- (1.) This is a reference under Section 21 of the Chartered Accountants Act, 1949 ( Act ).
(2.) The facts giving rise to presentation of the present reference may be summed up thus: a) In a complaint verified on 9th February, 1994 the Registrar of Company, West Bengal, made the following allegations against D.K. De, Partner of M/s. Dey Dutta Lunawat & Co., Chartered Accountants, Calcutta, the respondent in these proceedings:- The Respondent undertook the audit of M/s. Sunbeam Trading Company Pvt. Ltd. for the period ended 31.3.1989 with the full knowledge that his partner Shri K.C. Lunawat is a director in the said Company and as per Section 226(3) of the Companies Act, 1956 he being a partner/of an officer [which includes a Director under Section 2(30) of said Act] was not qualified for appointment as auditor of the said Company. The Respondent has made a statement in his audit report about the true and fair view of the state of affairs of the Company without disclosing his own and his Partner Shri K.C. Lunawat s interest in the said Company. As per the annual return made up to 24.9.1990 of the said Company duly signed by Shri K.C. Lunawat as a Director and filed with the Registrar of Companies, West Bengal, the Respondent and his said partner held 28,400 and 41,800 equity shares respectively out of a total of 95,940 subscribed equity shares of the aforesaid Company. Therefore, the Respondent has committed professional misconduct in terms of Clause (4) of part I of the Second Schedule to the Chartered Accountants Act, 1949, by expressing his opinion on the financial statements of the business of the Company for the period ended 31.3.1989 in which he and his partner had a substantial interest. b) The Council at its meeting held on 5th and 6th December, 1996 was prima facie of the opinion that the respondent was guilty of professional and other misconduct and thus, decided to refer the matter to the Disciplinary Committee for enquiry. Accordingly, the Disciplinary Committee conducted an enquiry in the matter and submitted its report dated December 28, 1998. c) By the said report, the Committee opined that the respondent was guilty of professional misconduct within the meaning of Clause 4 of Part I of Second Schedule to the Act read with Sections 21 and 22 of the Act. d) The aforesaid report was considered by the Council at its meeting held between 19th August and 20th August, 1999 at New Delhi. The Council observed from the report of the Committee that the respondent had accepted the position of auditor though his partner was an officer-director and there was also substantial interest of his relatives in the audited company and no disclosure whatsoever was made by the respondent in his audit report. It further appears that the respondent had pleaded guilty of professional misconduct and had requested for a lenient view as the complaint is filed after 4 1/2 years and he was suffering from cancer the fact which was duly supported by a medical certificate to that effect. e) The Council decided to accept the report of the Disciplinary Committee holding the respondent guilty of professional misconduct within the meaning of Clause 4 of Part I of the Second schedule to the Act read with Sections 21 and 22 of the Act. f) However, in deciding the punishment to be recommended to this Court, in view of submissions made by the respondent about his suffering from serious ailment of cancer, the Council decided to recommend to the High Court that the proceedings against the respondent might be filed.
(3.) The said finding along with recommendation of the Council has, accordingly, been placed before us for passing necessary order in terms of Section 21(6) of the Act.;