relevant and that the ability or inability of the Publisher to bank his receipts had nothing to do with the respondent's certifying without any qualification that all receipts had been in fact banked and that that was a misleading assertion of the respondent. The Disciplinary Committee also observed that it was "difficult to understand the respondent's conduct of not referring to the existence of unbanked , receipts at all and instead certifying unequivocally that all receipts have been banked". In conclusion the Disciplinary Committee was of the opinion that the respondent was guilty of professional misconduct under Clauses (5)(6) and (9) of part I of the second-schedule to the Act.
9. The Council initially accepted the report of the Disciplinary Committee dated 26-4-1981 without giving notice to the respondent and without furnishing a copy of the report and without giving an opportunity to the respondent to present his case and forwarded the case to this Court with its recommendations and the same was numbered as R.C. No. 115 of 1985. While that R.C was pending, the Supreme Court held in the case of Institute of Chartered Accountants of India v. L. K. Ratna that "a member accused of misconduct is entitled to a hearing by the Council when, on receipt of the report of the Disciplinary Committee, it proceeds to find whether he is or is hot guilty". In view of this decision of the Apex Court, the Council sought withdrawal of R.C. No. 115 of 1985 and under the circumstances it was dismissed as withdrawn by order of this Court dated 27-10-1988. Thereafter copies of the report of the Disciplinary Committee dated 26-4-1981 were sent to the complainant as well as the respondent and they were asked to send their written representations, if any, and were told that if they so desired they could appear before the Council in person and/or through a member of the Institute duly authorised to present their case. The complainant, i.e. the Bureau, replied that it did not consider it necessary to present its case in person and that it agreed with the conclusion of the Disciplinary Committee. The Council states that the respondent did not send any written representation and that no representative appeared on its behalf before the Council when the report of the Disciplinary Committee was considered. After consideration of the facts and the reasons given and the conclusions reached by the Disciplinary Commitee, the Council, as already stated above, agreed with the conclusions of the Disciplinary Committee that the respondent was guilty of professional misconduct under clauses (5), (6) and (9) of Part I of the second-schedule to the Act and recommended to this Court that he should be reprimanded.
10. The learned counsel for the respondent, Mr. C. Malla Reddy, does not seriously dispute the findings of the Council as regards the professional misconduct of the respondent, and, on the facts of the case, rightly so. The material on record, referred to above, clearly establishes that the respondent was guilty of professional misconduct under subsection (5) of Section 21 and Section 22 of the Act read with Part I of the Second Schedule to the Act, which deals with professional misconduct in relation to Chartered Accountants in practice requiring action by a High Court.
11. To the extent relevant for the present case, Part I of the Second Schedule provides that "a Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he -- xxx xxx (5) fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary to make the financial statement not misleading;
(6) fails to report a material mis-statement known to him to appear in a financial statement with which he is concerned in a professional capacity;
xxx - xxx (9) fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances;"
Section 22 of the Act defines professional misconduct and provides that for the purposes of the Act, "the expression 'professional misconduct' shall be deemed to include any act or omission specified in any of the Schedules, but nothing in this section shall be construed to limit or abridge in any way the power conferred or duty cast on the Council under sub-sec. (1) of S. 21 to inquire into the conduct of any member of the Institute under any other circumstances,"
12. In the present case, the publisher himself accepted the fact that he did not bank the cash receipts from all sources intact as per the Bureau's rule during the half-yearly audit period January-June, 1978. That fact is not disputed by the respondent even. The respondent's knowledge of the said fact at the relevant time is also not disputed by him. The material on record establishes that he was very much aware of the said fact throughout. Therefore, the incoming certificates containing Auditor's Certificates given by "M/s. Oommen & Mouli for the half-yearly'' audit period January-June, 1978 in respect of the two dailies and the weekly of the publisher stating that the publisher's cash receipts from all sources were regularly banked intact as per the Bureau's rule is a mendacious statement to the knowledge of the respondent. The respondent has clearly stated that he was responsible for the said incoming certificates being given in that manner at a time when he was admittedly employed as General Manager (Finance & Personnel) of the Publisher. He stated that the remuneration for his services was being given to him in his name. At that time he was also a Chartered Accountant in practice and a partner of the firm -- M/s, Oommen & Mouli, The respondent stated that the incoming certificates in question were signed by Mr. Mouli on his behalf and that he was taking the full responsibility for the said certificates. As per Regulation 11(5) of the Chartered Accountants Regulation, 1964 (equivalent to Regulation 12(6)(b) of the Chartered Accountants Regulation, 1988), the Institute gave a notice to M/s. Oommen & Mouli calling upon it to disclose the name of the member who was answerable to the charge of misconduct. The said firm took time and, therefore, the written statements dated 9-5-1980 and 2-6-1980 were filed by the respondent.
