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TMI Blog2012 (6) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... the Chartered Accountants Regulations, 1988, the above papers containing the complaint, written statement, rejoinder and comments were considered by the Council at its meeting held in May, 2006 at New Delhi. The Council was prima facie of the opinion that the respondent was guilty of professional misconduct and other misconduct and accordingly, referred the case to the disciplinary committee. (d)A meeting of the disciplinary committee for the purpose of enquiry was fixed on 9-8-2006 but was adjourned. Ultimately, the copy of the report of the disciplinary committee was forwarded to the parties and they were informed that the report would be considered by the council and were requested to send their written representation, if any, in the matter. (e)On consideration of the report of the disciplinary committee along with the written representation received from the complainant and the respondent, the Council arrived at the following conclusions: "1.to accept the Report of the Disciplinary Committee wherein the Respondent had been held not guilty of professional misconduct under charge Nos. 1, 2, 6, 7, 8 and 9 falling within the meaning of Clauses (5), (6) and (8 ) of Part 1 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificates to Sri Subhash Singh. Where as the fact is that an E.G.M. was held on 6-1-2005 at the request of the majority shareholders. In the meeting both Sri Subhash Singh and Mr. De Sarkar were present. Sri Subhash Singh left the meeting, in a huff when questions were raised about his actions regarding affairs of the company. However the meeting was continued. It was attended by all the shareholders except three. The minutes of the said meeting states that Sri Subhash Singh is the defaulter and Mr. De Sarkar twisted the facts and alleged that I have failed to raise valid objections. (Letter - Exhibit D1 and minutes of the meeting with narration of the subsequent actions/correspondence - Exhibit F are attached. Point of contention duly highlighted)." 4. The finding of the Council against the respondent in respect of charge Nos. 3, 4 and 5 are quoted below: "13.5 In respect to charge No. 3, that the Respondent did not perform his duties as a mediator/arbitrator and moreover he held the said position despite being the Auditor of the Company, the Committee noted that the witnesses informed the Committee that as per the Memorandum of Understanding (MOU) they have paid Rs. 60 lakh to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & 5, that the Respondent handed over the share certificate to Shri Subhash Singh, the Committee noted that on the basis of documents placed on record and also agreed to by the Respondent, the Respondent had handed over the share certificate to the other Director, Shri Subhash Singh even on non-acceptance of money by the Complainant. Therefore, in the opinion of the Committee, the Respondent had failed to comply with the terms and conditions of the MOU. Therefore, in the opinion of the Committee, the Respondent was guilty of professional misconduct falling within the meaning of Clause 7 of Part 1 of Second Schedule to the Chartered Accountants Act, 1949 under this charge." 5. Mr. Basu, the learned Senior Advocate appearing on behalf of the Council, has placed before us the entire materials based on which the aforesaid findings were recorded by the council and has submitted that the findings of guilt on the three charges are quite reasonable and having regard to the grave allegations which come within the Second Schedule of the Act, the imposition of penalty recommended by the council was also quite reasonable. Mr. Basu, therefore, prays for affirming the recommendation of the coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule to the Chartered Accountants Act, 1949 read with section 21(5) of the Act as charged by the Council. 8. In order to appreciate the above question, it will be profitable to refer to the provisions contained in sections 21 and 22 of the Act and the Schedules annexed thereto which are quoted below: "21. Procedure in inquiries relating to misconduct of members of Institute.- (1)Where on receipt of information by, or of a complaint made to it, the Council is prima facie of opinion that any member of the Institute has been guilty of any professional or other misconduct, the Council shall refer the case to the Disciplinary Committee, and the Disciplinary Committee shall thereupon hold such inquiry and in such manner as may be prescribed, and shall report the result of its inquiry to the Council. (2)If on receipt of such report the Council finds that the member of the Institute is not guilty of any professional or other misconduct, it shall record its finding accordingly and direct that the proceedings shall be filed or the complaint shall be dismissed, as the case may be. (3)If on receipt of such report the Council finds that the member of the Institute is guilty of any prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he highest civil court of appeal, not including the Supreme Court, exercising jurisdiction in the area in which the person whose conduct is being inquired into carries on business, or has his principal place of business at the commencement of the inquiry: Provided that where the cases relating to two or more members of the Institute have to be forwarded by the Council to different High Courts, the Central Government shall, having regard to the ends of justice and the general convenience of the parties, determine which of the High Courts to the exclusion of others shall hear the cases against all the members. Explanation II.-For the purposes of this section "member of the Institute" includes a person who was a member of the Institute on the date of the alleged misconduct although he has ceased to be a member of the Institute at the time of the inquiry. (8)For the purposes of any inquiry under this section, the Council and the Disciplinary Committee shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the following matters, namely:- (a)summoning and enforcing the attendance of any person and examining him on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, personal communication or interview or by any other means; (7)advertises his professional attainments or services, or uses any designation or expressions other than chartered accountant on professional documents, visiting cards, letter heads or sign boards, unless it be a degree of a University established by law in India or recognised by the Central Government or a title indicating membership of the Institute of Chartered Accountants or of any other institution that has been recognised by the Central Government or may be recognised by the Council; (8)accepts a position as auditor previously held by another chartered accountant or a restricted State auditor without first communicating with him in writing; (9)accepts an appointment as auditor of a company without first ascertaining from it whether the requirements of section 225 of the Companies Act, 1956 (1 of 1956), in respect of such appointment have been duly complied with; (10)charges or offers to charge, accepts or offers to accept in respect of any professional employment fees which are based on a percentage of profits or which are contingent upon the findings or results of such employment, except in cases which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is professional engagement to any person other than his client, without the consent of his client or otherwise than as required by any law for the time being in force; (2)certifies or submits in his name or in the name of his firm a report of an examination of financial statements unless the examination of such statements and the related records has been made by him or by a partner or an employee in his firm or by another chartered accountant in practice; (3)permits his name or the name of his firm to be used in connection with an estimate of earnings contingent upon future transactions in a manner which may lead to the belief that he vouches for the accuracy of the forecast; (4)expresses his opinion on financial statements of any business or any enterprise in which he, his firm or a partner in his firm has a substantial interest, unless he discloses the interest also in his report; (5)fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary to make the financial statement not misleading; (6)fails to report a material mis-statement known to him to appear in a financial statement with which he is concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondent by virtue of the agreement between the parties were not the duties of a Chartered Accountant and thus, in this case, by no stretch of imagination the alleged act or omission could be brought within the purview of the Clause 7 of Second Schedule indicated above. 11. In order to attract the aforesaid clause, the act or omission must be in connection with the duties cast upon a Chartered Accountant in such capacity which no person other than a Chartered Accountant can perform. 12. In the case before us, thus even without entering into the question whether the respondent performed his duties imposed upon him by the agreement reasonably or without any negligence, we are of the view that the breaches alleged do not come within the purview of the expression "professional misconduct". The Council has found the respondent guilty only on the aforesaid charge and no other. 13. Thus, we hold that the respondent is not at all guilty of any professional misconduct as charged under Clause 7 of the Second Schedule and consequently, we answer the reference by holding that no action is called for against the respondent. 14. In the facts and circumstances, there will be, however, no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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