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The Institute of Chartered Accountants of India Vs. B. Mohanty - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtOrissa High Court
Decided On
Case NumberCivil Reference No. 2 of 1980
Judge
Reported inAIR1985Ori46; [1986]59CompCas178(Orissa)
ActsChartered Accountants Act, 1949 - Sections 22(6) and 30; Chartered Accountants Regulations, 1964 - Regulation 32B and 32B(1)
AppellantThe Institute of Chartered Accountants of India
RespondentB. Mohanty
Appellant AdvocateA.S. Naidu, Adv.
Respondent AdvocateR. Mohanty, ;K. Patnaik and ;Sanjit Mohanty, Advs.
Cases ReferredInstitute of Chartered Accountants v. Shri Radhey Mohan (decided
Excerpt:
.....replied by his letter dt 11-10-1977 (ext 7). in this letter he pointed out that the dues of ajaya kumar, the articled clerk, had been satisfied and that the original letter of ajaya kumar dt 7-9-1977 acknowledging receipt of payment had been forwarded to the institute, the institute then enquired from the respondent whether ajaya kumar's stipend was paid to him on a monthly basis or in a lump sum and the respondent was also requested lo indicate the amounts paid and the dates of payment vide letter dt. the respondent denied that ajaya kumar had complained at any time regarding nonpayment of stipend every month. 1,500/- and that he had signed the other receipt under a threat from the respondent rightly this statement of ajaya kumar has not been accepted by the disciplinary..........under the name and style of m/s. b. mohanty & co., chartered accountants, cuttack. one shri ajaya kumar bardhan entered into articles with the respondent with effect from 11-9-1973. by his letter dt 20-6-1977 (ext 4) ajaya kumar informed the secretary of the institute of chartered accountants of india, new delhi that the respondent had not paid the stipend due to him in spite of repeated requests and reminders. by letter dt. 25-8-1977 (ex. 5) the institute enclosed a copy of ajaya kumar's letter and asked the respondent to offer his comments on it the respondent replied by his letter dt 11-10-1977 (ext 7). in this letter he pointed out that the dues of ajaya kumar, the articled clerk, had been satisfied and that the original letter of ajaya kumar dt 7-9-1977 acknowledging receipt.....
Judgment:

B.N. Misra, J.

1. This reference arises out of the recommendation received from the Council of the Institute of Chartered Accountants of India under Section 21(5) of the Chartered Accountants Act, 1949 ( hereinafter referred to as 'the Act') read with CL (i) of Part II of the Second Sch. to the Act. On finding the respondent guilty of professional misconduct for contravening the provisions of Reg. 32B of the Chartered Accountants Regulations, 1964 (hereinafter referred to as the Regulations'), the Council has forwarded the case to this Court with its recommendation that the respondent be reprimanded.

2. The respondent is a Chartered Accountant within the meaning of the term as defined in Section 2(1)(b) of the Act and is practising as a Chartered Accountant under the name and style of M/s. B. Mohanty & Co., Chartered Accountants, Cuttack. One Shri Ajaya Kumar Bardhan entered into articles with the respondent with effect from 11-9-1973. By his letter dt 20-6-1977 (Ext 4) Ajaya Kumar informed the Secretary of the Institute of Chartered Accountants of India, New Delhi that the respondent had not paid the stipend due to him in spite of repeated requests and reminders. By letter dt. 25-8-1977 (Ex. 5) the Institute enclosed a copy of Ajaya Kumar's letter and asked the respondent to offer his comments on it The respondent replied by his letter dt 11-10-1977 (Ext 7). In this letter he pointed out that the dues of Ajaya Kumar, the Articled Clerk, had been satisfied and that the original letter of Ajaya Kumar dt 7-9-1977 acknowledging receipt of payment had been forwarded to the Institute, The Institute then enquired from the respondent whether Ajaya Kumar's stipend was paid to him on a monthly basis or in a lump sum and the respondent was also requested lo indicate the amounts paid and the dates of payment vide letter dt. 18-3-1978 (Ext. 8). The respondent replied by his letter dt. 23-5-1978 (Ex. 10) that Ajaya Kumar was paid Rs. 1,000/- on 27-8-1977 and Rs. 1,500/- on 1-9-1977. The Institute, by its letter dt. 16-11-1978 (Ext 1), treated all the communications referred to above collectively as 'information' against the respondent under Section 21 of the Act read with CL (i) of Part II of the Second Sch. to the Act and called upon the respondent to file his written statement if any. within fourteen days as required under Reg. 11(6) read with Reg 12 of the Regulations. The respondent filed his written statement vide Ext 2 dt. 5-12-1978. He admitted that Ajaya Kumar had joined his firm as an Articled Clerk on 11-9-1973. He submitted that there was no infraction of Regn. 328 as Ajaya Kumar had been paid his total stipend of Rs. 2,500/- in two instalments and he had withdrawn his complaint in writing. The respondent denied that Ajaya Kumar had complained at any time regarding nonpayment of stipend every month. The complaint was made only after Ajaya Kumar had completed his articteship and as he had already withdrawn his complaint there was no complaint before the Council to form the basis of a proceeding. He also pointed out that the stipend payable under Reg. 3 B need not be paid every month. The said regulation merely indicates the accrual of liability to be paid on the basis of monthly calculation, but it does not require payment every month. Accordingly, he prayed that the disciplinary proceeding initiated against him should be dropped Upon consideration of the matter, the Council of Chartered Accountants as its meeting held on 5th, 6th and 7th April 1979 at New Delhi came to the conclusion that prima facie in its opinion the respondent was guilty of professional and/or other misconduct The Council, therefore, decided to refer the case to its Disciplinary Committee for enquiry.