13. The facts of the case clearly establish that the respondent suppressed the fact that the publisher in fact did not bank the cash receipts from all sources during the relevant half-year as required by the Bureau's invariable rule. The stand taken by the respondent before the disciplinary committee was that he could make a judgment as to the materiality of the non-banking of all cash receipts by the publisher at the relevant time while giving the incoming certificates. But that is not an excuse for suppressing a fact which was required to be disclosed by the ABC audit. Nothing prevented the respondent from disclosing the fact and giving his opinion or judgment as a note; it was for the Bureau to decide about the materiality of the deviation by the publisher from the Bureau's rule.
14. We, therefore, hold that the respondent is guilty of professional misconduct as found by the Council.
15. What then are the deserts the respondent merits? The Council recommends reprimand. Mr. C. Malla Reddy, learned counsel for the respondent, submits that he should not even be reprimanded in view of his age and standing. We are not impressed. It is true that Courts have some times taken a lenient view in imposing punishments.
16. In Institute of Chartered Accountants v. P. K. Mukherjee, , the Supreme Court found that it was no defence for the Chartered Accountant i.e., the 1st respondent in that case, to say that he had disclosed the irregularity committed by the Board of Trustees of the Provident Fund to the Company and that it was a breach of duty on his part not to have made a disclosure thereof to the beneficiaries of the Provident Fund in the statement of accounts for the relevant year. The Supreme Court also observed that the conduct of the 1st respondent before it was wholly unworthy of a Chartered Accountant, who was expected to maintain a high standard of professional conduct and that the proper punishment would have been the removal of his name from the Register for a limited period. But, in view of the fact that the proceedings had been pending against him for a long time, the Supreme Court held that the ends of justice would be served in that particular case if respondent No. 1 was severely reprimanded for his misconduct under S. 21(2) of the Act. In holding so, the Supreme Court must have been influenced by the fact that the contention advanced on his behalf, on the basis of his understanding of his duty, was that he owed a duty to the company which appointed him to audit the accounts of the Provident Fund and there was no duty owed by him to the beneficiaries of the fund -- the Supreme Court rejected that contention and stand of respondent No. 1 and held as follows (at page 1108) :--
"It is not correct to say that respondent No. 1 owed a duty only to the company which had appointed him to perform the auditing ..... the auditing was intended for the protection of the beneficiaries and the auditor was expected to examine the accounts maintained by the trustees with a view to inform the beneficiaries of the true financial position. The auditor is, in such a case, under a clear duty towards the beneficiaries to probe into the transactions' and to report on their true character. In our opinion, the legal position of the auditor in the present case is similar to that of the auditor under the Indian Companies Act, 1956. In such a case the audit is intended for the protection of the shareholders and the auditor is expected to examine the accounts maintained by the Directors with a view to inform the shareholders of the true financial position of the company. The Directors occupy a fiduciary position in relation to the shareholders and in auditing the accounts maintained by the Directors the auditor acts in the interest of the shareholders who are in the position of beneficiaries."
Thus, there was a mis-apprehension on the part of the 1st respondent in that case as regards the duty owed by him and he was under the impression that he owed aduty only to the company and that he discharged that duty by informing the Directors of the irregularity committed by the Trustees of the Fund. We are of the view that it was in that context that the Supreme Court did riot impose the punishment of removal of his name from the Register for a limited period taking into consideration also the fact that the proceedings were pending for a long time i.e., for nearly 10 years. We may also observe here that in that case the Supreme Court reversed the judgment of the Calcutta High Court setting aside the findings of the disciplinary committee as confirmed by the Council of the Institute and absolving the 1st respondent of the charges of misconduct.
