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Council of the Institute of Chartered Accountants of India Vs. C.H. Padliya and Co. and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case (Ch. Acc.) No. 53 of 1974
Judge
Reported in[1979]49CompCas478(MP)
ActsChartered Accountants Act, 1949 - Sections 21, 21(5), 21(6) and 22; Chartered Accountants Regulations, 1964 - Regulation 36
AppellantCouncil of the Institute of Chartered Accountants of India
RespondentC.H. Padliya and Co. and ors.
Appellant AdvocateS.N. Kohli, Adv.
Respondent AdvocateK.A. Chitale and ;K.N. Puntambekar, Advs.
DispositionComplaint dismissed
Cases ReferredInstitute of Charteted Accountants v. M. Rajamany
Excerpt:
- - , indore, and he failed to take any steps in sending the necessary information to the institute even after he had been informed by the institute itself. and he should not have allowed his clerk to engage himself in other employment during the period of his articles without prior permission of the council and these findings should not be interfered with by this court as they are the best judges of what their own standard of professional conduct should be and the respondent has committed professional misconduct as knowledge about the other employment of his clerk must be inferred from the facts and circumstances of the case coupled with his conduct in not intimating the council about this irregularity by himself before he was called upon to submit his written explanation......kondaiah, j.1. this is a reference by the council of the institute of chartered accountants of india under section 21(5) of the chartered accountants act, 1949 (hereafter referred to as ' the act '), with its recommendation to this court that shri c. h. padliya, a chartered accountant of indore (hereinafter referred to as ' the respondent '), be reprimanded on the ground that the respondent has allowed his articled clerk shri vijay kumar gupta, to engage himself in other employment during the period of his articles commencing from september 1, 1969, to august 31, 1971, without taking prior permission of the council under regln. 36 of the chartered accountants regulations, 1964 (hereinafter referred to as ' the regulations').2. facts that give rite to this reference which lie in a short.....
Judgment:

Kondaiah, J.

1. This is a reference by the Council of the Institute of Chartered Accountants of India under Section 21(5) of the Chartered Accountants Act, 1949 (hereafter referred to as ' the Act '), with its recommendation to this court that Shri C. H. Padliya, a chartered accountant of Indore (hereinafter referred to as ' the respondent '), be reprimanded on the ground that the respondent has allowed his articled clerk Shri Vijay Kumar Gupta, to engage himself in other employment during the period of his articles commencing from September 1, 1969, to August 31, 1971, without taking prior permission of the Council under regln. 36 of the Chartered Accountants Regulations, 1964 (hereinafter referred to as ' the Regulations').

2. Facts that give rite to this reference which lie in a short compass may briefly be stated. The Council of the Institute of Chartered Accountants of India received information that the respondent, Shri C. H. Padliya, had allowed his articled clerk, Vijay Kumar Gupta, to engage himself in the employment of Liberty Insurance Co. Ltd., Indore, on a full-time basis during the period of articles from September 1, 1969, to August 31, 1971. The Secretary of the Council by his letter dated October 9, 1972, conveyed this information to the respondent and called upon him to send his written statement, if any, as required by regln. 11(6) of the Regulations. The respondent submitted his written statement to the Council on November 27, 1972, to the effect that Vijay Kumar Gupta was serving with him as articled clerk during the period in question ; that he was devoting his full time in his office and attending the audit work during the period of his training ; that he never disclosed that he was employed in the Liberty Insurance Company Ltd., Indore, or anywhere else ; that the office of the Liberty Insurance Company Ltd., Indore, is situated in a separate portion of the building and the entrance of the same is from a street different from that of his office and that he was neither aware of nor had knowledge of the fact that Vijay Kurnar Gupta was serving with the Liberty Insurance Company Ltd. and, therefore, requests the Council to treat the matter as closed.

