TMI Blog2017 (10) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 & 14495/2017 - - - Dated:- 11-10-2017 - MR VIBHU BAKHRU J. Advocates who appeared in this case: For the Petitioner: Mr. S. Ganesh, Senior Advocate with Ms. Priyanjali Yadav, Mr. Dwaipayan Banerjee. For the Respondents: Mr. Ramji Sriniwasan, Senior Advocate with Ms.Pooja M. Saigal Mr Tushar Bhardwaj. JUDGMENT VIBHU BAKHRU, J 1. The petitioners have filed the present petition, inter alia, praying for a direction to respondent no.3 to quash the disciplinary proceedings instituted against them and the Show Cause Notice dated 06.12.2006 issued pursuant thereto. 2. The petitioners are chartered accountants and were at the material time working with Price Waterhouse Co. (hereafter PwC ), a firm of Chartered Accountants; petitioner no. 1 was one of the Partners and petitioner no. 2 was holding the designation of a Senior Manager in PwC. The petitioners are members of respondent no.1, the Institute of Chartered Accountants of India, (hereafter ICAI ). 3. The context in which the controversy involved in the present petition arises, is briefly set out hereafter: 3.1 PwC was the statutory auditor of the banking company Global Trust Bank Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purposes of Section 21 of the Chartered Accountants Act, 1949 (hereafter the Act ). In terms of Regulation 12(6) of the Chartered Accountants Regulations, 1988, (hereafter Regulations ), PwC was called upon to disclose the names of the members answerable to the charge of alleged misconduct. By letter dated 05.01.2007, PwC submitted the names of the petitioners to ICAI. 3.6 Thereafter, ICAI issued a Show Cause Notice dated 23.10.2007 to the petitioners, whereby it was informed that the above matter was considered in light of the written statements and the Council (ICAI) was prima facie of the opinion that the petitioners were guilty of professional misconduct and therefore, an enquiry would be instituted by the Disciplinary Committee, ICAI (respondent no.3) in the matter. Thereafter, by letter dated 03.12.2007, the petitioners were notified of the date and venue fixed for the hearing and were called upon to appear along with evidence. The said letter also indicated the procedure to be followed by the Disciplinary Committee (ICAI). 3.7 It is stated that no substantial progress was made in the disciplinary proceedings between December 2007 to April 2010 as the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter dated 26.02.2013, inter alia, stating that since three years had been passed during the last hearing and since then Disciplinary Committee had been reconstituted three times, the hearings were required to be held de novo. They also requested that the witnesses of ICAI be called upon to produce the relevant working papers to establish the charges against the petitioners. 3.13 In the meanwhile, the petitioners once again moved the Bombay High Court by way of (Writ Petition No.1354/2013). They now prayed that the respondents be restrained from conducting further proceedings or passing any order in the enquiry instituted against the petitioners till the decision of the Supreme Court in Civil Appeal no. 6142/2012 captioned as P Ramakrishna v. The Institute of Chartered Accountants . The said appeal arose from a decision rendered by a Division Bench of this Court in a matter, wherein it was held that the unamended provisions of Sections 21, 22 and 22A of the Act would be applicable to pending proceedings and information cases. In that case, the Supreme Court has not stayed the proceedings but had restrained ICAI from passing a final order as far as the appellant (ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on pursuant to their request under the RTI - that apart from a bald statement in the minutes of the Council's meeting regarding formation of a prima facie opinion, there was no record whatsoever as to how the prima facie opinion was formed and what was the material considered for such opinion. The petitioners submit that the record only shows that there were oral discussions and there is no record as to who were the members of the Council participating in the discussion; whether the prima facie opinion was unanimous or by majority; and how was the opinion ascertained (whether by way of show of hands, voice vote etc.). According to the petitioners, such prima facie opinion is invalid and further proceedings pursuant thereto are without jurisdiction. 6. Mr S. Ganesh, learned Senior Counsel appearing for the petitioners earnestly contended that there was no reason to support the prima facie opinion or indicate the basis thereof and, therefore, the prima facie opinion that the petitioners were guilty of professional misconduct, was not legally valid. He further contended that this was a jurisdictional requirement and the failure of a valid prima facie opinion had rendered furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding the matter relating to the inquiry against them. In their petition, the petitioners had referred to the letter dated 23.10.2007 , informing the petitioners by the respondent no.2 that ICAI had formed a prima facie opinion, however, they did not seek any specific relief in that regard. However, one of the relief sought by them was as under:- (c) this Hon ble Court be pleased to issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ; order or direction calling for the records and proceedings relating to the present case and after considering the legality and validity thereof be pleased to quash and set aside the show cause notice dated 6th December, 2006 and any proceedings taken in pursuance thereof. 