COUNCIL OF THE INSTITUTE OF CHARTERED ACCOUNTANTS Vs. B MUKHERJEA

JUDGEMENT

(1.) The material facts leading to the present appeal are not in dispute and may be conveniently stated at the outset. On 17-7-1933, the respondent was enrolled as a registered accountant under the Auditors Certificate Rules, 1932. When the Chartered Accountants Act, 1949, came into operation, the respondent's name was entered as a Member of the Institute of Chartered Accountants of India on 1-7-1949. In 13-9-1950, the respondent was appointed a Liquidator of three companies. The respondent obtained refund of the sums and securities deposited on behalf of the three companies with the Reserve Bank of India. He, however, made no report about the progress of liquidation of the said three companies. Repeated requests made to him by the Assistant Controller of Insurance found no response. As Liquidator the respondent gave a cheque to Shri S. K. Mandal, Solicitor to the Central Government at Calcutta, towards payment of the taxes costs in the winding-up proceedings of one of the companies. The said cheque, was, however, returned dishonoured on the ground that the payment had not been arranged for. When the Assistant Controller of Insurance found that the conduct of the respondent as Liquidator was wholly unsatisfactory and that he would not even show the ordinary courtesy of replying to the letters addressed to him, he proceeded to cancel the appointment of the respondent as Liquidator by his letter dated 29-10-1952. The respondent was then called upon to hand over all books of account, records, documents, etc., to Shri N. N. Das, who was appointed a Liquidator in his place, Shri Das as well as the Assistant Controller of Insurance then made repeated demands on the respondent to deliver to Shri Das the assets and records of the three companies. It is common ground that the respondent had with him securities of the value of Rs. 11,950 and a cash sum of Rs. 642 on account of the United Common Provident Insurance Co. Ltd. He had also with him securities to the value of Rs. 12,000 on account of the Asiatic Provident Co. Ltd., and securities and cash on account of the Citizens of India Provident Insurance Co. Ltd. Out of these amounts the respondent returned only securities of the face value of Rs. 10,000 and Rs. 350 of Asiatic Provident Co. Ltd., and United Common Provident Insurance Co. Ltd., respectively. He failed to send any further securities or cash held by him on account of the said three companies. It was at this stage that a complaint was lodged against the respondent with the Council of the Institute of Chartered Accountants of India in Calcutta. As required by the provisions of the Act, the disciplinary committee of the Council inquired into the matter. Notice was served on the respondent but he filed no written statements within the time fixed. On 1-8-1953, a letter was received from the respondent that he was ill and was unable to attend personally. The respondent had also requested for the adjournment of the case. Proceedings were accordingly adjourned to 29-8-1953, on which date the respondent was represented by a counsel who filed the respondent's affidavit stating that he was prepared to hand over the entire cash, books of account, etc., to the newly appointed Liquidator without rendering the necessary accounts. It appears that Shri Das, the subsequently appointed Liquidator, gave evidence before the disciplinary committee. Though several opportunities were given to the respondent to appear before the disciplinary committee he failed to appear or to take part in the proceedings. Ultimately the committee made its report on September 13, 1953, and found that the respondent was guilty of gross negligence in the conduct of his professional duty in not handing over charge of the assets and the books of account of the said companies to the newly appointed Liquidator. This report was considered by the Council itself as required by the Act. The Council agreed with the finding recorded by the disciplinary committee in substance, but took the view that the acts and omissions of the respondent were more serious than what can be described as gross negligence. The finding of the Council was then forwarded to the High Court of Judicature at Calcutta as required by S. 21 (1) of the Act and the matter was heard by the learned Chief Justice and Mr. Justice Lahiri. By their judgment delivered on January 12, 1955, the reference was rejected on the ground that no action could be taken against the respondent under the Act though the facts proved against the respondent showed that "he had been guilty of grossly improper conduct if not dishonesty." On these facts the main point which arises for our decision is what is the nature, scope and extent of the disciplinary jurisdiction which can be exercised under the provisions of this Act against the respondent.

(2.) It would now be necessary to examine the scheme of the material provisions of the Act. This Act came into force in 1949 and it was passed, because the Legislature thought it expedient to make provision for the regulation of professional accountants and for that purpose it has provided for the establishment of the Institute of Chartered Accountants. Section 2, sub-s. (1)(b) defines a Chartered Accountant as meaning "a person who is a member of the Institute and who is in practice". Section 2, sub-s. (2) provides that a member of the Institute shall be deemed to be in practice when, individually or in partnership with chartered accountants, he, in consideration of the remuneration received or to be received, does any of the acts mentioned in the following 4 sub-cls ..... Sub-cl. (iv) is relevant for our purpose:

(3.) Let us first consider whether the conduct of the respondent amounts to professional misconduct or not. In dealing with this question it is necessary to bear in mind the provisions of S. 2, sub-s. (2) (vi) of the Act. A member of the Institute under this provision shall be deemed to be in practice when he renders such other services as in the opinion of the Council are or may be rendered by a chartered accountant. In other words, just as a member of the Institute who engages himself in the practice of accountancy is by such conduct deemed to be in practice as a chartered accountant, so is he deemed to be in practice as a chartered accountant when he renders other services mentioned in S. 2, sub-s. (2)(iv). What others services attract the provisions of this sub-section has to be determined in the light of the regulations framed under provisions of this Act. Section 30 of the Act confers power on the Council to make regulations by notification in the Gazette of India for the purpose of carrying out the object of the Act and it provides that a copy of such regulation should be sent to each member of the Institute. Section 30, sub-s. (2) sets out the several topics in respect of which regulations can be framed though, as usual, it provides that the enumeration of the different topics is without prejudice to the generality of the powers conferred by S. 30, sub-s. (1). Sub-section (4) lays down that, notwithstanding anything contained in sub-ss. (1) and (2), the Central Government may frame the first regulations shall be deemed to have been made by the Council and shall remain in force from the date of coming into force of this Act until they are amended, altered or revoked by the Council. Regulation 78 is one of the regulations originally framed by the Central Government under S. 30, sub-s. (4). It reads thus: