Andhra HC (Pre-Telangana)
C. Krishna Babu vs Institute Of Chartered Accountants Of ... on 7 April, 2000
Equivalent citations: 2000(3)ALD238, 2000(3)ALT39
ORDER
1. These writ petitions are filed by the three Chartered Accountants against the disciplinary actions taken by the Council of the Institute of Chartered Accountants of India under Section 21 of the Chartered Accountants Act, 1949 (for short 'the Act') read with the provisions of the Chartered Accounts Regulations (for short 'the Regulations') on the basis of the complaint lodged by the 4th respondent herein, namely, one Sri M.S. Varadachari who is also a Chartered Accountant. The writ petitioners and the 4th respondent are the partners of the firm called "M/s. Varadachari and Company". This Court while entertaining the WP No.31855 of 1998, by way of interim order directed that the disciplinary actions taken against the petitioner may go on as per the progamme already notified but the Institute shall not take any final decision in the matter until further directions. Similar interim directions are issued in all the three writ petitions and these interim directions have been in operation till date. It is stated that now the proceedings are pending before the Disciplinary Committee and the Disciplinary Committee has yet to submit its report to the Institute.
2. The disciplinary actions taken by the Council arc assailed on the ground that (i) the Council failed to record its prima facie opinion that the petitioners are guilty of professional misconduct as required under Regulation 12(11)(i) of the Regulations and, therefore, the very initiation of the disciplinary actions against the petitioners is without authority of law; (ii) the impugned actions are vitiated on account of non-application of mind inasmuch as the Council has not at all applied its mind to the written statements and the reply affidavits filed before it, before it referred the matter to the Disciplinary Committee; (iii) the President of the Council is biased inasmuch as though he chose to take necessary steps in pursuance of the complaints lodged by the 4th respondent herein, he has not taken any steps so far on the complaints lodged by the petitioners against the 4th respondent; (iv) the allegations made by the 4th respondent are baseless and they do not constitute a misconduct against the petitioners warranting initiation of disciplinary action against the petitioners; (v) the complaint lodged by the 4th respondent on 1-7-1996 was considered and closed by the Council and, therefore, subsequent complaints dated 25-7-1996 and 13-9-1996 lodged by the 4th respondent herein are not maintainable and the Council is incompetent to take any steps on those subsequent complaints.
3. In the counter-affidavit filed by the official respondents 1 to 3, these material allegations made by the petitioners in their pleadings are squarely denied.
4. In my considered opinion, the only point that arises for consideration and decision at this stage of the proceeding is whether the Council of the Institute inherently lacks jurisdiction to initiate disciplinary proceedings against the petitioners who are admittedly its members.
5. The Chartered Accounts Act, 1949 and the Regulations framed thereunder constitute a complete code in itself as regards the misconduct of the members of the Institute. It may be appropriate to refer to the relevant provisions of the Act and that of the Regulations before the Court proceeds to consider the point framed above. The Regulations arc framed by the Council of the Institute by virtue of the powers conferred on it under Section 30 of the Act. Under Section 9 of the Act, it is provided that the Council hall manage the affairs of the Institute of Chartered Accounts and it shall discharge the functions assigned to it under the Act. Section 15(2) (1) confers powers on the Council to take disciplinary actions against its members. Section 22 of the Act defines professional misconduct and Section 21 deals with procedure to be followed in the case of professional or other misconduct. It may be noted that Section 21 covers procedure to be followed while investigating into all classes of misconducts, be it professional or otherwise. Regulation. 12 is the subsidiary provision laying down in great elaboration the procedure to be followed while conducting the inquiry under Section 21 of the Act. Section 30(p) of the Act enables the Council to frame Regulations regarding the powers, duties and functions of President and Vice-President of the Councils;
Section 30(s) deals with framing of regulations relating to exercise of disciplinary powers conferred under the Act. It is in exercise of its power conferred under Section 30(p)(s) of the Act that the Regulations 12 and 67 have been framed by the Council.
