TMI Blog2013 (3) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... itute is guilty of any professional or other mis-conduct. If the Council finds that the member is guilty of any professional or other misconduct, reference of the case is made to the Disciplinary Committee, it will hold an enquiry and submit a report to the Council. If on receipt of the report, the Council holds that the member is not guilty of any professional or other misconduct the complaint is dismissed. And if the Council holds that the member is guilty of professional or other misconduct, then the Council will proceed under Section 21 makes distinction between professional misconduct specified in the First Schedule and the Second Schedule. For professional misconduct specified in the First Schedule, the Council after hearing the member, can make an order of reprimand or recommend removal of name of the member from the register for a period not exceeding five years. As per the proviso to sub-section 4 to Section 21, in case the Council is of the opinion that the name of the member ought to be removed from the register for a period exceeding five years or permanently, it is required to forward the case to the High Court with it's recommendation. Thus in cases not covered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required, some basic and essential facts may be noticed. 4. Between 3rd and 21st March, 2002, the Department of Company Affairs, Government of India had carried out inspection of books of accounts of Global Trust Bank Limited under Section 209A of the Companies Act, 1956. Affairs of Global Trust Bank Limited were also investigated extensively by a Joint Parliamentary Committee. Accounts of Global Trust Bank Limited were audited by Lovelock Lewes (L L, for short), Chartered Accountants, who were also asked to furnish certain details to the Department of Company Affairs and the Reserve Bank of India. 5. On 6th December, 2002, Reserve Bank of India made a complaint to the appellant institute alleging misconduct by the L L and asking for action to be taken against them. Paragraph 2 of the said letter reads as under:- "2. We have been informed by the Department of Company Affairs (DCA), Government of India that the inspection of the Bank conducted by them under Sec. 209A of Companies Act, 1956 revealed violations of Sec. 227, 228, 292 and 211 of the Companies Act by the Auditors of the Bank. The report contained comments to the effect that though the auditor had certified th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany Affairs, Government of India, New Delhi. You are requested to examine the matter in the light of the above report and decide whether the audit firm M/s Lovelock Lewes, Hyderabad, had discharged their duties properly or not. You may also let us know the action taken in this regard at an early date." 8. The appellant institute by their communication dated 10th July, 2003, to the Reserve Bank of India, recapitulated the background of the matter and stated as under:- "3. Our letter of even number dated 29th January, 2003, through which you were inter alia requested to use your good offices to procure from the DCA relevant details/ supporting documents pertaining to the matter and send to us and also to lodge a formal complaint, if you so desire, in the matter. Since we have not received any formal complaint in this matter, we presume that your present letter of 19th June, 2003, is in response to our letter of 29th January, 2003, whereby you have requested the Institute to deal with the matter only under "information" route and not under the complaint route." 9. This was followed by another detailed communication dated 22nd July, 2004, written by the appellant institute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pporting documents. Thereafter, correspondence was exchanged between the Reserve Bank of India and the Institute of Chartered Accountants asking for documents etc. 12. Provisions of CA Act, 1949, relating to misconduct and the procedure and penalties, underwent substantial modification and amendments by the Chartered Accountants (Amendment) Act, 2006 (hereinafter referred to as the Amendment Act, 2006). 13. Sections 21 and 22 of the unamended CA Act, 1949 read as under:- "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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to impose, and the High Court to which such case is transferred shall deal with it as if the case had been forwarded to it by the Council. Explanation I. In this section" High Court" means the 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 veste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a complaint against a member under section 21 shall be investigated and all other enquiries relating to misconduct of such member shall be held by the Disciplinary Committee: Provided that if the subject matter of a complaint is, in the opinion of the President, substantially the same as or has been covered by any previous complaint or information received, the Secretary shall file the said complaint without any further action and inform the Complainant accordingly. (2) A complaint under section 21 shall be in the appropriate Form duly verified and shall be in triplicate. (3) Such complaint shall contain the following particulars namely: (a)the acts and omission which, if proved, would render the person complained against guilty of professional or other misconduct; (b)the oral and or documentary evidence relied upon in support of the allegations made in the complaint, (4) Every complaint, other than a complaint made by or on behalf of the Central or any State Government, shall be accompanied by a deposit of one hundred