3. On a consideration of the information against the respondent and his written statement, the Council opined that there was a prima facie case against the respondent and consequently referred the case to the Disciplinary Committee for enquiry as required by Section 21(1) of the Act. Thereupon, the Disciplinary Committee met at Bombay on January 3, 1974, and held an enquiry in the presence of the respondent, who was represented by Shri S. M. Agrawal and Shri Sagarmal Jain, Chartered Accountants. Shri Vijay Kumar Gupta, the articled clerk, and the respondent were examined by the committee. Shri Vijay Kumar Gupta deposed that he started working with the respondent since August, 1968, but his articles were given only in September, 1969, and the appointment in the insurance company was given to him in May, 1969, when he was studying for M. Com. According to him, his father took charge of the affairs of the insurance company from a person, who had by his fraudulent methods, created problems to the company in the name of Gupta and was actually in charge of the branch office of the insurance company. The business of the insurance company was developed to a great extent by his father who was the de facto manager of the company, though he was shown to be the manager by his father. Though he was started on a salary of Rs. 250 per month in May, 1969, it was enhanced to Rs. 900 per month by July 1, 1969. The salary was further increased to Rs. 1,110 in December, 1970, and revised to Rs. 1,190 per month from January 1, 1971. The articled clerk, Vijay Kumar Gupta, was definite in his deposition that he was attending the office of the respondent during the regular office hours and was signing the papers of the insurance company only in the morning hours or evenings and he did not at any time inform the respondent about his appointment or drawing salary from the insurance company for the services rendered by his father, who was the de facto manager of the insurance company. The respondent reiterated his stand indicated in the written explanation. The statement of the custodian of the Liberty Insurance Company Ltd. regarding the appointment of Vijay Kumar Gupta and his drawing the salary from the insurance company was preferred to the testimony of the articled clerk and the respondent, although the custodian of the insurance company, has not been examined. The father of the articled clerk was not examined. The Disciplinary Committee came to the conclusion that the respondent was aware of the employment of his articled clerk, Vijay Kumar Gupta, with Liberty Insurance Company Ltd., Indore, and he failed to take any steps in sending the necessary information to the Institute even after he had been informed by the Institute itself. The Committee also noticed a discrepancy and contradiction in the explanation submitted by the respondent as to when he came to know of the employment of Vijay Kumar Gupta. The report of the Disciplinary Committee was submitted, to the Council which found that the respondent, who is a member of the Institute, is guilty of professional misconduct and, consequently, submitted this reference for appropriate action under Section 21(5) of the Act.

4. Shri S. N. Kohli, learned counsel for the applicant, contended that the Disciplinary Committee and the Council constituted by eminent professional men have found that the respondent was aware of the employment of his articled clerk, Vijay Kumar Gupta, in Liberty Insurance Company Ltd. and he should not have allowed his clerk to engage himself in other employment during the period of his articles without prior permission of the Council and these findings should not be interfered with by this court as they are the best judges of what their own standard of professional conduct should be and the respondent has committed professional misconduct as knowledge about the other employment of his clerk must be inferred from the facts and circumstances of the case coupled with his conduct in not intimating the Council about this irregularity by himself before he was called upon to submit his written explanation. This claim of the Council is resisted by Shri K.A. Chitale, learned counsel for the respondent, contending, inter alia, that this court has ample power and jurisdiction to set aside the findings of fact arrived at by the Disciplinary Committee and the Council if they are illegal or erroneous or violati-ve of the principles of natural justice or violative of the provisions of the Act or Regulations made thereunder and the material findings of the Committee and the Institute are not supported by legal evidence and they are vitiated by wrong assumptions of fact and law and the onus of proof was wrongly shifted to the respondent and the proof must be one akin to a criminal prosecution and the Institute has not proved professional misconduct of the respondent beyond reasonable doubt and, therefore, this court should direct the dismissal of the complaint in the present case. In reply, Shri Kohli asserted that the proceedings under the Act in respect of professional misconduct of an accountant is only of a quasi-judicial nature and the onus of proof applicable to a civil proceeding only can be applied in the instant case and the proceeding cannot be held to be a prosecution of any kind nor is it similar to the one under the Legal Practitioners Act and, therefore, the decision arising under the criminal prosecutions and the Legal Practitioners Act have no application to the case in hand.

