1986 (10) TMI 37 - SC - Income Tax

Whether the Council is obliged to give reasons for its finding that a member is guilty of misconduc? Held that - It seems to us that it is bound to do so. In fairness and justice the member is entitled -to know why he has been found guilty. The case can be so serious that it can attract the harsh penalties provided by the Act. Moreover the member has been given a right of appeal to the High Court under section 22A of the Act. To exercise his right of appeal effectively he must know the basis on which the Council has found him guilty. We have already pointed out that a finding by the Council is the first determinative finding on the guilt of the member. It is a finding by a Tribunal of first instance. The conclusion of the Disciplinary Committee does not enjoy the status of a finding . Moreover the reasons contained in the report by the Disciplinary Committee for its conclusion may or may not constitute the basis of the finding rendered by the Council. The Council must therefore state the reasons for its finding. The appeals fail and are dismissed.

Summary

Issues Involved:

1. Right to a hearing by the Council of the Institute of Chartered Accountants of India after the Disciplinary Committee's report.
2. Validity of proceedings due to the presence of Disciplinary Committee members in the Council's consideration of the report.
3. Obligation of the Council to provide reasons for its findings of misconduct.

Detailed Analysis:

1. Right to a Hearing by the Council:

The primary issue was whether a member of the Institute of Chartered Accountants of India is entitled to a hearing by the Council after the Disciplinary Committee has submitted its report. The court noted that the Council is the governing body of the Institute and is responsible for finding whether a member is guilty of misconduct. The Disciplinary Committee conducts an inquiry and submits a report to the Council, but its conclusions are tentative and not determinative. The Council must consider the report, the evidence, and the member's defense before making a finding. The court emphasized the need for the member to have an opportunity to demonstrate any errors in the Disciplinary Committee's conclusions and to point out any procedural errors that might have vitiated the inquiry. The court concluded that the member is entitled to a hearing by the Council before it can find him guilty of misconduct, as this is fundamental to ensuring fairness and justice.

2. Validity of Proceedings Due to Presence of Disciplinary Committee Members:

The second issue was whether the presence of Disciplinary Committee members in the Council's proceedings vitiated the process. The court highlighted the principle that justice must not only be done but must also appear to be done. The participation of the President, Vice-President, and other members of the Disciplinary Committee in the Council's deliberations could lead to a reasonable apprehension of bias. The court noted that the Act does not explicitly exclude the participation of Disciplinary Committee members in the Council's meetings, but the fundamental principle of impartiality necessitates their exclusion. The court suggested legislative amendments to avoid this anomaly and ensure that the Disciplinary Committee's composition does not include the President and Vice-President of the Council. The court concurred with the High Court's view that the findings of the Council were vitiated by the participation of the Disciplinary Committee members.

3. Obligation to Provide Reasons for Findings:

Lastly, the court addressed whether the Council is obliged to provide reasons for its findings of misconduct. The court held that the Council must state the reasons for its finding, as the member is entitled to know why he has been found guilty. This is essential for the member to exercise his right of appeal effectively. The reasons provided by the Disciplinary Committee may not necessarily constitute the basis of the Council's finding, and therefore, the Council must independently state its reasons.

Conclusion:

The Supreme Court upheld the High Court's decision, concluding that the members accused of misconduct are entitled to a hearing by the Council and that the findings of the Council were vitiated by the participation of the Disciplinary Committee members. Additionally, the Council is obliged to provide reasons for its findings. The appeals were dismissed, and no order as to costs was made.