1. This is a matter brought to this Court under Section 21(2) of the Chartered Accountants Act, Act 38 of 1949.
2. On the 1st November 1948, Jagdish Raj Cha-trath, the opposite party made an application for inclusion in the list of Registered Accountants entitled to train articled clerks. In columns 3 and 4 of this application he made certain statements which it is necessary to set out in extenso:
Whether practising independently orwhether a member of a firm of Registered Accountants, and if so, state the period for which acting as such.
From August, 1939 upto March 1944, I was employed as a Managerin the firm of Registered Accountants on a fired salary.
From April 1944 onwards I was employed as a Manager in the firmof Registered Accountants on a fixedsalary plus percentage of the firm's earnings.
From 21st October 1948 onwards I amfull-fledged partner in the firm of RegisteredAccountants holding 2/5th share.
If a member of a firm, state the position therein, that is to say:
Whether afull-fledged legal partner, and ifso, state the period forwhichpractising as such and give the names of other partners or
The details about myself have already beengiven in paragraph 3 above.
The other partners are Mr. K. P. Soni holding 2/5th share andMr. Siri Chand Kapur holding l/5th
3. On the 19th January 1949, the Chief Commissioner's office made a recommendation to the Ministry of Commerce staling that Jagdish Raj Chat-rath was eligible as he had served for more than eight years in the firm, of Messrs. B.M. Chatrath & Company at a fixed salary plus a percentage of the firm's earning and since October 1949 he was a partner in the firms of Messrs. B.M. Chatrath & Co. and Messrs. V. P. Soni & Co. On the 15th September 1949 Jagdish Raj Chatrath made another application for admission as a Fellow of the Institute of the Chartered Accountants of India under Section 5 which was as follows;
I am submitting herewith my application for admission as a Fellow of Institute of Chartered Accountants of India.
A cheque for Rs. 268/- only, in payment of admission fee and annual subscription and certificate of Practice is enclosed.
Please acknowledge receipt and oblige.
* * *'
As the law then stood, Jagdish Raj Chatrath could be enrolled as a Fellow if he had been in continuous practice in India for at least five years, whether before or after the commencement of the Act. In the application that I have referred to above, which is marked as Ex. 15 and is typed at page 53, he stated as follows:
'** ** *(iv)
Whether practising independently or as a partner of a firm of practising members of the Institute, andif so, state the period for which acting as such.
Practised as a partner all through.** ** *'
In Ex. 16 at page 54 Jagdish Raj Chatrath gave fuller particulars which were:
'** ** *5.
(a) Independently since
(b) In partnership
In partnership ofMessrs. B. M. Chatrath &Co.; from 1944 to 1948.
In partnership of Messrs. Soni Chatrath & Co. since 1948.'** ** *
This was on the 26th September 1949. On the 23rd November 1949, the opposite party wrote a letter to the Secretary to the Council of the Institute of Chartered Accountants of India, New Delhi, in which he stated that he had started as a partner in Messrs. B.M. Chatrath & Co. from the 1st April 1944 and the name of the firm was changed to Messrs. Soni Chatrath & Co. with effect from the 21st October 1948. This statement was reiterated in a letter, Ex. 18, at page 56 dated the 13th March 1950 where it was stated that the opposite party was a partner of Mr. B.M. Chatrath as from the 1st April 1944, but it was added that he was getting a salary plus a share of profits and also had a share in the goodwill.
4. P.R. Mehra, who is a Fellow of the Institute of Chartered Accountants on the 5th May 1950 made a complaint to the President of the Council of the Institute of the Chartered Accountants of India that the opposite party, Jagdish Raj Chatrath, had made material misstatements of facts while applying for the Fellowship of Institute. The Council then called upon him to explain, and in his letter Ex. 3 dated the 19th September 1950 at page 33 he stuck to his position that the statements he had made in his application for Fellowship were correct. He reiterated that he became a partner of Messrs. B. M, Chatrath & Co. in April 1950. Inquiry was then started under Section 21 of the Act and a report was made under the first subsection of that section, and it was found by the Council that Jagdish Raj Chatrath had made statements which had rendered him fit (sic) to be a member of the Institute. The exact finding was:
'Shri J.R. Chatrath had included in his application for enrolment as a Fellow the particular that he was a partner in the firm of B.M. Chatrath & Co., from 1944 to 1948, knowing it to be false, so as to render him unfit to be a member of the Institute.'