5. Upon the respective contentions of the parties, the following question arises for decision :

' Whether, on the facts and in the circumstances, the respondent-chartered accountant is or is not guilty of professional misconduct within the meaning of Section 22 of the Act on the ground that he has allowed his articled clerk to engage himself in other employment during the period of his articles without prior permission of the Council as required under regulation 36 of the Regulations '

6. The answer to this question depends upon the power and jurisdiction of the High Court vested under Sub-section (6) of Section 21 of the Act in hearing the reference under Sub-section (5) thereof, and the provisions of regln. 36 read with Part II of- the Second Schedule to the Act and their application to the facts of the present case. Before considering the facts and circumstances of the case, it is not only profitable but necessary to refer to the jurisdiction of this court in disposing of a reference under the Act. Section 21 of the Act provides a procedure for inquiries relating to misconduct of the members of the Institute. The members may be active practitioners in the profession or employees in a company, firm or any other department. In order to refer the case to the Disciplinary Committee, the Council must opine prima facie that a member of the Institute is guilty of any professional or other misconduct. The opinion of the Council must be based on the receipt of any information or complaint made to it by any person. The source of the information afforded to the Council or the kind of person that can lodge a complaint against a member of the Council is not very material. The Disciplinary Committee shall hold an inquiry in the manner prescribed therefor and submit its report to the Council. Where the report is to the effect that the member of the Institute is not guilty of any professional or other misconduct, the Council shall record its finding accordingly with a direction that the proceedings shall be filed or the complaint shall be dismissed. But, however, if the finding is that the member of the Institute is guilty of any professional or other misconduct specified in the First Schedule, the Council shall record a finding accordingly and afford to the member an opportunity of being heard before passing orders against him. After affording a reasonable opportunity to the member, the Council may pass an order either reprimanding the member or removing the name of the member from the register for such period not exceeding five years as the Council thinks fit. Where the Council opines that the name of the member ought to be removed from the register for a period exceeding five years or permanently, it shall refer and forward the case to the High Court with its recommendations thereon. Where the misconduct of the member is one other than such misconduct specified in the First Schedule and provided for in Sub-section (4) of Section 21 of the Act, the Council shall forward the case to the High Court with its recommendations thereon.

7. Section 21(6) of the Act provides for the procedure to be followed and the power to be exercised by the High Court on receipt of any case referred to it under Sub-section (4) or Sub-section (5) thereof. This court has to fix a date for the hearing of the case and issue notice of the date so fixed to the member of the Institute concerned, the Council and the Central Government. It shall afford such member, the Council and the Central Government opportunity of being heard on the relevant points at issue. Thereafter, this court may pass any of the following orders, namely :

(a) direct that the proceedings be filed, or dismiss the complaint, as the case may be ;

(b) reprimand the member ;

(c) remove him from membership of the Institute either permanently or for such period as the High Court thinks fit ;

(d) refer the case to the Council for further inquiry and report.

8. The High Court is also empowered under Section 21(7) of the Act to transfer the case subject to such conditions, if any, as it thinks fit to impose, to another High Court if it appears to it that the transfer of a pending case will promote the ends of justice or tend to the general convenience of the parties. The transferee-High Court thereafter shall exercise the same powers and jurisdiction as if the case has been forwarded to it by the Council. Sub-section (8) of Section 21 of the Act invests the Council and the Disciplinary Committee with such powers as are vested in a civil court under the Code of Civil Procedure, 1908, in respect of summoning and enforcing the attendance of any person and examining him on oath; the discovery and production of any document; and receiving evidence on affidavit. This in short is the scheme of Section 21 of the Act, which provides a specific procedure for inquiries pertaining to misconduct of members of the Institute.

