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Fraser and Ross, Chartered Accountants Vs. Sambasiva Iyer and anr. - Court Judgment

LegalCrystal Citation
CourtChennai High Court
Decided On
Case NumberWrit Petition No. 222 of 1966
Reported inAIR1969Mad134; [1968]68ITR279(Mad); (1968)ILLJ682Mad
ActsIndustrial Disputes Act, 1947 - Sections 2
AppellantFraser and Ross, Chartered Accountants
RespondentSambasiva Iyer and anr.
Appellant AdvocateT. Thiagarajan, Adv. for ;King and Partridge
Respondent AdvocateB.R. Dolia, Adv.
DispositionPetition allowed
Cases ReferredIn H. A. K. Rao v. Council of Institute of Chartered Accountants of India
service - nature of industry - section 2 (j) of industrial dispute act, 1947 - whether firm of chartered accountants and auditor will be 'industry' within scope of section 2 (j) - services rendered by 'learned profession' do not constitute 'industry' within scope of section 2 (j) - chartered accountants and auditors are considered as members of 'learned profession' rendering professional services dependent on personal qualification and ability of donor of services - held, chartered accountants and auditors constitute learned profession which cannot be termed as industry within definition. - - , did hold that a firm of chartered accountants and auditors, like the petitioner firm here, might be included within the definition of the expression 'industry' in section 2(j) of the act. ,.....anantanarayanan, c.j.1. a question of considerable interest and importance, in the domain of industrial law, arises in this proceeding, namely, whether a firm of chartered accountants and auditors, a registered partnership which is conducting this profession, will be an 'industry' within the scope of section 2(j) of the industrial disputes act. the matter arises for our determination, in the following context of facts. messrs. fraser and ross (writ-petitioners) had employed the first respondent, (v. sambasiva ayvar) as a stenographer in the firm, and, under the rules relating to his service, he was to be retired in february, 1963, when he would have attained the age of superannuation. we need not now concern ourselves with the minute particulars, but it may be noted that the first.....

Anantanarayanan, C.J.

1. A question of considerable interest and importance, in the domain of Industrial Law, arises in this proceeding, namely, whether a Firm of Chartered Accountants and Auditors, a registered partnership which is conducting this profession, will be an 'industry' within the scope of Section 2(j) of the Industrial Disputes Act. The matter arises for our determination, in the following context of facts. Messrs. Fraser and Ross (writ-petitioners) had employed the first respondent, (V. Sambasiva Ayvar) as a stenographer in the Firm, and, under the Rules relating to his service, he was to be retired in February, 1963, when he would have attained the age of superannuation. We need not now concern ourselves with the minute particulars, but it may be noted that the first respondent was permitted to avail himself of earned leave from 1-2-1963 to 31-5-1963, and that he finally retired on 1-6-1963. He made a claim that he ought to be continued in service till the completion of his 60th year, or at least for three years more, but this was rejected by the Firm, and he instituted a proceeding in the Labour Court, claiming a sum of Rs. 7,254/-, as retrenchment compensation and wages in lieu of one month's notice. The petitioner Firm raised a preliminary objection to the maintainability of the petition, claiming that the Firm did not constitute an 'industry', within the meaning of the Industrial Disputes Act. The Labour Court negatived this contention, and this has led to the present proceeding in certiorari.

