Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Partha Ghosh & Anr. Versus The Institute of Chartered Accountants of India & Ors.

2017 (10) TMI 565 - DELHI HIGH COURT

Disciplinary proceedings instituted against petitioners Chartered accountants - Eligibility of subsequent action - Held that:- Merely because the petitioners have now acquired further information pursuant to their request under the RTI - which, at best, provides them with additional pleas in support of their earlier challenge - does not mean that the subject matter of the present petition was not included in the matter before the Bombay High Court. - The petitioners had challenged the format .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ceedings, which cannot be permitted. - W.P.(C) 8413/2016 & CM Nos. 34783/2016 & 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 res .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d 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 Limited (hereafter the Bank ) - for the year ended 31.03.2003. The petitioners in their respective capacities as a constituting partner and a Senior Manager of the firm, conducted the statutory audit and signed a qualified audit report on 30.09.2003 in respect of the a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the Bank for the year ended 31.03.2002. The special audit report was submitted on 09.05.2003 and directions were issued to the Bank to follow the recommendations contained in the report after adjusting for any material developments/recoveries post 31.12.2002. The RBI had recommended additional provisioning upto ₹596.30 crores while the report prepared by the special auditor recommended provisioning upto ₹373.43 crores, for the year ended 31.03.2002. 3.3 Thereafter, RBI conducted an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

reafter, a series of correspondence was exchanged between the parties. 3.5 On 06.12.2006, PwC received a Show Cause Notice issued by the ICAI wherein reference was made to various articles that appeared in the newspapers in July 2004 as well as the extracts of AFI 2003 for the year ended 31.03.2003. It was claimed that in regard to some of the accounts mentioned in the AFI 2003, the clarifications received from PwC in respect of the statutory audit of the Bank for the financial year ending 31.03 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

der the cover of a letter dated 31.07.2008. Thereafter, there was a change in the constitution of the Disciplinary Committee (ICAI) and the proceedings were required to be held de novo. 3.8 Thereafter, the petitioners successively filed three writ petitions, which are briefly noticed hereafter. 3.9 The petitioners filed a writ petition, being (Writ Petition (L) No. 634/2009), before the Bombay High Court, inter alia, alleging that the Disciplinary Committee failed to adhere to the prescribed pro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ted that the petitioners be afforded an opportunity of hearing as per Regulation 15(3) and the hearings be conducted in conformity with procedure stated in the letter dated 03.12.2007. In case any other procedure was chosen to be adopted, the Disciplinary Committee was required to ensure that the procedure adopted be just and fair. 3.10 Thereafter, the petitioners filed another petition being (Writ Petition No. 1555 of 2009), inter alia, praying that the respondents be directed to comply with th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e years, the petitioners received a letter dated 22.02.2013 informing them about the date of next hearing in the disciplinary proceedings against them. In reply to the same, the petitioners sent a letter 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 t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d 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 (therein) was concerned, until disposal of the appeal. By an order dated 23.06.2016, the Bombay High Court dismissed the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Disciplinary Committee on 30.05.2016 and 31.05.2016. The same were adjourned and the next hearing took place on 14.07.2016 and 15.07.2016. The petitioners again raised an objection on the jurisdiction of the Disciplinary Committee on the same ground as mentioned above. 3.15 On 23.06.2016, the petitioners filed an application under the Right to Information Act, 2005 (hereafter RTI ) with the ICAI requesting for certain information including the minutes recorded by the Council for reaching the p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