9. The High Court is, therefore, invested with wide jurisdiction empowering it either to direct the proceedings to be filed or dismiss the complaint, reprimand the member, remove him from membership of the Institute either permanently or for such period as the High Court thinks fit or refer the case to the Council for further inquiry and report. There is no restriction placed upon the power of the High Court relating to only questions of law or procedure or jurisdiction. The High Court, therefore, is competent and has jurisdiction to examine the entire material, oral and documentary, on record and arrive at its own conclusions on all material questions of fact and law. The High Court can interfere with the findings of fact arrived at by the Disciplinary Committee and the Council. The findings of the members of the Disciplinary Committee and the Council are no noubt entitled to great weight in view of the fact that they are the experts with regard to the matters pertaining to the profession of a chartered accountant and they are deemed to know the intricacies of the profession on account of their personal experience and their object being only to maintain a high standard of conduct and discipline amongst the members of the Institute. The High Court has to examine the entire record and the correctness of the findings recorded by the Disciplinary Committee and the Council and come to its own conclusions and findings on all material points at issue and pass an appropriate order depending upon the facts and circumstances of each case. Where the material on record is not sufficient to express its opinion one way or the other, this court can refer the case to the Council for further inquiry and report or transfer the case to another High Court if in its opinion such transfers would promote the ends of justice or tend to the general convenience of the parties. The powers of the High Court while hearing references under Section 21 of the Act are not lettered or limited in any way. It is not bound in every case to deal with the merits of the finding recorded by the statutory bodies and express its opinion either to accept or to reject this. The powers of the High Court are undoubtedly wide enough to enable it to adopt any course, which, in its opinion, will enable it to do complete and substantial justice between the member concerned, the Council and the Central Government : vide Council of the Institute of Chartered Accountants v. B. Mukherjea [1958] 28 Comp Cas 1 (SC).

10. In Chief Controller of Exports v. G. P. Acharya, AIR 1964 Cal 178, the learned judge, Mukharji J. (as he then was), speaking for the court, observed at page 181 thus:

' Wide are the powers, therefore, of this court in dealing with references under Section 21 of the Chartered Accountants Act. Nevertheless itappears that some well-settled principles should guide this court in exercising this ample power. It is essential to remember that this court insuch jurisdiction as under Section 21 of the Chartered Accountants Act isdealing with not so much a private dispute or a private litigation but isdealing with the findings of a professional body of people who are intendedto be the best judges of what their own standard of professional conductshould be. Unless, therefore, there is a gross violation or disregard of theprovisions of the Chartered Accountants Act or the Regulations madethereunder or a gross and utter disregard of certain well known principlesof natural justice and fairness or obvious disregard of essential considerations cf law or fact, this High Court should not be too eager to interferewith the findings of professional bodies like the Council of the CharteredAccountants of India and its Disciplinary Committee. '

11. Much reliance has been placed by Shri Kohli on this passage in support of his contention that the findings of the Disciplinary Committee and the Council in the present case should not be interfered with as the members thereof are the best judges of their own standard of professional conduct and they are disinterested bodies. True, as pointed out earlier, the findings of the statutory bodies consisting of eminent and experienced members of that profession are entitled to great weight ; but, however, no limitation or restriction on the power and jurisdiction of this court while hearing references under Section 21 of the Act can be imposed when they are not found in the Act. We are conscious of the fact that the powers of this court are not circumscribed in the statute. They are of very wide character, nor can it be said that the jurisdiction of this court under Section 21(6) of the Act is analogous to that of an appellate court. Where the sovereign Parliament thought fit and proper in its wisdom to entrust such wide powers and jurisdiction to this court while dealing with references under Section 21 of the Act, it is not permissible for this court to limit its jurisdiction in this regard by any general principles. Each case has to be judged and decided by the court by applying its mind to all the facts and circumstances without any preconceived notions of its own. It is nowhere stated in the Act or the Regulations made thereunder that the findings of the statutory bodies under the Act in disciplinary proceedings are either binding or they cannot be interfered with unless there is a gross failure or disregard of the provisions of the Act or the Regulations or law or principles of natural justice. With great respect to the learned judges of the Calcutta High Court, we are unable to agree in their view, which, if accepted, would amount to importing something into the language of Section 21(6) of the Act, as the court has to interpret the law and apply the same to the facts of each case but not to take the role of the Legislature. We may add that nothing prevented Parliament from limiting the jurisdiction of this court to only questions of law as in the case of income-tax references, if they intended to do so. The limitations pointed out by the learned judge, P. B. Mukharji J., for exercising the power of reference under Section 21 of the Act would only confine to questions of law. It is now well-settled that whether the finding of fact is perverse or is not supported by any evidence or is violative of the provisions of the Act or Regulations arid principles of natural justice is a question of law. If the view of the Calcutta High Court is accepted, it amounts to reducing or limiting the jurisdiction of the High Court under Section 21 of the Act to only one of law and it cannot interfere with findings of fact or appreciation of the entire evidence, oral or documentary, de now from its own standpoint. We, therefore, express our respectful dissent to the opinion of the learned judge, P. B. Mukharji J.

