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Council of Institute of Chartered Accountants of India Vs. A. Umanath Rao - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKarnataka High Court
Decided On
Case NumberCivil Petn. No. 100 of 1966
Judge
Reported inAIR1969Kant312; AIR1969Mys312; (1969)1MysLJ194
ActsChartered Accountants Act, 1949 - Sections 21(5)
AppellantCouncil of Institute of Chartered Accountants of India
RespondentA. Umanath Rao
Excerpt:
- religious endowments act, 1863 [repeal by act ii /1927] section 6 of act ii of 1927 & section 8; [a.s. bopanna, j] application of the repealing act held, section 8 would clearly indicate that the repeal of religious endowments act would apply in so far as hindu religious endowments to which the act applies. but in so far as the jain religious endowments, the repeal by act (ii) of 1927 is not applicable. further, the religious endowments act 1863 has been repealed only in so far as it applies to hindu religious endowments and the repeal is specific to that extent and therefore the applicability of the act to the jain religious endowments act, 1863 is still applicable to the jains of dakshina kannada. section 10; maintainability of application under power of the district judge to..........i of the second schedule.3. umanath rao, who is respondent, was entrusted with the auditing of accounts of a company called the canara sales corporation, limited in mangalore, he has stated in his explanation that he in turn entrusted the work to audit to his assistant who was a chartered accountant and to a clerk and was under the belief that the work was being done properly by these persons.4. the charges against the respondent were that he did not conduct sample checking of the bank accounts in relation to the accounts of the company and that he did not carry out vouching with respect to the transactions reflected in the accounts of the company. the charge that there was no proper vouching by him was the subject matter of charges 2 to 8. the other charge was incorporated in charge.....
Judgment:

Somnath Iyer, J.

1. This is a case in which the Council of Institute of Chartered Accountants of India has made a recommendation under Section 21(5) of the Chartered Accountants Act 1949 that a certain Umanath Rao who is a member of the Institute may be removed from the membership of the Institute for a period of one year in respect of acts of professional misconduct stated to have been committed by him.

2. The Council did not find Umanath Rao guilty of any professional misconduct such as that enumerated in Schedule I of the Act, but it was of the opinion that the misconduct fell within clauses (7), (8) and (9) of Part I of the Second Schedule.

3. Umanath Rao, who is respondent, was entrusted with the auditing of accounts of a company called the Canara Sales Corporation, Limited in Mangalore, He has stated in his explanation that he in turn entrusted the work to audit to his assistant who was a chartered accountant and to a clerk and was under the belief that the work was being done properly by these persons.

4. The charges against the respondent were that he did not conduct sample checking of the bank accounts in relation to the accounts of the company and that he did not carry out vouching with respect to the transactions reflected in the accounts of the company. The charge that there was no proper vouching by him was the subject matter of charges 2 to 8. The other charge was incorporated in charge 1.

5. The finding of the Council was that the respondent was grossly negligent in the discharge of his duties and it did not discredit the explanation offered by the respondent that he depended upon his assistant who was a chartered accountant and an experienced clerk who were entrusted with the auditing work. It was of opinion that such complete dependence on those two persons amounted to gross negligence and so to professional misconduct within the meaning of clauses (7), (8) and (9) of Part 1 of Schedule II.

6. Mr. Balakrishna Rao appearing for the respondent did not dispute the correctness of the finding of the Council that there was negligence on the part of the respondent, although he made a feeble attempt to suggest that the Council should not have embarked upon an investigation into allegations made by a certain Ramanathan on behalf of the State of Mysore, especially since it was not demonstrated that Ramanathan had the authority to make a complaint with respect to that matter to the Council. But we have no doubt in our mind that the council could commence a disciplinary proceeding in that way.

7. But the Council did not record a finding that there was any dishonesty or mala fides on the part of the respondent. The only negligence imputed to the respondent consisted, in the opinion of the Council, of the omission on his part of independently superintend the work done by his assistant and the clerk. It was explained to us by Mr. Balakrishna Rao that the company was extremely parsimonious in the fixation of the remuneration payable for the audit work and that the remuneration paid to the respondent was an extremely small sum of Rs. 200/- and that for the payment of that small sum of money the respondent could not be expected to exercise greater supervision over the audit work done by his assistant and the clerk.

8. But it is obvious that this postulate has only to be mentioned to be discarded. If the respondent undertook to carry out the audit work for a remuneration which was not commensurate with the onerous duties which he agreed to perform, he cannot escape from the consequences of negligence of those to whom he entrusted the audit work did not conduct it properly or adequately. But the council, in our opinion, was right in not finding that there was dishonesty or mala fides on the part of the respondent.

9. The suggestion of any misconduct stands completely excluded by the evidence given by Kudva who is the managing director of the company. The relevant part of his evidence reads:

'I do not think he had any collusion. There was definite dereliction of duty for a very long time. The Chief Accounts Officer was of a nature that he can play the confidence trick on many people. For example, I have been told that when the Chief Accounts Officer went with the books and other things to the office of Mr. Umanath Rao he will immediately get coffee, tea and tiffin for his staff there..............'

While, therefore, there can be no doubt that there was unreasonable insouciance on the part of the respondent who somewhat apathetically placed complete reliance upon his assistant who was also a chartered accountant and a clerk whom he considered to be an experienced person, it is plain that there was no deliberate dereliction of duty impelled by a desire for personal gain or profit.

10. In a case of that description we think that we should do no more than to make an order of reprimand under Section 21(6)(b) of the Act as pointed out by this Court in Institute of Chartered Accountants of India v. D. B. Kulkarni, AIR 1960 Mys 252 and by the High Court of Madras in the Registrar or Companies v. Arunajatai, : AIR1963Mad99 .

11. We accordingly express our disapprobation of the conduct of the respondent and we express the disapprobation in the form of an admonition which we have today administered to him.

12. Order accordingly.


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