rupees which will be forfeited if the Council, after considering the complaint, comes to the conclusion that no prima facie case is made out and moreov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for such additional particulars or documents connected therewith either from the Complainant or the respondent as he may consider expedient. (11) (i) If on a perusal of the complaint, the written statement, if any, the Complainant's rejoinder to the written statement, if any, and the respondent's comments on the Complainant's rejoinder, if any, and other relevant documents, the Council is prima facie of opinion that the respondent is guilty of professional and or other misconduct, the Council shall cause an enquiry to be made in the matter by the Disciplinary Committee. (ii) If, on the other hand, the Council is prima facie of opinion that the respondent is not guilty of any professional or other misconduct, the complaint shall be filed and the Complainant and the respondent shall be informed accordingly. (12) (i) Any notice issued by the Secretary under this regulation shall be sent to the member or the firm, as the case may be, by registered post with acknowledgement due. (ii) If any such notice is returned unserved with an endorsement to the effect that the addressee had refused to accept the notice, the notice shall be deemed to have been served. (iii) If the notice i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Council elected by the Council and the other member shall be nominated by the Central Government from amongst the persons of eminence having experience in the field of law, economics, business, finance or accountancy; (c)the Director (Discipline) shall function as the Secretary of the Board. (2) The Board of Discipline shall follow summary disposal procedure in dealing with all cases before it. (3) Where the Board of Discipline is of the opinion that a member is guilty of a professional or other misconduct mentioned in the First Schedule, it shall afford to the member an opportunity of being heard before making any order against him and may thereafter take any one or more of the following actions, namely:- (a)reprimand the member; (b)remove the name of the member from the Register up to a period of three months; (c)impose such fine as it may thinks fit which may extend to rupees one lakh. (4) The Director (Discipline) shall submit before the Board of Discipline all information and complaints where he is of the opinion that there is no prima-facie case; and the Board of Discipline may, if it agrees with the opinion of the Director (Discipline), close the matter or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 21(4) and sub-sections (2) and (4) of Section 21B of the CA Act, 1949, the Chartered Accountants (Procedure for Investigation of Professional and other Misconduct and Conduct of cases) Rules, 2007, have been enacted. These deal with the procedure of investigation relating to complaints and information etc. We are not reproducing the said Rules but what is relevant is that new Rules were enacted after the amendments were made in the CA Act, 1949. 17. Amendments/modifications made by the Amendment Act, 2006, became effective from 17th November, 2006. The Amendment Act, 2006, enacted a transitional provision in the form of Section 21D. As noticed above, the core issue relates to interpretation of the said Section. Section 21D reads as under:- "21D. Transitional Provisions. All complaints pending before the Council or any inquiry initiated by the Disciplinary Committee or any reference or appeal made to a High Court prior to the commencement of the Chartered Accountants (Amendment) Act, 2006, shall continue to be governed by the provisions of this Act, as if this Act had not been amended by the Chartered Accountants (Amendment) Act, 2006." 18. The contention of the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stahlunion GMBH v. Steel Authority of India Ltd. [2000] 25 SCL 102 (SC) and Qudrat Ullah v. Municipal Board Bareilly [1974] 1 SCC 202. 20. Lastly, it was submitted that even if there is a lacuna, the same cannot be filled up or rectified by the Court. Reliance was placed on Raghunath Rai Bareja v. Punjab National Bank [2007] 2 SCC 230; J.P. Bansal v. State of Rajasthan [2003] 5 SCC 134; Shiv Shakti Co-op. Housing Society v. Swaraj Developers [2003] 6 SCC 659; State of Jharkhand v. Govind Singh [2005] 10 SCC 437; Grasim Industries Ltd. v. Collector of Customs [2002] 4 SCC 297; and Union of India v. Deoki Nandan Aggarwal [1992] Supp(l) SCC 323. 21. Needless to state that the appellants have urged to the contrary. 22. The difference in procedure prior to and after the Amendment Act, 2006, is apparent. As per the unamended Act, on receipt of information or a complaint, the Council is required to form a prima facie opinion whether the member of the institute is guilty of any professional or other mis-conduct. If the Council is of the prima facie opinion that the member is guilty of any professional or other misconduct, reference of the case is made to the Disciplinary Committee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aints cases and information cases. A perusal of sub-regulations 2 to 5 would indicate that they pertain to particulars or the format in which the complaint should be made, deposit of fee by the complainant, withdrawal of the complaint and if the complaint is not in proper format, the complaint may be represented after removing objections etc. It is obvious that these formalities/aspects are not required in information cases. Thus, almost identical procedure is prescribed under the 1988 Regulations for enquiries relating to misconduct of members either on information or on a complaint. 