12. This brings us to examine the evidence on record and consider whether the conduct of the respondent-chartered accountant amounts to professional misconduct within the meaning of Section 22 of the Act, which defines professional misconduct. The professional misconduct shall be deemed to include any act or omission specified in Schedules I and II. However, nothing in Section 22 shall be construed to limit or abridge in any way the power conferred or duty cast on the Council under Sub-section (1) of Section 21 to inquire into the conduct of any member of the Institute under any other circumstances. Part I of the First Schedule indicates the instances of professional misconduct in relation to chartered accountants in practice. The chartered accountant in practice shall be deemed to be guilty of professional misconduct, if any one of the instances specified therein are found. We are not concerned with Part I of the First Schedule in the present case. Parts II and III of the First Schedule also have no application. Part II of the Second Schedule is relevant for our purpose whereunder a member of the Institute whether in practice or not shall be guilty of professional misconduct, if he contravenes any of the provisions of the Act or the Regulations made thereunder.

13. Section 30 of the Act empowers the Council, by notification in the Gazette of India, to make regulations for the purpose of carrying out the objects of the Act. In pursuance of the aforesaid power, the Chartered Accountants Regulations, 1964, have come into existence. Regulation 36, with which we are concerned, may be noticed :

' Articled clerk not to engage in any other occupation--Without the previous permission of the Council, no articled clerk shall, during the period of his service as an articled clerk, take any other course of study or training, whether academic or professional, or engage in any business or occupation.'

14. This regulation prohibits an articled clerk from taking any other course of study or training, or engage in any business or occupation during the period of his service as an articled clerk. But, however, the articled clerk may take any other course of study or training or engage in any business or occupation provided the previous permission of the Council has been obtained for the same. On proof of any misconduct or breach of regln. 36 or breach of any of the covenants contained in the Articles, the Council may cancel the registration of the articled clerk under regln. 37. Such clerk thereafter shall not be retained or taken as articled clerk or audit clerk by any member except with the permission of the Council.

15. The charge in the present case is against the respondent-chartered accountant that he has allowed, without requisite permission of the Council, his articled clerk, Shri Vijay Kumar Gupta, to engage himself in the service of the insurance company during the period of his articles and has, therefore, committed misconduct within the meaning of Section 22 of the Act and is liable to be dealt with under the provisions of Section 21. It may be convenient at this stage to consider the question as to on whom the onus of proof lies in the present case. The guideline and the clue to answer this question lies upon the nature and character of the proceedings initiated against the respondent-chartered accountant. The scheme, intendment and object of Section 21 referred to earlier when read with the use of the expressions 'complaint ', ' guilty of any professional or other misconduct', ' Disciplinary Committee ', ' inquiry ' and the nature of the punishment provided to be imposed by the Council or the High Court, as the case may be, against a member who is found to be guilty of any professional or other misconduct would indicate and leave no doubt in our minds that the proceeding initiated against a member in inquiries relating to misconduct is akin to, though not in fact, a criminal prosecution. At every stage, the statute provides for a reasonable opportunity of being heard to the delinquent member of the Institute against whom disciplinary proceedings have been initiated. Principles of natural justice must be followed by the inquiry authority, the Council as well as the High Court and the evidence has to be recorded by the Disciplinary Committee. The. Council and the Disciplinary Committee are empowered with the same powers as are vested in the civil court for summoning and enforcing the attendance of any person and examining him on oath, the discovery and production of any document, and receiving evidence on affidavit. The member against whom, a complaint is lodged or a charge is framed is permitted to lead his own evidence to vindicate his stand about the charge. Where no prima facie case has been made out, the Council itself may ignore the information: or complaint, but it has to refer the matter to the Disciplinary Committee if, in its opinion, there is a prima facie case against the member. The proceeding is undoubtedly quasi-judicial in character. In our considered opinion, it is quasi-judicial and quasi-criminal in character which is akin to criminal prosecution, though not exactly a criminal prosecution. It is akin to the proceedings of professional misconduct against a legal practitioner under the Legal Practitioners Act.

