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"3. Particular reference is invited to Instructions 1 to 4 for filling up the form and the Footnote to Co.l. Proprietary Firms based in the States listed therein only need apply".

(4)d. The proforma should be signed by a partner on behalf of the firm......proprietary firms of F.C. As with registered offices in the following only are being considered for audits in those States: Orissa, Jammu & Kashmir, Assam, Manipur, Meghalaya, Nagaland, Tripura" (emphasis supplied) The respondent herein submitted an application for enrolment on the panel, but the same was rejected on account of the fact that his firm was not a partnership firm, but a proprietary concern. Aggrieved, the respondent filed a writ petition under Article 226 of the Constitution challenging the exclusion of the proprietary concerns from their empanelment as being discriminatory, arbitrary and violative of Article 14 of the Constitution. One of the reliefs prayed for runs as under:

The appellant insists that it is only a smaller group of Chartered Accountants firms that would be eligible for being brought on the panel for audit of public sector undertakings or government concerns. The audit work of public sector undertaking, no doubt, is to be done by the qualified and efficient Chartered Accountants. Once a person is qualified, experienced and efficient, it is difficult to understand how he could be discriminated against only for the reason that he has chosen to act alone in the professional career and has not been able to form a partnership firm. The efficiency, as pointed out by the High Court, springs from the personal experience, proficiency and personal capacities. It is, therefore, not possible to link these characteristics and professional acumen to a person or persons in a firm alone. A single individual as an auditor in a proprietary concern can have such characteristics and professional acumen by himself and also through the assistance of experienced auditor who could be in his services as efficients as any partnership firm. It is often seen in many cases that some of the partners of the partnership firm are sleeping partners with no professional duties to discharge. A partnership concern is not a legal entity like company; it is a group of individual partners. In a partnership firm, it is the partner who will be assisted in carrying out the work but quite remains the eligible Chartered Accountant. It is the same situation as in a proprietary concern where a Chartered Accountant would be carrying on audit work all-in-one. Merely because some of the Chartered Accountants have formed a partnership firm, it cannot be assumed that they become more efficient for carrying out audit work than the individual Chartered Accountant who forms proprietary concern. It is, therefore, evident that the appellant himself erroneously assumed that the partnership firms are more efficient than the proprietary concern in the matter of audit of accounts of the public sector undertakings or of the government concerns.

For the aforesaid reasons the classification between proprietary and partnership firms is arbitrary and unfair, and accordingly falls on the anvil of Article 14 of the Constitution.

It was also urged that the proprietary firms of Chartered Accountants have been allowed empanelment in certain States namely, in the States of Orissa, Jammu & Kashmir, Assam, Manipur, Meghalaya, Nagaland and Tripura out of necessity and exigency and it would be not in public interest to allot audit work of government concerns to partnership firms from outside the State and, therefore, there was no discrimination involved in empanelment of proprietary concern in such States.

We find this submission inconsistent with the earlier submission that the proprietary concern although qualified are not suitable for considerable task of auditing public sector enterprises. Either proprietary concerns are suitable and, therefore, eligible, or they are not. If the proprietary concern of Chartered Accountants are really inefficient, there appears no reason why they have been made eligible to audit the government and public sector undertakings in the aforesaid states. Further, if there was a paucity of partnership firm of Chartered Accountants in a given State, the services of partnership firm who were said to be efficient based on in other States could be taken. Under such circumstances, we are of the view that the impugned notification does not stand the test of Article 14 of the Constitution.