filed the present petition, inter alia, contending that the proceedings before the Disciplinary Committee are without jurisdiction as there was no valid prima facie opinion formed by the Council of ICAI for referring the matter to the Disciplinary Committee. The petitioners claim that in terms of Section 21(1) of the Act (as applicable at the material time), the requirement of the Council forming a prima facie opinion that a member is guilty of professional misconduct was a jurisdictional condi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 ther .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on the decision of the Punjab and Haryana High Court in Institute of Chartered Accountants of India v. V.K. Verma: AIR 1965 Punjab 295 and the decision of the Kerala High Court in V.K.S. Narayanan Nambudiri v. Institute of Chartered Accountants and Anr.: AIR 2006 Kerala 1997 in support of its contention. He drew the attention of this Court to paragraphs 5 and 6 of the decision of the Kerala High Court and contended that formation of the prima facie opinion was a condition precedent for referring .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Mr S. Ganesh and he made a categorical statement that the disputes raised were never subject matter of any earlier proceedings. This statement as it turns out can most charitably be described as misleading. 8. As noticed above, ICAI had informed the petitioners by a letter dated 23.10.2007, that as per the provisions of the Regulations , the information was considered by the Council of ICAI alongwith the petitioners' written statement and the Council was prima facie of the opinion that the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and this Committee attempted to change the procedure. 10. The petitioners filed a writ petition (being W.P.(C) No. 634/2009) before the Bombay High Court, inter alia, challenging the vires of Regulation 15(4) of the Regulations and the procedure adopted by the Disciplinary Committee. This was the first writ petition filed by the petitioners regarding the matter relating to the inquiry against them. In their petition, the petitioners had referred to the letter dated 23.10.2007 , informing the pet .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ny order in the inquiry initiated against the petitioners pursuant to the Show Cause Notice dated 06.12.2006. 13. The aforesaid writ petition, being (WP (C) No. 1555 of 2009), was taken up for hearing on 18.08.2009 and the petitioners state that during the course of hearing, the counsel appearing for ICAI stated that the report of AFI 2003 as far as it relates to the petitioner and other documents would be furnished to the petitioner within a period of two weeks. According to the petitioners, th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er:- In the hearings held on 6th and 7th April, 2010, the Petitioners through their Counsel raised various preliminary objections before Respondent No. 3. Respondent No. 3 has yet not giving any ruling on two preliminary issues raised by the Counsel for the petitioners i.e. no justification for formation of prima facie opinion by the Respondent No. 2 and non-production of work papers available with RBI. xxxx xxxx xxxx xxxx The petitioners are aggrieved by the arbitrary, irrational, manifestly, u .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

etitioners 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 Respo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the matter to the Respondent No. 3. The same provision is also contained in Regulation 12(11) of the Chartered Accountants Regulation, 1988 where it is specifically provided as under: 12(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 profess .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the prima facie opinion of the Respondent No. 2 cannot be considered to be a prima facie opinion measuring up to the requirement of Section 21 of the said Act. The Respondent No. 1 however vide notice dated 23rd October 2007 had only informed the Petitioners that the Respondent No. 2 was of prima facie of the opinion that the Petitioners are guilty of professional and/or other misconduct and it was decided to cause an enquiry to be made by the Respondent No. 3. No reasoned opinion was issued or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he Respondent No.2 (as if then was constituted) totally failed to consider and ignore the submission by the Petitioners. Furthermore, the aforesaid letter was issued without disclosing the back ground material on the basis of which the so called prima facie opinion was formed by the Respondent No.2 and/or without even examining the back ground material. Thus the so called prima facie opinion of the Respondent No.2 is bad in law, void ab initio and consequently the direction of the Respondent No. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 Borrower .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to apply his mind. The Respondent No. 1 mechanically cut and pasted the contents of the said extracts into the said notices without even considering the factual position with respect to each of the alleged misconducts. None of the members of the Respondent No. 2 even textually differed on the words in support of the so called prima facie opinion. No records or materials have been provided by Respondent No. 2 or Respondent No. 3 to the Petitioners inspite of several request to demonstrate the bas .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

same. In reality the work of drawing the prima facie opinion was completely and absolutely abdicated by them by asking the Secretary of the Institute to form the prima facie opinion by accepting whatever was mentioned in the said extracts of the AFI Report. 16. The petitioners also made specific prayers, inter alia, praying that the notice dated 23.10.2007 and the proceedings initiated pursuant thereto be set aside. The relevant prayers in this regard are set out as under:- b) this Hon'ble C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

his 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 specificall .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lly challenged before the Bombay High Court. Thus, indisputably, the subject matter of the present petition (which also seeks to impugn the Show Cause Notice dated 06.12.2006 as well as the prima facie opinion formed by the Council) was also the subject matter of the dispute in the petition filed before the Bombay High Court (W.P.(C) No. 1354/2013). Merely because the petitioners have now acquired further information pursuant to their request under the RTI - which, at best, provides them with ad .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o how the Council had formed the prima facie opinion was always within the reach of the petitioners. The petitioners had recourse to the RTI. Further, the petitioners had also approached the Bombay High Court, inter alia, seeking that directions be issued to the respondents to furnish certain information and it was well within their rights to also request for information as to the formation of the prima facie opinion. However, the petitioners chose to challenge the validity of the Council's .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ot be permitted to take that plea against the same party in a subsequent proceeding which is based on the same cause of action; but basically, even this view is founded on the same considerations of public policy, because if the doctrine of constructive res judicata is not applied to writ proceedings, it would be open to the party to take one proceeding after another an urge new grounds every time; and that plainly is inconsistent with considerations of public policy to which we have just referr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version