Madras High Court
V. Pichaikutty And Ors. vs Council Of The Institute Of Chartered ... on 14 November, 1978
Author: V. Ramaswami
Bench: V. Ramaswami
JUDGMENT Ramaswami, J.
1. In these writ petitions, the validity of Regulation 32B of the Chartered Accountants Regulations, 1964 (hereinafter referred to as " the Regulations ", is in question. The Chartered Accountants Act, 1949 (hereinafter referred to as " the Act), was intended to regulate the profession of chartered accountants and for that purpose to establish an institute of chartered accountants. Under Section 3 of the Act, all persons whose names are entered in the register of members at the commencement of the Act and all persons who may after the commencement of the Act have their names entered in the register under the provisions of the Act would constitute a body corporate in the name of the Institute of Chartered Accountants of India. The persons whose names are registered are known as the member's of the Institute. Section 4 enumerates persons who shall be entitled to have their names entered in the register. Among them are persons who have passed such examination and completed such training as may be prescribed for the members of the Institute. Regulation 4 provides that a person shall be entitled to have his name entered in the register if he has passed the examinations and completed the practical training specified in Schedule B or Schedule BB, as the case may be. Schedule B is applicable where the training commenced before 1st October, 1973, and Schedule BB is applicable where the training commenced on or after October 1, 1973. Since, in these cases, we are concerned with persons who had their training commenced on or after October 1, 1973, Schedule BB is the relevant Schedule that is to be noticed. Under the provisions of the Act, Regulations and Schedule BB, in order to entitle a person to have his name entered in the register, he has to pass the entrance examination, intermediate examination and final examination. He shall have also undergone practical training for the period prescribed as articled clerk as provided in para. 10 of Schedule BB and shall produce a certificate in the appropriate form from the appropriate person entitled to issue the certificate to the effect that he has served as an articled clerk for the period required. It is not necessary to notice the other educational qualifications required for writing the preliminary, intermediate and final examinations.
2. The members of the Institute are divided into two classes designated respectively as associates and fellows. Any person shall on his being entered in the register, be deemed to have become an associate member of the Institute and be entitled to use the letters A.C.A. after his name to indicate that he is an associate member of the Institute of Chartered Accountants. An associate member who has been in continuous practice in India for at least five years shall on payment of the prescribed fee be entitled to be registered as the fellow of the Institute and to use the letters, F.C.A., after his name to indicate that he is a fellow of the Institute of Chartered Accountants. Some other persons are also entitled to become a fellow of the Institute and it is not necessary for the purpose of these cases to enumerate all those categories.
3. Chapter III of the Act deals with the constitution and functions of the Council of the Institute, The Council manages the affairs of the Institute and discharges the functions assigned to it under the Act. Apart from the general duty of carrying out the provisions of the Act which is vested in the Council, Section 15(2), in particular, enumerates the duties of the Council which include " the regulation of the engagement and training of articled and audit clerks ". The Council under Section 30 is empowered to make regulations for the purpose of carrying out the objects of the Act. Without prejudice to the generality of the power to make regulations for the purpose of carrying out the objects of the Act, Sub-section (2) of Section 30 authorises the Council to make regulations for all or any of the matters enumerated in that clause. Among the matters in respect of which this provision authorises the making of the regulations is " the training of articled and audit clerks, the fixation of limits 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 ".
4. In exercise of the powers under the Act, the Council has made regulations and the regulations that are now in force are the Chartered Accountants Regulations, 1964. Associates and fellows of the Institute who are in practice or who are deemed to be in practice within the meaning of Sub-section (2) of Section 2 of the Act are entitled to train articled clerks. The maximum number of trainees that a chartered accountant can take is made dependent on the number of years he has been in practice. These are provided under Regulation 29 of the Regulations. Regulation 31 of the Regulations deals, with the premium that could be charged from articled clerks. The corresponding provision in the 1949 Regulations is regulation 34. Under the original regulation 34, the members of the Institute entitled to train articled clerks under the Regulations were enabled to charge as premium from articled clerks such amount as may be agreed to between the parties. Later, by an amendment of this regulation, the council was authorised to prescribe a maximum and minimum rate of premium that could be charged from an articled clerk. It was decided that the minimum limit of the premium may be fixed at Re. 1 and the maximum at Rs. 3,000. By a further amendment by notification dated June 22, 1961, which came into force from July 1, 1961, it was provided that if a premium is charged from an articled clerk, it should not exceed Rs. 2,000. It was also provided that any premium charged by the employer shall be refunded by him in full to the articled clerk in such instalment as the former may deem fit, but not later than 14 days after the date of completion of the termination of the article, as the case may be. It was also provided that if the premium charged by the employer exceeds Rs. 500, it shall be deposited in a separate account in a scheduled bank. The amount deposited together with the interest accruing thereon ought to be refunded to the articled clerk in the manner provided. In the 1964 Regulations, by an amendment dated March 30, 1966, Regulation 31 dealing with premium from articled clerks, prohibited the charging of premium in respect of articled clerks entering the articled service on or after 18th day of July, 1964. By a notification dated May 24, 1973, the Council amended the Regulations by introducing a new Regulation 32B. Since the validity of this Regulation is in question, it may usefully be extracted in full as below :
" 32B. Stipend to articled clerks.--(1) Every member engaging an articled clerk on or after 1st July, 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% 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 1st July, 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. "
5. The petitioners in W.P. Nos. 4010/73, 4646/73, 5858/75 and 3378/76 are members of the Institute of Chartered Accountants and they have filed the writ petitions questioning the validity and enforceability of Regulation 32B against them. W.P. No. 3669 of 1977 has been filed by a candidate who wants to qualify herself as a chartered accountant impugning Regulation 32Bon the ground that it is violative of her rights under Article 19(1)(g) of the Constitution.