The Council examined Jagdish Raj Chatrath on the 6th July 1951. No written deed of partnership between him and Mr. B.M. Chatrath was produced, before them and it was admitted that there was no written document and that the partnership was oral. The opposite party relied on the fact that he was allowed to sign certain balance-sheets and reports on behalf of Messrs. B.M. Chatrath & Co. But before the Council no such papers were produced, on the ground that they had been left in Pakistan.
It is significant to note that no proof was given that Messrs. B.M. Chitrath & Co. were paying income-tax in a manner which would show that Jagdish Raj Chatrath was one of the partners of the firm. On the other hand, when Mr. B.M. Chatrath was examined as a witness he stated as follows:
'This is the arrangement. There is no registration with the Income-tax authorities. It is not unregistered firm either. I paid tax on my incomeand he paid tax on his income. I assume that his income must have been described in the same manner. It may even have been described as salary. I do not know anything about it. This question was never a sort of.........'
The letter Ex. 12 dated the 23rd December 1948 is more significant where it was stated by Mr. B.M. Chatrath that approximately a sum of Rs. 1,000/- was paid as tax for the year 1946-47 in respect of his (Jagdish Raj Chatrath's) salary. This does not support partnership.
5. On the 25th March 1948 a partnership was entered into between Mr. S. P. Chopra and Mr. B.M. Chatrath and on the 9th June 1948 a written deed of partnership confirmed the old partnership. The profits of this partnership were to be divided in certain shares between Mr. S. P. Chopra and Mr. B.M. Chatrath as partners. Mr. B.M. Chatrath, it appears, joined Government service in June 1948 and on the 30th June a deed of dissolution of partnership between Mr. B. M Chatrath and Mr. S. P. Chopra was executed. By this document certain amounts of money were to be paid to Mr. B.M. Chatrath. In paragraph 2(d) it is stated that if Mr. B.M. Chatrath were to return within a year, then he was to pay to Mr. S. P. Chopra whatever he had actually received as his share of goodwill and also was to return to Mr. Chopra whatever was paid to Mr. Jagdish Raj Chatrath under Clause 5 of the agreement, and this clause was as follows:
'5. Mr. S. P. Chopra will pay Mr. J.R. Chatrath in addition to what he was drawing before 3-3/4 per cent, of the average mentioned in para (1) above for four years and 2 1/2 per cent, of the average for another four years to follow.'
On the 18th October 1948 a document, Ex. 8, typed at page 43, was executed, being a deed of partnership between Mr. S. P. Chopra and Mr. K.P. Soni, and on the 7th of January 1949 a partnership was entered into between Mr. K. P. Soni, Mr. Jagdish Raj Chatrath and Mr. S. C. Kapur which was to carry on the business of Messrs. B.M. Chatrath & Co. which was previously carried on by Mr. S. P. Chopra. Under this arrangement the profits and losses were to be shared between the three partners, Messrs. Jagdish Raj Chatrath and K.P. Soni, two-fifths each and Mr. S. C. Kapur one-fifth. All these documents show, as has been found by the Council of Chartered Accountants that before the last document was executed on the 7th January 1949 Jagdish Raj Chatrath was not a partner in any firm of Chartered Accountants.
There is a document Ex. 12 at p. 48. It is a certificate by Messrs. B.M. Chatrath & Co. and is dated the 23rd December 1948, and it is as follows:
'Copy of the certificate of salary received and produced by Mr. Jagdish Raj Chatrath, dated the 23rd December 1948.
Certified that Mr. Jagdish Raj Chatrath, B A., R. A., acted as the Manager of our Firm from the year 1939 uptil 25th October, 1948 and that he was getting a remuneration of Rs. 500/- p.m. when he left our services.
Further certified that for the assessment year 1946-47 an approximate sum of Rs. 1000/- was paid as tax for the year in respect of his salary. Sd/- B.M. Chatrath & Co.