16. This view of ours gains support from the decision of a Division Bench of the Delhi High Court consisting of the learned judges, I. D. Dua, Actg. C.J., and T. V. R. Tatachari J. (as he then was) in In the matter of Shadilal Batra, AIR 1968 Delhi 283. Therein the court had to consider whether the chartered accountant was liable for misconduct on the ground that, with the object of forcing the Corporation by way of audit fee, attempted to delay the finalisation of the balance-sheet and the profit and loss account. In the course of the argument, a number of decisions arising under the Legal Practitioners Act have been cited and it was conceded that the test applied to the legal practitioner would be applicable to the cases of chartered accountant. In fact, the learned judges applied the principles laid down by the Privy Council in the case of A, a Pleader v. Judges of the High Court of Madras, AIR 1930 PC 144, and the Supreme Court in B. Nageshwara Rao v. Hon'ble Judges of the Madras High Court, AIR 1955 SC 223, to the case before them, to decide the question of misconduct of the chartered accountant.

17. In the case of A, a Pleader v. Judges of the High Court of Madras, AIR 1930 PC 144, the Privy Council laid down a broad principle that charges of professional misconduct must be clqarly proved and should not be inferred from mere ground for suspicion, however reasonable, or what may be mere error of judgment or discretion and the inquiry in a case of professional misconduct being serious should proceed on formulated charges and the evidence recorded carefully and judged according to the ordinary standard of proof. The aforesaid cardinal rule has been approved by the Supreme Court in Nageshwara Rao's case, AIR 1955 SC 223, where the appellant therein was given the benefit of doubt as the court thought that the charges 4 and 5 had not been brought home to the appellant.

18. We may also notice the decisions of the other High Courts under the Legal Practitioners Act. A Division Bench of the Allahabad High Court in Nityanartd Mathur v. Babu Ram, AIR 1937 All 506, opined that the proceedings under Section 13 of the Legal Practitioners Act are something very akin to the prosecution, though they cannot strictly be described as a prosecution. A Full Bench of the Patna High Court in Emperor v. Suriya Narayan Singh [1920] 57 IC 460 ; AIR 1920 Pat 84 [FB], held that the standard of proof that ought to be applied to cases arising under the Legal Practitioners Act is the same proof which is required for conviction on a criminal charge. The charge must be proved beyond reasonable doubt. To the same effect is the decision of a Special Bench of the Rajasthan High Court in Amarsingh v. Madanmohan Lal, AIR 1956 Raj 58 [SB] and that of the Orissa High Court in Annada Devi v. Banchhanidhi Samantoray, AIR 1959 Orissa 1 [SB].

19. We may now refer to the decision of the Calcutta High Court inS. Ganesan v. A. K. Joscelyne [1957] 27 Comp Cas 114, 140 ; AIR 1957 Cal 33,arising under the Chartered Accountants Act, wherein it was observed(p. 43) :

'Professional misconduct on the part of a person exercising one of the technical professions cannot fairly or reasonably be found, merely on a finding of a bare non-performance of a duty or some default in performing it. The charge is not one of inefficiency, but of misconduct, and in an allegation of misconduct, an imputation of a certain mental condition is always involved, I think, it would be impossible for any professional man to exercise his profession if he was to be held guilty of misconduct simply because he had not, in a given case, been able to do all that was required iu the circumstances or he had misconceived his duty or failed to perform a part of it, I think the test roust always be whether in addition to the failure to do the duty, partial or entire, which had happened, there had also been a failure to act honestly and reasonably.'

20. We are in entire agreement with the view expressed by the Calcutta High Court iu this regard. The charge of misconduct implies dishonesty and mental condition of the concerned chartered accountaiit. The chartered accountant cannot prove something which is of a negative character to disprove the charge. He may lead evidence, oral and documentary, to establish his stand or throw reasonable doubt about his guilt of any misconduct so as to entitle him to have the complaint dismissed. However, the onus is on the authority or the person that charges or complains against the chartered accountant of any misconduct to prove the same beyond reasonable doubt by adducing legal and satisfactory evidence, oral and documentary. The legal practitioner has no duty to disprove the charge, if there is no material worth mentioning to prove his guilt.