3. The Disciplinary Committee gave the parties opportunity to adduce evidence and examined Shri Ajaya Kumar Bardhan and the respondent Besides Ajaya Kumar's complaint the written statement of the respondent and the communications already referred to above, the extract from the minutes of the 87th Meeting of the Council held on 5th, 6th and 7th April 1979 at New Delhi and the vouchers dt 29-4-1977 for Rs. 500/-, dt 27-8-1977 for Rs. 1,000/- and dt 1-9-1977 for Rs. 1,500/- of the firm were marked as Exts. 3, 11, 12 and 13 respectively. The letter dt 7-9-1977 from Ajaya Kumar addressed to the Secretary to the Council was marked as Ext 14.

4. The Disciplinary Committee examined all the materials placed before it and found that except for the disputed amount of Rs. 500/-, the respondent did not make payment of stipend to Ajaya Kumar until the matter was raised by the Institute although Ajaya Kumar had commenced his articleship almost four years prior to that date. The committee came to the conclusion that the respondent had not paid the stipend to Ajaya Kumar as required under Reg. 32B of the Regulations. His explanation that the stipend was not required to be paid every month was not accepted The committee accordingly held that the respondent had contravened the provisions of Reg. 32B of the Regulations and was guilty of professional misconduct within the meaning of Section 21 of the Act read with CL (i) of Part II of the Second Sch. to the Act

5. The findings of the Disciplinary Committee were placed before the Council at its meeting held on 12th, 13th and 14th Dec. 1979 at New Delhi. The Council held the respondent guilty of professional misconduct within the meaning of Section 21 of the Act read with CL (i) of Part II of the Second Sch. to the Act for contravening the provisions of Reg. 32B of the Regulations. Accordingly, it decided to recommend to this Court that the respondent should be reprimanded

6. The charge against the respondent is that he did not pay the stipend to Ajaya Kumar in accordance with Regn. 32B Sub-regulation (i) of Rega 32B provides :

'Every member engaging an articled clerk on or after 1st July 1973 shall pay to such clerk a minimum monthly stipend at the rates specified in Sub-regulation (2) or in Sub-regulation (3) hereof, as the case may be.'

Sub-regulattons(2) and (3) are not in dispute and hence need not be extracted The respondent's explanation to this charge is that Regn. 32B(1) provides for accrual of liability for payment of stipend on the basis of monthly calculation, but it does not require payment of stipend every month. This explanation by the respondent has not been accepted by the Disciplinary Committee and the Council and we also do not consider that it is a plausible explanation. If the respondent's construction of the provision is accepted, it would mean that the stipend could be paid on a quarterly basis, half-yearly basis, or annual basis or at any time when the principal chooses to make the payment, may be even after the completion of the articleship. We do not think Regn. 32B(1) contemplates such uncertainties as regards the due date of payment The only reasonable and proper construction of the provision is that the monthly stipend must be paid every month.