26. After the amendment Act, 2006 an entirely different procedure has been prescribed with the requirement that the Council shall establish a disciplinary directorate headed by an officer designated as Director (Discipline) and other employees for making investigation. Section 21(2) post amendment requires the Director (Discipline) to arrive at a prima facie opinion on the occurrence of alleged misconduct and then depending upon whether the professional or other misconduct falls in the First Schedule or Second Schedule, the procedure as specified is to be followed. Section 21A states that the Counci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt shall continue to be governed by the unamended provisions. The amendment made by the Amendment Act, 2006 will not apply to the pending matters before the Council, enquiry initiated by the Disciplinary Committee or appeal or reference before the High Court. The intention is not to disturb pending cases or the existing proceedings. 31. No doubt Section 21, both unamended and post amendment, refers to information and complaint but it would be incorrect to hold that the legislature wanted to make a distinction between complaint or information cases in Section 21D of the CA Act, 1949. Such distinction may be relevant and material as in the case of a complaint there is a complainant, a third party, who wishes to prosecute and has an interest, whereas in the case of information the action may be suo motu or information may be provided by the third party who does not want to, for various reasons, file a formal complaint; but the said distinction is not relevant for Section 21D of the CA Act, 1949. In view of this difference between a complaint and information case, some specific procedures or requirements have been prescribed for complaint cases. In case of information, there is grea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court is to choose that interpretation which represents the true intention of the legislature and give a true meaning to the statutory provision. In G.P. Singh's "Principle of Statutory Interpretation" at page 3, 11th Edition, 2008, it has been observed as under:- " ..The task is often not an easy one and the difficulties arise because of various reasons. To mention a few of them: Words in any language are not scientific symbols having any precise or definite meaning, and language is but an imperfect medium to convey one's thought, much less of a large assembly consisting of persons of various shades of opinion. It is impossible even for the most imaginative Legislature to forestall exhaustively situations and circumstances that may emerge after enacting a statute where its application may be called for. The function of the courts is only to expound and not to legislate. The numerous rules of interpretation or construction formulated by courts are expressed differently by different judges and support may be found in these formulations for apparently contradictory propositions. The problem of interpretation is a problem of meaning of words and their effectiveness as medium of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention had been manifested in express words. Out of the two interpretations, that language of the statute should be preferred to that interpretation which would frustrate it. It is a cardinal rule governing the interpretation of the statutes that when the language of the legislature admits of two constructions, the court should not adopt the construction which would lead to an absurdity or obvious injustice. It is equally well settled that within two constructions that alternative is to be chosen which would be consistent with the smooth working of the system which the statute purported to be regulating and that alternative is to be rejected which will introduce uncertainty, friction or confusion in the working of the system. (See Collector of Customs v. Digvijaysinhji Spg. Wvg. Mills Ltd., at p. 899 and Kesavananda Bharati v. State of Kerala.) The court must always lean to the interpretation which is a reasonable one, and discard the literal interpretation which does not fit in with the scheme of the Act under consideration." 35. In P. Vaikunta Shenoy Co. v. P. Hari Sharma AIR 2008 SC 416, it was held that purposive interpretation should be given to harmonize and effectua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law but the spirit and internal sense of it that makes the law meaningful." 54. In American Home Products Corpn. v. Mac Laboratories (P.) Ltd. (AIR at p. 166, para 66), it was held that: (SCC p. 508, para 66) "66. ... It is a well-known principle of interpretation of statutes that a construction should not be put upon a statutory provision which would lead to manifest absurdity or futility, palpable injustice, or absurd inconvenience or anomaly...." 55. Further, in State v. Sat Ram Dass, the Punjab High Court held that: (AIR p. 498, para 4) "4. ... To avoid absurdity or incongruity even grammatical and ordinary sense of the words can in certain circumstances be avoided;"" 37. The intention of the legislation in enacting Section 21D of the CA Act, 1949 is to draw out or make a distinction between the cases pending before the Council on a complaint or on information, and ensure that the amended provisions would apply to a fresh complaint or information and the unamended Act will apply to the pending complaints or information. It is inconceivable and there is no good reason or cause why distinction should be made between 'information' and 'complaint' for the purpose of d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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