6. The first contention raised on behalf of the petitioners, who are the members of the Institute of Chartered Accountants, is that Regulation 32B is beyond the regulation-making power of the Council. According to the learned counsel for the petitioners, the power to make regulations is to be found only in Section 30 and that section does not enable the making of a Regulation directing payment of stipend to an articled clerk. In particular, the learned counsel referred to Section 30(2)(j) of the Act which enabled the Council to make regulations for " the training of articled and audit clerks, the fixation of limits within which premium 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 was contended that this provision is the only provision relating to regulations for the training of articled clerks and this does not enable the Council to make regulations such as Regulation 32B. The impugned Regulation is, therefore, ultra vires the regulation-making powers of the Council, Learned counsel for the respondents., on the other hand, relied on Section 15(2)(b) read with Section 30(1) of the Act as enabling the Council to make regulations such as those contained in Regulation 32B.
7. Section 30(1) contains the general power of the Council to make regulations for the purpose of carrying out the objects of the Act. Section 15, after stating that the duty of carrying out the provisions of the Act shall be vested in the Council, further provided that in particular, and without prejudice to the generality of the power, the duties of the Council shall include " the Regulation of the engagement and training of articled and audit clerks ". Though the Regulation of the engagement and training of articled clerks is put as one of the duties of the council, it is in effect a power of the Council to regulate the engagement and training of such articled clerks. In order to carry out this duty or power, the Council is also authorised to make regulations under Section 30(1), as any Regulation in this regard will be for the purpose of carrying out the objects of the Act, Therefore, the general power contained in Section 30(1) confers power to make Regulation 32B. It is well settled and in fact Sub-clause (2) of Section 30 specifically provides the enumeration or particularisation of matters which may form the subject of regulations under Sub-clause (2), without prejudice to the general power of the Council to make such regulations as are necessary for the purpose of carrying out the objects of the Act. One of the objects of the Act, as set out in Section 15, being Regulation of engagement and training of articled clerks by the Council, any Regulation relating to the same is certainly within the regulation-making power of the Council.
8. It was also contended by the learned counsel for the petitioners that even this power of making regulations relating to engagement and training of articled clerks would not enable the Council to make Regulation directing the members to pay stipend to articled clerks. In fact, it was contended that the payment of stipend is foreign to the nature of the relationship between the member and the articled clerk. According to the learned counsel, the relationship between the member and the articled clerk is akin to that of the teacher and the taught. The requirement of payment of stipend is foreign to this relationship and it is consistent only with the idea or basis of the relationship being the employer and the employed and the student coming for work and not to learn. The provisions of the Act and the Regulations show that only members of the association with sufficient standing, thereby implying that they are fit to impart knowledge by reason of their wide experience and large work, can take persons as articled clerks. The learned counsel also referred to the covenants entered into under the articles executed and registered with the Council and in particular the covenants which require the member to bestow the best ways and means in his power and to the utmost of his skill and knowledge in instructing the articled clerk and affording such reasonable opportunity and work as may be required to enable him to acquire the art, science and knowledge of accountancy. It did not stop with this duty, but went further in requiring him to use his best ways and endeavour to cause the articled clerk to be admitted as a member of the Institute. These provisions are relied on to show that the predominant idea or feature is learning and getting trained and merely because incidentally some benefit is also derived by the member by way of service of the articled clerk, it could not be stated as enabling the Council, to make regulations directing the member to pay stipend on an assumed basis that the incidental benefit derived by the member should not go unremunerated. We are unable to agree with this line of argument of the learned counsel. We have already noticed that in order to become a member of the Institute of Chartered Accountants and to have the name entered in the register, a candidate must have passed the necessary examination and also undergone the training as required in the Regulations. It is seen from the counter-affidavit that in the course of the years since the establishment of the Institute, the Council has found it necessary to recommend to the members payment of stipend to their articled clerks for meeting their out of pocket expenses. Many of the committees appointed from time to time by the Council have felt the need for paying stipends to ensure that bright students were not kept away on account of long period of training without any pecuniary aid. It was also felt that the nature and volume of work turned out by articled clerks during the course of their training are such that they relieve the chartered accountants of a sizeable expenditure on labour. Further, the work turned out by articled clerks directly contributes to the professional work of the member for which the member charges a fee and recovers it from his clients. It is in these circumstances that the Council thought it necessary, and in our opinion rightly, that a Regulation for obliging the members to pay stipend to the articled clerks is necessary and made the impugned regulation. We are, therefore, unable to agree with the learned counsel for the petitioners that the idea of payment of stipend is opposed to or foreign to the relationship of the member and the articled clerk or the purpose of the training.