7. The vouchers Exts. 11, 12 and 13, show payment of Rs. 3,000/- to Ajaya Kumar. Rs. 500/- on 29-4-1977, Rs. 1,000/-on 27-8-1977 and Rs. 1,500/- on 1-9-1977. In his written statement (Ext 2), the respondent had stated that he had paid a total sum of Rs. 2,500/- to Ajaya Kumar. This amount is covered by the vouchers, Exts. 12 and 13. He had not included in his written statement the first payment of Rs. 500/- dt 29-4-1977, vide Ext 11. Before the Disciplinary Committee, he produced the voucher, Ext. 11, and stated that he inadvertently omitted to include that payment in his written statement Ajaya Kumar, in his evidence before the Disciplinary Committee, disputed that he had received payment of a total sum of Rs. 3,000/-. He stated that he had in fact received only Rs. 1,500/- and that he had signed the other receipt under a threat from the respondent Rightly this statement of Ajaya Kumar has not been accepted by the Disciplinary Committee and the Council In his letter dt 7-9-1977 (Ext 14) he has clearly admitted that he had received full payment We therefore accept the finding that though the respondent had paid the full stipend to Ajaya Kumar, he had not made the payment every month.

8. In his written statement the respondent had stated that as Ajaya Kumar had withdrawn his complaint by his letter dt 7-9-1977 (Ext. 14), there was no complaint before the Council in the eye of law to form the basis of a disciplinary proceeding. This contention is clearly misconceived The Council had in its letter dt. 16-11-1978 (Ext. 1) clearly stated that all the communications including the complaint of Ajaya Kumar, the letters of the Council and the letters of the respondent had been collectively treated as 'information against the respondent under Section 21 of the Act read with Clause (i) of Part II of the Second Sch. to the Act Section 21(1) of the Act inter-alia provides that proceedings can be initiated by the Council either on the basis of information received by it or on the basis of a complaint made to it Therefore, the plea that on account of withdrawal of the complaint there was no basis for initiation of a disciplinary proceeding must be rejected

9. For the reasons stated above, we confirm the findings of the Disciplinary Committee and the Council that the respondent had acted in breach of Regn. 32B and was guilty of professional misconduct

10. The next question is whether the respondent should be reprimanded according to the recommendation of the Council. Mr. A. S. Naidu, learned counsel appearing on behalf of the Council has urged that the respondent should be reprimanded as he has been found guilty of professional misconduct for violating the provisions contained in Rega 32B. Mr. R. Mohanty, learned counsel appearing for the respondent has pleaded that the present proceeding should be filed as Ajaya Kumar has withdrawn his complaint and there was a genuine misunderstanding by the respondent about his liability to pay stipend every month. Mr. Mohanty has referred to the decision of the Madras High Court reported in AIR 1953 Mad 310 (Council of Institute of Chartered Accountants v. M. Rajamany, Chartered Accountant). In that case, the High Court accepted the findings of the Disciplinary Committee that the Chartered Aecountant had knowledge that his Articled Clerk was employed in the post offiee during the period of his service and that the conduct of the Chartered Accountant in keeping such a person as an Articled Clerk rendered him unfit to be a member of the Institute. On consideration of the facts and circumstances of the case, the High Court held that the Chartered Accountant had committed an error of judgment and accordingly he was warned with the observation that no further action was called for. Reliance is also placed on the decision of the Delhi High Court in the case of Institute of Chartered Accountants v. Shri Radhey Mohan (decided on 9-11-1979), The Chartered Accountant Judgments, Page 840 (A photostat copy of the said judgment has been placed on record). In circumstances almost similar to the present case the Delhi High Court observed :

'The result is that we confirm the findings of the Disciplinary Committee and the Council Inasmuch as Satyendra Kumar Gupta himself withdrew the complaint on receipt of his money and there is some possibility of misunderstanding in the mind of Shri Radhey Mohan, we think it will serve the ends of justice if we just order the case to be now filed In our view, the stress and strain under which Shri Radhye Mohan has been for almost three years would be sufficient warning to him not to violate the regulations framed by the Institute either in letter or in spirit and remember that if he violates any of the regulations or commits any misconduct he may be answerable to his own peers. This is enough reprimand.'

In this case also Ajaya Kumar withdrew his complaint before the enquiry commenced and there is some possibility of misunderstanding in the mind of the respondent Further, more that five years have passed since the disciplinary proceeding was initiated against the respondent The present proceeding should be sufficient warning to the respondent not to violate the law in future. In the facts and circumstances of this case, we think it will serve the ends of justice if we order and direct that the present proceeding be filed

11. It is ordered accordingly.

D. P. Mohapatra, J.

12. I agree.


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