TMI Blog2011 (6) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under section 21 of the Chartered Accountants Act, 1949 ('Act'). 2. The facts giving rise to presentation of the present reference may be summed up thus: ( a )In a complaint verified on 9-2-1994 the Registrar of Companies, West Bengal, made the following allegations against D.K. De, Partner of M/s. Dey Dutta Lunawat Co., Chartered Accountants, Calcutta, the respondent in these proceedings:- "The Respondent undertook the audit of M/s. Sunbeam Trading Company (P.) Ltd. for the period ended 31-3-1989 with the full knowledge that his partner Shri K.C. Lunawat is a director in the said Company and as per section 226(3)( c ) of the Companies Act, 1956 he being a partner/of an officer [which includes a Director under section 2(30) of said Act] was not qualified for appointment as auditor of the said Company. The Respondent has made a statement in his audit report about the true and fair view of the state of affairs of the Company without disclosing his own and his Partner Shri K.C. Lunawat's interest in the said Company. As per the annual return made up to 24-9-1990 of the said Company duly signed by Shri K.C. Lunawat as a Director and filed with the Registrar of Companies, W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Council has, accordingly, been placed before us for passing necessary order in terms of section 21(6) of the Act. 4. Mr. Saptangshu Basu, the learned Senior Advocate appearing on behalf of the Council, submitted before us that there is no dispute that the respondent is guilty as found by the Council as would appear from the fact that in course of hearing he admitted such guilt. Mr. Basu, however, submits that having regard to the illness the respondent was suffering from, the Council having taken a lenient view of filing of the proceeding, this Court should accept the said recommendation. 5. None appeared on behalf of the respondent or the Central Government in spite of service of notice of the reference. 6. In view of the importance of the point involved as to whether in spite of the finding that the respondent is guilty of an offence specified in the Second Schedule to the Act, the law permits filing of the proceedings or dismissal of the complaint, we appointed Mr. Poddar, a Senior Advocate of this Court, as Amicus Curie for assisting us in arriving at our conclusion in answering this reference. 7. Therefore, the first question that arises for determination in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sconduct as is referred to in sub-section (4), it shall forward the case to the High Court with its recommendations thereon. (6) On receipt of any case under sub-section (4) or sub-section (5), the High Court shall fix a date for the hearing of the case and shall cause notice of the date so fixed to be given to the member of the Institute concerned, the Council and to the Central Government, and shall afford such member, the Council and the Central Government an opportunity of being heard, and may thereafter make any of the following orders, namely: ( a )direct the proceedings be filed, or dismiss the complaint, as the case may be; ( b )reprimand the member; ( c )remove him from membership of the Institute either permanently or for such period as the High Court thinks fit; ( d )refer the case to the Council for further inquiry and report. (7) Where it appears to the High Court that the transfer of any case pending before it to another High Court will promote the ends of justice or tend to the general convenience of the parties, it may so transfer the case, subject to such conditions, if any, as it thinks fit to impose, and the High Court to which such case is transferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt may, on its own motion or otherwise, after calling for the records of any case, revise any order made by the Council under sub-section (2) or sub-section (4) of section 21 and may - ( a )confirm, modify or set aside the order; ( b )impose any penalty or set aside, reduce, confirm, or enhance the penalty imposed by the order; ( c )remit the case to the Council for such further inquiry as the High Court considers proper in the circumstances of the case; or ( d )pass such other order as the High Court thinks fit: Provided that no order of the Council shall be modified or set aside unless the Council has been given an opportunity of being heard and no order imposing or enhancing a penalty shall be passed unless the person concerned has also been given an opportunity of being heard. Explanation. In this section "High Court" and "member of the Institute" have the same meanings as in section 21." [Emphasis supplied] 9. After hearing the learned Counsel for the Institute and Mr. Poddar, the learned Amicus Curie, we find that under the provisions of the Act, various types of professional misconducts mentioned in the Act have been classified under the two Schedules a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misconduct specified in the First Schedule, the Council shall afford to the member an opportunity of being heard regarding the proposed punishment and may thereafter make any of the following orders, namely: ( i )reprimand the member; ( ii )remove the name of the member from the Register for such period, not exceeding five years, as the Council thinks fit. If the Council passes any of the aforesaid two orders in the above circumstances, there is no necessity of referring the matter to the High Court for approval. However, if the Council proposes an order that the name of the members ought to be removed from the Register for a period exceeding five years or permanently, it shall not make any such order but shall forward the case to the High Court with its recommendations thereon. (B) Where the misconduct in respect of which the Council has found any member of the Institute is guilty of misconduct referred to in Second Schedule, which are graver in nature, the Council is not competent to pass any penal order but will simply forward the case to the High Court with its recommendations thereon. 13. On receipt of any case of recommendation of higher penalty than reprimand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e involved. It was recorded further that no mens rea was established. In such a situation, the Division Bench decided to drop the proceedings. In our opinion, the said decision, first, cannot be said to have laid down as a proposition of law that even in cases where the misconduct is proved there is no necessity of giving even a minimum punishment of reprimand and secondly, in the said decision, the scheme of the Act, as quoted above, permitting the dismissal of complaint or dropping of proceedings only on finding that the member was not guilty, was not considered. Consequently, we are unable to accept the said decision as a precedent on the point we are dealing with. 16. Thus, we are unable to accept the contention of Mr. Basu or Mr. Poddar, the learned Senior Advocates, appearing for the Institute and as Amicus Curie respectively, that even in cases of the misconduct referred to in the Second Schedule which contains graver misconducts than those specified in the First Schedule, the Council is entitled to recommend dropping of proceedings after the member is found to be guilty by the Council itself. 17. In our opinion, the order referred to in clause (a) of sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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