6. The Supreme Court in Institute of Chartered Accounts of India v. L.K. Ratna, , in Paragraph 11 observed thus:
"It is apparent that in the scheme incorporated in Section 21 of the Act there are separate functionaries, the Disciplinary Committee, the Council and, in certain cases, the High Court. The controlling authority is the Council, which is only logical for the Council is the governing body of the Institute. When the Council receives information or a complaint alleging that a member of the Institute is guilty of misconduct, and it is prima facia of opinion that there is substance in the allegations it refers the case to the Disciplinary Committee. The Disciplinary Committee plays a subordinate role. It conducts an inquiry into the allegations. Since the inquiry is into allegations of misconduct by the member, it possesses the character of a quasi-judicial proceeding. The Disciplinary Committee thereafter submits a report of the result of the inquiry to the Council. The Disciplinary Committee is merely a Committee of the Institute, with a function specifically limited by the provisions of the Act. As a subordinate body, it reports to the Council, the governing body. The report will contain a statement of the allegations, the defence entered by the member, a record of the evidence and the conclusions upon that material. The conclusions are the conclusions of the Committee. They are tentative only. They cannot be regarded as 'findings'. The Disciplinary Committee is not vested by the Act with powers to record any findings. It is the Council which is empowered to find whether the member is guilty of misconduct. Both Section 21(2) and Section 21(3) arc clear as to that. If on receipt of the report the Council finds that the member is not guilty of misconduct, Section 21(2) requires it to record its finding accordingly and to direct that the proceedings shall be filed or the compliant shall be dismissed. If, on the other hand, the Council finds that the member is guilty of misconduct, Section 21(3) requires it to record a finding accordingly, and thereafter to proceed in the manner laid down in the succeeding sub-sections. So the finding by the Council is the determinative decision as to the guilt of the member, and because it is determinative the Act requires it to be recorded. A responsibility so grave as the determination that a member is guilty of misconduct, and the recording of that finding, has been specifically-assigned by the Act to the governing body, the Council. It is also apparent that it is only upon a finding being recorded by the Council that the Act moves forward to the final stage of penalisation. The recording of the finding by the Council is the jurisdictional springboard for the penalty proceeding which follows."
In the same decision the Supreme Court in Paragraph 24 observed thus:
"There can be no dispute that the function of the Disciplinary Committee of holding an enquiry under Section 21(1) of the Act into the conduct of the member calls for a recording of evidence by the Committee. Its duty does not end there. It must consider the evidence and come to its conclusions. As Section 21(2) of the Act plainly says, it must report 'the result of its enquiry' to the Council."
7. It is one of the well settled principles of law governing the jurisdiction of the extraordinary power of this Court under Article 226 of the Constitution that when a field is occupied by Legislation enacted by the Competent Legislature and the remedies arc provided under the Legislation to the affected interest, the affected interests or persons should work out the remedies as provided under the Statute before invoking extraordinary jurisdiction of the High Court under Article 226 of the Constitution. It is equally established principle that in the matter of disciplinary proceedings, whether it is in the field of industrial adjudication or service under the State or professional bodies or members of the social clubs etc., the persons/members governed by those respective field of law should work out their remedies as envisaged in the respective laws in the first instance before they approach of this Court under Article 226 of the Constitution. Thirdly, it is equally well established that the High Court in exercise of its extraordinary jurisdiction under Article 226 of the Constitution need not and shall not interdict the disciplinary proceedings initiated against a person to whom misconduct is attributed at every stage of such proceeding even in a case where the Court finds that certain procedural irregularities or illegalities have crept into the enquiry.
8. It is not the contention of the learned Counsel for the petitioners that the Institute or the Council or the Disciplinary Committee lack the jurisdiction inherently to initiate disciplinary proceedings against the petitioners on the basis of the complaints lodged by the 4th respondent. The crux of the charge is that the Council took the impugned actions against the petitioners without application of mind and without recording its prima facie opinion that the petitioners are guilty of professional misconduct. In the scheme of things, it is not expected that Council of the Institute shall record its opinion envisaged under Regulation 12(11)(i) supported by reasons in writing. In other words, the opinion required to be recorded by the Council need not be equated to a reasoned decision as understood in the administrative law. Nevertheless, if the action of the Council is assailed in a legal action, the Council is bound to disclose the reasons in support of its opinion to the Court for its review.
9. At the time of hearing, the learned Standing Counsel for the official respondents 1 to 3 produced the record, where the satisfaction of the Council was recorded preceding the initiation of the disciplinary proceedings against the petitioners. The decision/satisfaction of the Council is recorded in the following manner:
"The Council was prima facie opinion that the respondent was guilty of professional and/or other misconduct. It was, therefore, decided to refer the case to the Disciplinary Committee for enquiry."
10. The Supreme Court in Institute of Chartered Accounts v. Mukheerjea, , in Paragraph 5 opined that the Council is competent to hold an enquiry only where the Council is satisfied prima facie that the facts alleged against the member, if proved, would justify the exercise of disciplinary jurisdiction against the member. The ratio of this judgment is that, if the allegation levelled against the member, if proved, would amount to a misconduct on his part, then, the Council has undoubtedly legal competence to initiate disciplinary action against such member. Having perused the complaints lodged by the 4th respondent against the petitioners, I should state that if the allegations levelled by the 4th respondent against the petitioners, if proved, would undoubtedly tentamount to misconduct on the part of the petitioners warranting exercise of disciplinary jurisdiction by the Council. By this observation of mine, it should not be understood that the Court is recording any finding on the truth or otherwise of the allegations. That has to be established in the enquiry envisaged under the Act and the Regulations framed thereunder. At this stage, it may be relevant to note that in the field of disciplinary proceedings, the Court, at the stage of initiation of the proceeding, shall not go into merits of the allegations and the only thing to be seen at that stage of disciplinary action is whether the officer or the authority who has initiated disciplinary action or proceeding has the legal authority to initiate the action, and if the Court finds that the Officer or the authority has the legal authority to initiate the proceedings, the Courts should not interfere with the disciplinary action.
11. Adverting to the allegations of the petitioners that the President of the Council is biased, suffice it to state that the mere fact that the President of the Council did not take steps on the complaints lodged by the petitioners against the 4th respondent herein is not a proof that the President is biased against the petitioners. If there is a delay on the part of the President in not placing the complaints filed by the petitioners against the 4th respondent before the Council for appropriate action, the petitioners can seek appropriate directions to the Council. I need not dilate this aspect further because in the counter-affidavit filed by the official respondents 1 to 3 in Paragraphs 2, 4, 6, 9 and 11 have set out the steps taken by the Council on the complaints filed by the petitioner in WP No.31855 of 1998 against the 4th respondent in that writ petition. There is a factual controversy between the parties as to whether the petitioners in WP Nos.31856 and 31857 of 1998 have lodged any complaint against the 4th respondent. Therefore, it is not necessary for the Court at this stage to resolve this factual controversy whether the petitioners in the above two noted writ petitions have also lodged complaints against the 4th respondent or not.
12. Be that as it may, I do not want to record any conclusive finding on the allegation of bias alleged by the petitioners against the Council and its President. I leave that plea open to be agitated by the petitioners at an appropriate stage in the event of the disciplinary proceedings culminating in adverse orders against the petitioners. The resultant position is that no case is made out for the Court to interdict disciplinary actions initiated by the Council against the petitioners under Section 21 of the Act. Added to this, I have one more weighty reason not to entertain these writ petitions at this stage. I say this because on an earlier occasion the Firm M/s. M.S. Varadachari and Company represented by the 4th respondent herein filed WP No. 14508 of 1996 before this Court complaining that the Council of the Institute did not take any steps on the complaint dated 1-7-1996 lodged by the 4th respondent against the writ petitioners herein and seeking intervention of the Court. A learned single Judge of this Court on 25-7-1996 dismissed that writ petition. Against the said dismissal order, the Firm Varadachari and Company filed WANo.943 of 1996. A Division Bench of this Court while disposing of the said appeal on 3-9-1996 directed that complaints lodged by the 4th respondent herein or the respondents therein or any other person with the Institute must be disposed of at an early date, preferably within a period of two months. This direction issued by the Division Bench has become final. It is trite to state that the parties to the above decision are bound by the same. If the Court were to grant reliefs as prayed for by the petitioners in these writ petitions, it would amount to the learned single Judge interfering with the direction issued by the Division Bench in the above writ appeal and such a course of action is totally impermissible in law. Looking from that angle also, these writ petitions are liable to be dismissed.
13. In the result, writ petitions are dismissed leaving open all the questions touching merits of the allegations levelled by the 4th respondent and the contentions raised by the writ petitioners. Further, the official respondents 1 to 3 are directed to take further steps on the complaints lodged by the petitioner in WP No.31855 of 1998 against the 4th respondent expeditiously and without further loss of time. No costs.