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2010 (9) TMI 217 - HIGH COURT OF DELHIWhether the learned Single Judge has fallen into error by not unsettling the order passed by the ICAI which has failed to take note of the fact that the respondent No.2 was carrying on dual roles, a Director of a holding company and the auditor of its subsidiary company? Whether the circular issued by the Department of Company Affairs has its own connotation? Held that:- On a perusal of clause (11), it is quite vivid that the respondent No.2 was not a whole-time director of LSPH; he was not engaged in any business or occupation and, therefore, the First part of the clause does not get attracted to his case. As far as the proviso is concerned, a Chartered Accountant is not disentitled from becoming a director of a company. The only rider is that he should not be interested in such company as an auditor. The terms which have been laid emphasis upon and correctly so are "such company" and the respondent No.2 is not the auditor of LSPH. He is the auditor of LPHM which is a separate corporate entity. Regard being had to the concept of different juris entity and keeping in view the concept of disqualification which has to be strictly construed, we are of the considered opinion that the analysis made by the learned Single Judge is absolutely impeccable. On a scanning of the anatomy of the aforesaid circular, it is luculent that a practising Chartered Accountant who is connected with the management of a particular company or acts as an auditor of the company should not be employed as a tax or financial advisor of a company in the same group. Whether the respondent No.2 could have been so appointed or not regard being had to the concept of desirability is the subject-matter of controversy which is pending for adjudication before the High Court of Rajasthan. It is worth noting that the disqualification in terms of sections 226(3) and 226(4) of the 1956 Act would depend upon the decision of the Rajasthan High Court. The ICAI ought not to have ventured into the same and judicial propriety warranted that the learned Single Judge also should not have entranced into the said arena and rightly he has not done so. Appeal dismissed.
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