21. We are unable to agree with Shri Kohli, learned counsel for the applicant, that the proceeding is of a civil nature, though quasi-judicial in character and the principles applicable to the onus of proof in a civil proceeding only can be applied to the case in hand. According to him, where a prima facie case against the chartered accountant has been made out on a charge of professional misconduct by adducing some evidence in support of the stand taken by the Disciplinary Committee and the Council, the onus shifts to the chartered accountant to disprove the same and establish his innocence. If this contention is accepted it will lead to injustice to the chartered accountant against whom disciplinary proceedings have been initiated under the Act. Innocent members, who are not really dishonest but had only some lapses on their part for which they are not accountable or responsible and which are beyond their control are likely to be punished. The intendment and object of the Act is only to maintain the standard of the profession of chartered accountant at a high level and prescribed certain code of conduct to the members, which is in the larger interest of the whole public and the companies and the persons who seek aid and assistance of the members of this profession. We are, therefore, of the firm view that this is not a civil proceeding but a quasi-judicial and quasi-criminal proceeding akin to, though not a regular criminal prosecution, and the test applicable to prove the guilt of a charged person beyond reasonable doubt in a quasi-criminal proceeding must be applied to a case of the chartered accountant charged with professional misconduct.

22. Applying the aforesaid principles and tests, we shall consider the evidence on record in order to ascertain whether the guilt of the respondent-chartered accountant by allowing his articled clerk, Shri Vijay Kumar Gupta, who engaged himself in the service of the Liberty Insurance Co. Ltd., Indore, during the period of his articles has been established. From the leading of regln. 36, it admits of no doubt that the Regulation by itself does not saddle any obligation on the chartered accountant to hold a surveillance on the movements of the articled clerk, except that he is under a statutory duty and obligation to see that the clerk is properly trained. The insistence of proper and adequate training of the articled clerk by the chartered accountant must be considered to be in public interest as a duty and obligation is cast on the accountant to see that the clerks are trained properly and adequately so that the public can entrust to them their audit woik. The accountant also should not take any one as an articled clerk, if he is already in business and he should not also permit him to engage in any business during the period of training. Any breach of such principle must be held to be misconduct which renders him unfit to be a member of the Institute. As the conduct of the articled clerk in engaging himself in any other business or employment during the period of his training, is considered to be improper, the conduct of the accountant in conniving at such conduct or consciously and knowingly making it possible for the articled clerk to breach rules and regulations intended and framed for the benefit of the public, must be held to be equally improper which amounts to misconduct. Such norms of conduct have been prescribed for the chartered accountant as well as the articled clerk with the sole aim and object of giving full, proper and adequate training to the articled clerk, who would become future accountant and also to maintain self-discipline and code of conduct, which would enhance the prestige and dignity of the profession of the chartered accountant.

23. The evidence of Shri Vijay Kumar Gupta, the articled clerk, does not support the complaint or charge levelled against the respondent. He bas categorically deposed that he did not work in the insurance company at any time during the office hours when he was undergoing training with the respondent. According to him, his father who was sufficiently experienced in the field of insurance business was the de facto employee of the insurance company looking after the management and the work and he has lent his name at the request of his father and, therefore, used to sign the papers brought to him by his father or any other employee of the insurance company during the period either in the morning or in the evening without any hindrance to his training in the office of the respondent. Admittedly, he has checked the accounts of some of the constituents of the respondent and was also appearing before the officers and, therefore, had his training in the office of the respondent. In order to show that Shri Vijay Kumar Gupta, the articled clerk, was working in the insurance company during office hours as a regular employee, none has been examined either from the insurance company or even the father of the articled clerk. The only piece of evidence sought to be relied upon by the Disciplinary Committee and the Council in this regard is the statement of the custodian of the Liberty Insurance Company Ltd., Indore, to the effect that Shri Vijay Kumar Gupta joined their branch at Indore on May 28, 1969, on a salary of Rs. 250 per month and thereatter his remuneration was increased from time to time to Rs. 1, 190 from January 1, 1971, and that Shri Vijay Kumar Gupta did not disclose to the management about his signed articles for chartered accountant nor had he obtained permission from the management to do so. There is no positive statement even of the custodian of the Liberty Insurance Co. Ltd. that the articled clerk, Shri Vijay Kumar Gupta, was actually attending and functioning as a whole-time employee of the company during the office hours. That apart, the statement has not been proved in accordance with law by examining the custodian before the Disciplinary Committee. The respondent was not afforded a reasonable opportunity to cross-examine the custodian in this regard. Not only that the statement is inadmissible in evidence but the same does not advance the case levelled against the respondent. The version of Shri Vijay Kumar Gupta that his father was the de facto manager of the insurance company appears to be more probable and true as a new recruit like him would not have been given a salary of Rs. 1,190 within I 1/2 years when he joined on May 28, 1969, on a salary of Rs. 250 per month. Hence, we have no hesitation to hold that there is no positive and conclusive proof of Shri Vijay Kumar Gupta, the articled clerk, actually working in the insurance company as a whole-time employee during the office hours. There is no reason to reject the testimony of the respondent that the clerk was attending his office during office hours and, therefore, he was under a bona fide impression that he was not employed anywhere else during the period of his training.

