TMI Blog2020 (3) TMI 518X X X X Extracts X X X X X X X X Extracts X X X X ..... nant is entitled to receive a copy of the order closing such inquiry against the member. Order would necessarily include the reasons for the same. The Rules having themselves created this right in favour of the Complainant, it cannot be accepted that the Complainant would only be supplied with the Information of the closure of the complaint. Various judgments emphasize the requirement of recording reasons to obviate arbitrary and non-considered decisions even by the administrative authorities. Communication of such reasons to the concerned party is, therefore, essential to achieve this objective of the rule of natural justice. In absence of such communication of reasons, the objective of prescribing a condition for recording reasons may itself fail. It must be held that unless the legislature specifically or by necessary implication exempts the Authority from communicating reasons for its decision, such reasons must be communicated to the affected parties - In the present case, no such exemption is prescribed or can be inferred in the Act. Thus, it is held that the respondent no. 1 is under an obligation to provide reasons to the complainant for its prima facie conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Profit and Loss Account for the period ending 31.03.2013 and 30.06.2013, as it was found that the same had overstated assets as well as earnings of the company. 5. The petition further alleges that by a letter dated 04.09.2013, the RBI also observed that an inspection of the Company had revealed that the company had been falsifying its books of accounts and other financial statements over several years, thereby portraying a positive net worth. 6. The RBI also issued a Press Release dated 13.09.2013 inter-alia prohibiting the Company from selling, transferring, creating charge or mortgaging or dealing in any manner with its property and assets without prior written permission of the RBI. 7. It is further alleged that based on a complaint filed by the father of the petitioner, an FIR no.580/2013 has been registered with Police Station: Mahamandir, Jodhpur, Rajasthan. 8. The petitioner filed a complaint bearing Complaint no. 230A/2014 with the Institute of Chartered Accountants of India against the Internal Auditors of the Company and a complaint bearing no.230/2014 against the Statutory Auditors of the Company. 9. The complaint, being Complaint no.230A/2014, has been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Del 6333 and N.C. Bansal v. Board of Discipline of ICAI and Ors., MANU/DE/0887/2014 , further submits that this Court has held that in proceedings before the Director (Discipline)/Board of Discipline/ Disciplinary Committee, the complainant does not have a right to be personally heard before a decision is taken on the complaint closing such complaint. Placing reliance on the judgment of the Supreme Court in Competition Commission of India v. Steel Authority of India Ors MANU/SC/0690/2010 , she further submits that the proceedings before the Director (Discipline) are merely inquisitorial in nature and not adjudicatory in nature and therefore, reasons for closing the complaint need not be provided. 13. The learned counsel for the respondent further submits that, in fact, it is not the case of the respondent that reasons are not required to be recorded, but that reasons/prima facie opinion is not required to be communicated to the complainant upon closure of the complaint; on a challenge being made to the said decision, the record can be produced before the Court where such challenge is made and in any case, even the complainant can obtain the same under the Right to Inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Second Schedule or in both the Schedules to the Act, he shall place the matter before the Disciplinary Committee constituted under Section 21B of the Act. 17. Section 21A (4) of the Act provides that where the Director (Discipline) is of the prima facie opinion that no case of any professional or other misconduct is made out against the member, the Director (Discipline) shall submit before the Board of Discipline the complaint and the Board of Discipline may, if it agrees with the opinion of the Director (Discipline), close the matter or in the case of disagreement, may advice the Director (Discipline) to further investigate the matter. Section 21A(4) is reproduced hereinbelow: Section 21(A) Board of Discipline xxxxxx (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 the case of disagreement, may advise the Director (Discipline) to further investigate the matter. 18. The Central Government has also framed The Chartered Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplaint would be applicable in relation to the information so received. 21. Rule 8 of the Rules prescribes the procedure to be followed by the Director (Discipline) on receipt of a complaint. The same is reproduced hereinbelow: 8. Procedure to be followed by Director on a complaint.- (1) The Director or an officer or officers authorized by the Director, within sixty days of the receipt of a complaint under rule 3, shall,- (a) if the complaint is against an individual member, send particulars of the acts of commission or omission alleged or a copy of the complaint, as the case may be, to that member at his professional address; (b) if the complaint is against a firm, send particulars of the acts of commission or omission alleged or a copy of the complaint, as the case may be, to the firm at the address of its head office, as entered last in the Register of Offices and Firms maintained by the Institute, with a notice calling upon the firm to disclose the name or names of the member or members concerned and to send particulars of acts of commission or omission or a copy of the complaint, as the case may be, to such members: Provided that while disclosing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sent by the respondent within the time allowed under sub-rule (3) or by the complainant within the time allowed under sub-rule (4), the Director shall presume that the respondent or the complainant, as the case may be, have nothing further to state and take further action as provided under this Chapter. 22. Rule 9 of the Rules provides for the examination of the complaint by the Director (Discipline) and reads as under: 9. Examination of the Complaint.