11. The petitioners gave up their challenge to Regulation 15(4) of the Regulations and the petition was disposed of by an order dated 16.04.2009,whereby the Hon'ble Bombay High Court directed the Disciplinary Committee to pass a speaking order in relation to petitioner's application and to grant a fair opportunity of hearing . 12. Thereafter, the petitioners filed another petition (being W.P.(C) No. 1555 of 2009), inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication without assigning any reasons whatsoever for rejecting the Application, the Petitioners are constrained to file the present Writ Petition. 15. The petitioners also specifically alleged that there was nonapplication of mind by the Council of ICAI and a failure to form a prima facie opinion. Some of the relevant grounds urged in the petition are set out below:- (N) As per the provisions of the Act, prior to the amendment, (as made applicable by the Respondent No. 1 in the present case,) it is specifically provided that a prima facie opinion is required to be rendered by the Respondent No. 2 before referring the matter for enquiry to the Respondent No. 3. Section 21(1) of the said Unamended Act, (as it stood prior to its amendment with effect from 17th November 2006) provided that only if the Respondent No. 2 has formed a prima facie opinion that a member of the Respondent No. 1 has been guilty of professional misconduct, that the case shall be referred to the Respondent No. 3. In other words, the formation of the prima facie opinion by the Respondent No. 2 is a sine quo non or jurisdictional condition precedent for the reference of the matter to the Respondent No. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is bad in law, void ab initio and consequently the direction of the Respondent No.2 to the Respondent No.3 to conduct the alleged disciplinary proceedings is also exfacie bad in law, null and void. (P) The Petitioners submitted that since the Respondent No. 2 failed to form a reasoned prima facie opinion as required under Section 21(1) of the said Act any enquiry conducted or action taken or sought to be taken by the Respondent No. 3 pursuant to such an unreasoned prima facie opinion issued by the Respondent No. 2 is void ab initio. The respondent No. 3 has no jurisdiction to hear and/or decide the case of the Petitioners and consequently the entire proceedings are void ab initio and patently lacks jurisdiction. XX XX XX XX XX (T) The Petitioners submitted that Respondent No. 2 did not independently apply its mind to the case to arrive at the prima facie view about the alleged misconduct of the Petitioners. The Respondent No. 2 at that time did not even know the full details of the accounts such as the true name of the Borrowers, code number assigned to the Borro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w cause notice issued to the Petitioners dated 23th October 2007 and any proceedings taken in pursuance thereof; (c) this Hon'ble Court be pleased to issue a writ of prohibition or a writ in the nature of prohibition or any other appropriate writ, order or direction prohibiting the Respondents herein from in any manner whatsoever conducting, proceeding further with or passing any order in the enquiry purported to be initiated against the Petitioners herein pursuant to the show cause notices dated 6th December, 2006 and 23th October 2007; 17. It is apparent from the above that the petitioners had specifically challenged the validity of the prima facie opinion before the Bombay High Court. They had also urged that a fully reasoned opinion was necessary and in absence of the same, a prima facie opinion of the Council of ICAI could not be considered as one that measured up to the requirement of Section 21 of the Act. The letter dated 23.10.2007 informing the petitioners that the Council had formed a prima facie opinion that the petitioners were guilty of professional or other misconduct, was specifically challenged before the Bombay High Court. Thus, indisputably, the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public policy to which we have just referred. 20. In State of Uttar Pradesh v. Nawab Hussain: AIR 1977 SC 1680, the Supreme Court considered a case where the respondent, Nawab Hussain, a Sub Inspector of Police in Uttar Pradesh was dismissed from service by the Deputy Inspector General of Police pursuant to disciplinary proceedings. He filed a writ petition challenging the disciplinary proceedings, inter alia, on the ground that he was not afforded reasonable opportunity to meet the allegations against him and such action taken was malafide. The said writ petition was dismissed. He then filed a suit challenging his order of dismissal, inter alia, on the ground that he was appointed by the Inspector General of Police and, therefore, the Deputy Inspector General of Police was not competent to dismiss him from service. This ground was not urged by him in the writ petition filed earlier and the Allahabad High Court was of the view that the suit filed subsequently was not barred by the principles of res judicata or constructive res judicata. However, the Supreme Court found that view to be erroneous; the Supreme Court held that the subsequent action was clearly barred by the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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