17. In Registrar of Companies v. Aruna-jatai, , a Division Bench of the Madras High Court found that there was sufficient material before the auditor to excite his suspicion and the least that he should have done was to apprise the share-holders in his report of the circumstances under which the debts came to be written off which were once shown to be good and, therefore, agreed with the Council that the respondent had been grossly negligent in auditing the accounts of the Company in question and failed thereby to discharge his duties. The Division Bench further observed that the Council recommended that the respondent in that case should be removed from the membership of the Institute for a period of two years and that ordinarily the punishment suggested could not be said to be inappropriate in the cases of that kind. However, taking into consideration the circumstances that the respondent in that case evidently appended to the balance-sheet of the years in question a clean certificate in the usual form believing that everything was above board in the conduct of the financial affairs of the Company (of which he was the auditor) by its Directors, the Division Bench held as follows:--
"He should never have taken into account the social position of those in management of the company while he was doing his duties as auditor. We have no hesitation in holding that the respondent did not conform to the high standards of efficiency and integrity which the Institute of Chartered Accountants expects of its members, but at the same time we consider that in the circumstances of the case when practically (sic) particularly there has been no suggestion of any moral turpitude on the part of the respondent, it would be sufficient if we administer which we hereby do a severe reprimand to the respondent for his gross negligence in discharging his duties as an auditor."
Thus, this was a case of negligence in discharge of duties by an auditor, and the Division Bench was impressed by the fact that the auditor was comparatively unsuccessful in his profession and was gullible and could be over-awed by the status and apparent respectability of those in virtual control of the management of the Company and that the management persuaded him to accept their own statements and assurances as to the propriety of their dealings and the auditor accepted the assurances of the persons like Dr. Alagappa Chettiar and others, who had the management of the Company after his death.
18. Secretary to the Council of Chartered Accountants v. B. Shantaram is also a case of gross negligence of the auditor in the performance of his duties and failed to disclose the material fact known to him in that the financial statement had under provided for depreciation in order to inflate the assets which would have the effect of misleading the shareholders in regard to the true state of affairs of the Company. The Council of the Institute recommended a punishment of removal of the name of the auditor for a period of three months. A Division Bench of the Karnataka High Court held in that case that such punishment was clearly warranted having regard to the nature of the charges levelled and the vague and unsatisfactory explanations offered by the auditor, keeping in view the high standard of conduct expected of the members of the Institute. However, certain extenuating circumstances were taken into consideration by the Division Bench, like the fact that for several years he had been the auditor of the Company in question and the practice as regards under provision of depreciation was the same as the years in point and he was not found fault with it any time and that his conduct did not involve any moral turpitude and was not actuated by any motive for securing financial gain and that he was on the verge of retirement from the profession, and it was held that the ends of justice would be served if he was severely reprimanded under Section 21(2) of the Act.
19. In C.A. Institute v. V.K. Madhava Rao AIR 1956 Hyd 205 a Division Bench of the Hyderabad High Court found that the Chartered Accountant in that case, who did not have sufficient experience, acted without due care and caution in giving the certificate regarding the printing and circulation of Deccan Chronicle daily for income-tax purposes but that he was not actuated by any motive of gain, pecuniary or otherwise, and that he issued the certificate without checking the figures stated in the certificate; and under those circumstances the Division Bench held that punishment of suspension would be too severe, and that having regard to the short time which elapsed between the application of the Chartered Accountants Act to Hyderbad State and the giving of the offending certificate a warning would be sufficient to meet the situation.
20. The present case is not one of mere negligence, gross or otherwise. It is not a case of inexperience or of an unsuccessful auditor. It is also not a case where the auditor failed to note that the Publisher did not bank the cash receipts from all sources during the relevant half-year. As found by us, this is a case where the respondent deliberately saw to it that false incoming certificates for the relevant half-year were given at a time when he was also employed by the Publisher as its General Manager, incharge of Finance and Personnel.
21. Therefore, we find that there are no extenuating circumstances in the present case, On the other hand, we find that there are aggraveting circumstances. We find from the record of the disciplinary committee that the respondent defended his conduct with great vehemence. Instead of admitting his guilt, the respondent strenuously strove to defend his action on the specious plea that as a Chartered Accountant he was entitled to judge the materiality of the deviation from the Bureau's invariable rule as regards the banking of cash receipts from all sources by Publishers and could ignore the deviation as per his own judgment. The standardised form and language in which the incoming certificates had to be given as per the ABC Audit requirements did not provide for any variations. If the respondent in fact really took the view at the time the incoming certificates were given that the deviation was not material and he wanted to be honest about it, he could have given a note stating why the Publisher could not bank some of the cash receipts he must not have certified that "the Publisher's cash receipts from All sources including the circulation receipts ..... and miscellaneous receipts of whatever nature were regularly banked intact as per Bureau's rule" and made himself guilty of giving incorrect and false certificates. The prestige and utility of the profession of Chartered Accountants is based on infallible veracity and unquestionable integrity of its members and any conduct on the part of its members wanting in those qualities cannot be allowed to escape without an effective punishment. In G.K. Oka, In re (1952) 22 Com Cas 168 Chagla, C.J., observed as follows:--
"We have had occasion to say this before when the first matter under this new jurisdiction came before us that the Council of the Institute of Chartered Accountants of India is entitled to expect from the chartered accountants the highest professional integrity and the maintenance of the highest traditions. It is only if the Council insists upon chartered accountants maintaining the highest traditions of the profession that the profession of chartered accountants will come to be looked upon as a very high profession..... It is hardly necessary to emphasise what value and importance is attached by all concerned to the signature of a chartered accountant appended to the balance-sheet."