- (1) The Director shall examine the complaint, written statement, if any, rejoinder, if any, and other additional particulars or documents, if any, and form his prima facie opinion as to whether the member or the firm is guilty or not of any professional or other misconduct or both under the First Schedule or the Second Schedule or both. (2) (a) Where the Director is of the prima facie opinion that,- (i) the member or the firm is guilty of any misconduct under the First Schedule, he shall place his opinion along with the complaint and all other relevant papers before the Board of Discipline; (ii) the member or the firm is guilty of misconduct under the Second Schedule or both the First and Second Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Information, the Institute will be under no obligation to inform the sender of the progress made in respect of the Information received, including the final orders. 27. In terms of Rule 5(7)(a), the order of closure of the complaint is passed by the Board of Discipline where the Complainant fails to rectify the defect in the complaint within the time allowed and an order for closure is also mandatory under Rule 9(3)(a) where Board of Discipline agrees with the prima facie opinion of the Director (Discipline) that the member is not guilty of any misconduct. 28. Reading the above three provisions together, therefore, it is clear that where the inquiry is initiated on a complaint filed under Rule 3 of the Rules, the Complainant is entitled to receive a copy of the order closing such inquiry against the member. Order would necessarily include the reasons for the same. The Rules having themselves created this right in favour of the Complainant, it cannot be accepted that the Complainant would only be supplied with the Information of the closure of the complaint. 29. Even otherwise, the duty to assign reasons is one of the essential concomitant of the principles of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rjee vs. Union of India, (1990) 4 SCC 594 , the Supreme Court explained the benefit of recording the reasons as under:- 35. The decisions of this Court referred to above indicate that with regard to the requirement to record reasons the approach of this Court is more in line with that of the American courts. An important consideration which has weighed with the court for holding that an administrative authority exercising quasi-judicial functions must record the reasons for its decision, is that such a decision is subject to the appellate jurisdiction of this Court under Article 136 of the Constitution as well as the supervisory jurisdiction of the High Courts under Article 227 of the Constitution and that the reasons, if recorded, would enable this Court or the High Courts to effectively exercise the appellate or supervisory power. But this is not the sole consideration. The other considerations which have also weighed with the Court in taking this view are that the requirement of recording reasons would (i) guarantee consideration by the authority; (ii) introduce clarity in the decisions; and (iii) minimise chances of arbitrariness in decision-making. In this regard a disti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es this object by excluding chances of arbitrariness and ensuring a degree of fairness in the process of decision-making. Keeping in view the expanding horizon of the principles of natural justice, we are of the opinion, that the requirement to record reason can be regarded as one of the principles of natural justice which govern exercise of power by administrative authorities. The rules of natural justice are not embodied rules. The extent of their application depends upon the particular statutory framework whereunder jurisdiction has been conferred on the administrative authority. With regard to the exercise of a particular power by an administrative authority including exercise of judicial or quasi-judicial functions the legislature, while conferring the said power, may feel that it would not be in the larger public interest that the reasons for the order passed by the administrative authority be recorded in the order and be communicated to the aggrieved party and it may dispense with such a requirement. It may do so by making an express provision to that effect as those contained in the Administrative Procedure Act, 1946 of U.S.A. and the Administrative Decisions (Judicial Revi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Kranti Associates Pvt. Ltd. and Anr. vs. Sh. Masood Ahmed Khan and Ors., (2010) 9 SCC 496, the Supreme Court formulated certain principles with respect to the structure of an order thereby enunciating the inevitable requirement of recording of reasons in an order, the same are reproduced hereinunder:- 47. Summarising the above discussion, this Court holds: (a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone pre-judicially. (b) A quasi-judicial authority must record reasons in support of its conclusions. (c) Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. (d) Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. (e) Reasons reassure that discretion has been exercised by the decision-maker on relevant grounds and by disregarding extraneous considerations. (f) Reasons have virtually become as indispensable a component of a decision-making process as observi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns for the decision is of the essence and is virtually a part of due process 37. In T.O.Aleyas (Supra), the Kerala High Court has held that it is mandatory for the Board of Discipline to give reasons for its decision. 38. All the above judgments emphasis the requirement of recording reasons to obviate arbitrary and non-considered decisions even by the administrative authorities. Communication of such reasons to the concerned party is, therefore, essential to achieve this objective of the rule of natural justice. In absence of such communication of reasons, the objective of prescribing a condition for recording reasons may itself fail. It must be held that unless the legislature specifically or by necessary implication exempts the Authority from communicating reasons for its decision, such reasons must be communicated to the affected parties. In the present case, no such exemption is prescribed or can be inferred in the Act. 39. The reliance placed by the respondent on the judgment of this Court in Wholesale Trading Services P Ltd. (Supra), does not in any manner absolve the respondent of its duty of communicating its order, which would necessarily include the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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