9. Mr. Padmanabhan, learned counsel appearing for some of the petitioners, contended that the duty of regulating the engagement and training of articled clerks under Section 15(2)(b) of the Act is discharged by making Regulations 19, 29, and Schedules B and BB and the words " Engagement and training " in Section 15(2)(b) of the Act relate only to those that are provided in the Regulations above referred to and not with reference to payment of stipend. We are unable to agree with this contention. It might be that Regulations 19, 29 and Schedules B and BB could also be attributed to the discharge of the functions of the Council under Section 15(2)(b) of the Act. But that could not be considered as exhausting the power to make regulations relating to stipend. There could be no doubt that the Regulation relating to payment of stipend is also a Regulation relating to engagement and training of an articled clerk. The Regulation is, therefore, clearly within the Regulation making power of the Council under Section 30(1) read with Section 15(2)(b) of the Act and the contention of the petitioners to the contrary is untenable.
10. It was next contended by Mr. Padmanabhan, learned counsel appearing for one of the petitioners, that the impugned regulation, in so far as it differentiates between the members having their offices and engaging articled clerks in places situated in Bombay, Calcutta, Delhi, New Delhi, Kanpur or Madras and those who are having offices outside these places and engaging articled clerks in those places, is discriminatory and violative of Article 14 of the Constitution. According to the learned counsel, the Regulation making such a distinction has no relevance either to the paying capacity of the member or the benefit derived by the member. If the object sought to be achieved by the Regulation was to make the member pay for the services rendered by the articled clerk, the distinction made between the places of employment is not legal and is unsustainable. We are unable to agree with this contention of the learned counsel. The provision was intended, as stated by the Council in their counter-affidavit, 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 cannot also be denied that there are disparities in the income of members of the profession in different areas of the country. Further, the differentiation made in Regulation 32B is with reference to the places of service of an articled clerk and not with reference to the members who have entered into the engagement with the articled clerk. Having regard to these facts and the objects sought to be achieved by the impugned Regulation and the disparity in the incomes, we are of the view that the classification made in the Regulation is an intelligible differentiation and rationable to the objects sought to be achieved and as such reasonable and, therefore, does not violate Article 14 of the Constitution.
11. The petitioner in W.P. No. 3669/77 contended that she is a graduate and wants to become a chartered accountant. She contends that Regulation 32B is illegal and ultra vires of Article 19(1)(g) of the Constitution. According to her, the compelling nature of Regulation 32B requiring the chartered accountants to pay stipend even in cases where the articled clerk does not require the same or even in cases where the chartered accountant does not have the capacity to pay, in effect prevents the students who desire to take up the profession of chartered accountant from qualifying themselves for such profession and carrying on the profession of chartered accountants and, therefore, such a provision violates her fundamental right under Article 19(1)(g). The learned counsel appearing for the petitioner contended that the petitioner has a right to waive the stipend and to the extent the Regulation insists on payment of such stipend, also violates her fundamental right. 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 the discharge of the same could not be pleaded by waiver by the person to be benefited from the performance of such obligation. This contention of the petitioner is, therefore, untenable.
12. In these petitions, originally a preliminary objection was raised by the respondents on the ground that since the regulations had been approved by the Central Govt. under Section 30, Clause (3), without impleading the Central Govt., the petitions are not maintainable. Subsequently, the Central Govt. was impleaded in these petitions and this preliminary objection does not survive for consideration.
13. In the result, these writ petitions are dismissed with costs. Counsel's fee, Rs. 500 one set.