The respondent had not admitted his obvious misconduct and glibly defended his action in giving false certificates. The respondent did not express any contrition before the Council or before us for his conduct. On the facts of the present case, we find that there can be no excuse for false certifications being given by the respondent, knowingly. We are, therefore, of the view of that mere reprimand suggested by the Council would not be an adequate punishment.
22. In Members of C.C.A., India v. J.R. Chatrath, the complaint against the respondent was that he made material mis-statement of facts while applying for the fellowship of the Institute. A Division Bench, of the Punjab High Court held as follows:--
"It is unfortunate that the opposite party showed no contrition in regard to the statements which he made. On the other hand, he persisted in maintaining that what he had been stating was correct, although on his own showing there was a period of six months during which he was not practising as a partner. Even before us the plea was one of jurisdiction which in my opinion has not been established nor have any extenuating circumstances been placed before us. In my opinion, it is a case in which action is called for, and, therefore, I would order the temporary removal of Jagdish Raj Chatrath for a period of one month from the register."
23. In re J. K. Ghosh is also a case where the Chartered accountant was found guilty of making mis-statements. By the time the Judgment was delivered in that case by a Division Bench of the Calcutta High Court, he ceased to be a member of the Institute because he failed to pay the membership subscription. The Division Bench held as follows:--
"We are sensible of the fact that the Council which is charged with the maitenance of the highest standard, of professional etiquette and integrity amongst its members, has recommended that a warning will be sufficient, It appears to us, however, that a mere warning can be of no practical value. Even on the findings of the Council, the respondent was not candid with the Institute up to the last moment, because not only had he failed to apprise the Institute of the true conditions of Basu's service under him, but he was also insisting that the Audit Clerk had served him for longer hours every day than the Council was prepared to believe. It appears to us that a mere warning is not sufficient for a Chartered Accountant who is capable of making mis-statements to his own Institute in regard to the discharge of his professional duties in the interest of a friend or a protege..... We think that the ends of justice require that he should be debarred for some further time from applying to the Institute for the restoration of his name. We are aware that such an order will operate virtually as an order of suspension, but that is precisely the kind of penalty which we consider called for and which we intend to impose."
24. In S. G. Mandre, Inre (1952) 22 Com Cas 130 speaking for a Division Bench of the Bombay High Court of which himself and Gajendragadkar, J., (as the learned Judge then was), Chagla, C.J. suspended the respondent in that case from practising as an accountant for two years, observing as follows:--
"When considering the conduct of the respondent we must also bear in mind that the profession of accountants is a very honourable and learned profession and that our Government for the first time has set up a Council and has conferred upon that Council important powers to deal with disciplinary matters affecting the members of the profession. The standards and traditions of a profession can only be maintained by the members themselves and when such important powers are for the first time vested in the Council it is necessary that the Council should exercise those powers for the benefit and welfare of the profession whose interests are entrusted to its care. It is very important that proper traditions should be laid down in the early days of the Institute and it is also important that the Council should insist upon proper traditions being maintained by those who are on the register of the Council, and therefore, we do not agree that we should really take a lenient view of the case that is before us."
We are of the view that the observations of the learned Chief Justice equally apply for continuing maintenance of proper traditions of the Institute considering the great importance of the profession of Accountants in the administration of the corporate sector in the present day economy of the country.
25. In the light of the above discussion, after anxious consideration of the matter, we think it proper that the respondent herein should be suspended from practising as an Accountant for a period of one month from 1st December, 1995 to 3Ist December, 1995. Accordingly, we direct that the respondent's membership with the Institute of Chartered Accountants of India shall stand suspended from 1st December, 1995 to 31st December, 1995, and, consequently, during that period he shall not practice or function as a Chartered Accountant. There shall be no, order for costs.
26. Order accordingly.