24. There is yet another hurdle for the complainant or the Council to prove the guilt of the respondent for misconduct in the present case. The charge cannot be brought home against the respondent, if it is simply established that the articled clerk was engaged in other work during the period of training but it must be proved that the respondent-chartered accountant had either connived at it or allowed or permitted knowing it to be true. There is no evidence worth mentioning to prove connivance of the respondent nor can any knowledge be attributed to him without any satisfactory evidence. The articled clerk might have played the double game. He might have attended office of the respondent during office hours in the training period and at the same time earned some more money with the active support and assistance of his father, who appears to be behind the scene, by lending his services outside the office hours in some manner or the other. The respondent would not have permitted his articled clerk to serve in the insurance company, if he really had knowledge about it. The respondent would not gain anything by his connivance or acquiescence in the conduct of his clerk. On the other hand, he must have been conscious and aware of the fact that he would be taken to task by the Council in case it is brought to the notice of the Council. Knowledge is a matter of inference. It cannot be drawn on either inadmissible facts and circumstances or on inadequate evidence. The evidence must be such that invariably any reasonable prudent man must infer knowledge of the respondent about such lapses on the part of his articled clerk.

25. It is pertinent to note that the charge against the respondent is not that the articled clerk has not been given proper training nor is there any finding that the articled clerk has not been properly trained. Hence, the respondent cannot be punished for such a charge. The decision of the Madras High Court in Council of the Institute of Charteted Accountants v. M. Rajamany : Rajamany (M.), In re [1952] 22 Comp Cas 179; AIR 1953 Mad 310, relied upon by Shri Kohli does not assist him. In that case there is a finding to the effect that the articled clerk did not regularly attend the office during usual hours of 11 a.m. to 5 p.m. and he adjusted his hours of work in the post office and in the office of the chartered accountant and the articled clerk, Natarajan, himself has categorically deposed that he had informed the chartered accountant of his working in the post office which was supported by the other material on record. Therefore, the High Court accepted the finding of the Disciplinary Committee that the chartered accountant had knowledge that the articled clerk was employed during the period of his service and that his conduct, in keeping him as an articled clerk renders him unfit to be a member of the institute. Hence, that case is distinguishable on facts.

26. On a consideration of the entire material on record, we are unable to agree with the finding of the Disciplinary Committee and the Council that the respondent-chartered accountant was aware of the employment of Shri Vijay Kumar Gupta in the Liberty Insurance Co. Ltd., Indore, during the period of his articles without prior permission of the Council.

27. We are unable to accede to the request of Shri Kohli that the matter may be sent back to the Council and the Disciplinary Committee for further inquiry to enable them to examine some other witnesses, if the material on record is not sufficient to prove the guilt of the respondent. We may add that the inconvenience and the trouble experienced by the respondent till now would be sufficient punishment to make him more conscious of bis duties and obligations to the articled clerks during the period of training for not evincing sufficient caution, care and interest. Taking into account his past record and the other circumstances, we do not think this to be a fit case for us to exercise our power under Section 21(6)(d) of the Act, as such power should be exercised only in furtherance of real and substantial justice but not to fill up the lacuna in the evidence at a belated stage.

28. For all the reasons stated, our answer to the question is in the negative and in favour of the respondent-chartered accountant. We, therefore, direct the complaint to be dismissed. There shall be no order as to costs.


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