Registered Accountants '
6. The learned Solicitor General relied on the schedule attached to the Act. Section 22, Clause (u) of this schedule is as follows:
' 22. A chartered accountant shall be deemed to be guilty of conduct rendering him unfit to be a member of the Institute, if he (u) includes in any statement, return or form to be submitted to the Council any particulars knowing them to be false;'
He drew our attention to the scheme of the Act where Section 2 deals with interpretation and Section 5 with two classes, that is, Fellows and Associates, and to Section 21 which deals with misconduct and the schedule which deals with what is misconduct under the Act. His submission was that by making those incorrect statements in his application Jasdish Raj Chatrath, the opposite party, had made 'himself liable to disciplinary action, and it had rightly been taken against him, but the question of punishment, if any, was rightly left to the discretion of this Court.
7. In reply counsel for Jagdish Raj Chatrath in the first instance submitted that there was no material misstatement in the applications made. He divided the period of the opposite party's professional career into three parts:
8. Firstly, from September 1939 when after being enrolled as a Registered Accountant Jagdish Raj Chatrath started as a paid Assistant of Messrs. B.M. Chatrath & Co. and this went on right up to the 31st March 1944.
9. Secondly, from the 1st of April 1944. According to counsel, the previous arrangement was modified by which Jagdish Raj Chatrath became a partner getting Rs. 500/- a month plus a portion of profits. Although he was acting as a Manager, yet because he was getting a share of the profits, he became a partner with Mr. B.M. Chatrath, and in support of his being a partner he has relied on the statement of Mr. B.M. Chatrath and a deed of dissolution between Mr. B.M. Chatrath and Mr. S. P. Chopra which is Ex. 7 at page 42, reference to which I have already made. The statement of Mr. B.M. Chatrath, in my opinion, does not show that Jagdish Raj Chatrath was a partner. I have already made reference to those portions of his evidence which militate against the two being partners and the certificate of Mr. Chatrath at page 48, Ex. 12, read with certificate, Ex. 19 at page 57, in my opinion, makes it sufficiently clear that Jagdish Raj Chatrath was not a partner in the firm, Messrs. B.M. Chatrath & Co.
10. Thirdly, after the dissolution of partnership between B.M. Chatrath ana S. P. Chopra there is a period of interregnum, i.e., the 13th June 1948 upto the 2nd December 1948 when a partnership was entered into between Messrs K.P. Soni, Jagdish Raj Chatrath and S. C. Kapur, and during which period it was admitted that Jagdish Raj Chatrath was not a partner of any firm, and to that extent the statement made in the application is incorrect.
11. No explanation has been given as to why in his first application Ex. 4, page 36, Jagdish Raj Chatrath stated that from August 1939 to March 1944 he was employed as a Manager of a firm of registered accountants on a fixed salary and then on salary plus a share of profits and from the 21st October 1948 onwards he was a full-fledged partner. This statement makes it quite clear that Jagdish Raj Chatrath did understand what was meant by the word 'partner'. The explanation offered by counsel was that Jagdish Raj Chatrath is not a lawyer and therefore he might well have understood that when he was getting salary plus a share of profits he was a partner. That he could be under no such misapprehension is clear from the fact that in the document Ex. 4 under para. 3 he clearly distinguishes between a partner and a manager getting a share of the profits.
It was suggested that the words used were 'a full-fledged partner'. I do not think that any distinction can be drawn between a partner and a full-fledged partner, and the significance of this word is made quite clear by question No. 4 and answer thereto in Ex. 4. It is difficult for me to believe that a Chartered Accountant would not be able to distinguish between a partner and a servant of a partnership who is paid by way of salary and a share of profits, particularly in the circumstances which I have mentioned above.
12. It is unfortunate that the opposite partyshowed no contrition in regard to the statementswhich ho made. On the other hand, he persistedin maintaining that what he had been stating wascorrect, although on his own showing there was aperiod of six months during which he was notpractising as a partner. Even before us the pleawas one of justification which in my opinion hasnot been established nor have any extenuating circumstances been placed before us. In my opinion,it is a case in which action is called for, and, there-fore, I would order the temporary removal of Jagdish Raj Chatrath for a period of one month fromthe register. The costs of the Institute which arrived at Rs. 100,'- shall be paid by the opposite party.