2. Though, at different stages of the arguments, several of the averments and counter-averments relating to the merits of the claims of the first respondent were particularised before us they need not be here gone into. Admittedly, it is only the general question which concerns us, and if Messrs. Fraser and Ross. a reputed Firm of Chartered Accountants and Auditors, do not come within the ambit of the statutory definition, the writ petition will necessarily have to be allowed. Nor can the matter be merely considered as res integra, though there is no previous judgment of this Court on the subject, or any judgment of the Supreme Court. There are two decisions of the Calcutta High Court. N. R. Mukherjee v. A. H. Just, : AIR1961Cal95 and Rabindranath Sen v. First Industrial Tribunal, West Bengal, : AIR1963Cal310 on this specific issue. In the first of these precedents, a contention was raised that the activities of that particular firm of Chartered Accountants were not confined to the business of a Chartered Accountant simpliciter, but extended to other activities, which might be viewed as commercial activities, and which were not strictly related to the business or profession of a Chartered Accountant. The learned Judge held that evidence was essential on two related questions of fact, and the decision really turned upon considerations of that character. But in the second precedent, : AIR1963Cal310 , Banerjee, J., did hold that a Firm of Chartered Accountants and Auditors, like the petitioner Firm here, might be included within the definition of the expression 'industry' in Section 2(j) of the Act. These precedents were considered, and a decision was rendered by Mathew, J., on the very point, in T. K. Menon and Co. v. District Labour Officer 1966 2 Lab LJ 608 . This judgment came up in appeal before Govinda Menon and Krishnamurthi Ayyar, JJ., In the High Court of Kerala, in T. K. Menon and Co. Calicut v. District Labour Officer Kozikode-2, 1966 2 Lab LJ 613 AIR 1967 Ker 31, and, after a considered review of the case-law, the learned Judges allowed the appeal, and held that the work of a Chartered Accountant or of Chartered Accountants could not be included in the definition of the word 'Industry' in Section 2(j) of the Act. Subsequent to this judgment of this Division Bench, we have the judgment of the Supreme Court in the Secretary, Madras Gymkhana Club Employees' Union v. Management of the Gymkhana Club, Civil Appeal No. 572 of 1966 : (1967)IILLJ720SC . That reviews the entire prior case-law on the subject, and formulates afresh the principles upon which the matter now before us will really have to be determined.

3. At a later stage of this judgment, we propose to refer, in some detail to the profession of Chartered Accountants and Auditors in the context of the Chartered Accountants Act (Act XXXVIII of 1949), the Chartered Accountants Regulations, .1964, and certain treatises and authorities, such as (1) Professional Ethics of Certified Public Accountants, by John L. Carey (1956), New York, and (2) The Accountant in Public Practice, by K. L. Milne (1959), Butterworth & Co., London, as well as extracts from Hals-bury's Laws of England, For the moment we shall relegate this task to the subsequent stage, and focus attention on the evolution of case-law. For this purpose, it is really necessary to keep in mind, throughout, three relevant definitions, namely, definition of 'industry' in Section 2(j), of 'industrial dispute' in Section 2(1) and of 'workmen' in Section 2(s) of the Industrial Disputes Act. But since those definitions have been set forth verbatim in several of the precedents cited at the Bar, including the Gymkhana Club Case, C. A. No. 572 of 1966= : (1967)IILLJ720SC , it is sufficient for our present purpose to extract the definition in Section 2(j) alone, namely:

' 'Industry' means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen.'

4. The true commencement of the case-law, as far as this country is concerned, would appear to be D. N. Banerjee v. P. R. Mukherjee, : [1953]4SCR302 . The following dicta of Chandrasekhara Ayyar, J., may be here relevantly set forth;

'Though the word 'undertaking' in the definition of 'industry' is wedged in between business and trade on the one hand and manufacture on the other, and though, therefore, it might mean only a business or trade undertaking, still it must be remembered that if that were so, there was no need to use the word separately from business or trade. The wider import is attracted even more clearly when we look at the latter part of the definition which refers to 'calling, service, employment, or industrial occupation or avocation of workmen', 'Undertaking' in the first part of the definition and 'industrial occupation or avocation' in the second part obviously mean much more than what is ordinarily understood by trade or business.' At the same time the Court was careful to observe that every aspect of employer and employee connection did not result in industry, and in the Hospital Mazdoor Case, : (1960)ILLJ251SC , their Lordships again emphasised that though the words were of a very wide denotation, 'a line would have to be drawn in a fair and just manner.'

5. While upon this aspect of the commencement of the evolution of the case-law, it is necessary to refer to two decisions from Australia, namely, Federated Municipal and Shire Council Employees of Australia v. Melbourne Corporation, (1918-19) 26 Com LR 508 and Federated State School Teachers' Association of Australia v. State of Victoria, (1928-29) 41 Com LR 569. These embodied certain dicta of Isaac, J., which have subsequently coloured the perspective of approach to a considerable extent, that an 'industry' involves 'co-operation between employer and employees for the object of satisfying material human needs'. It is understood that the co-operation may result in services, as much as in products, and that the contingency of profit-making need not necessarily exist.

6. We may now pass on to Baroda Borough Municipality v. Its Workmen, : (1957)ILLJ8SC , which extended the expression of 'industrial dispute' to include disputes between the Municipality and its employees 'in branches of work that can be regarded as analogous to the carrying on of a trade or business.' This was followed by the Corporation of City of Nagpur v. Its Employees, : (1960)ILLJ523SC , in which precedent the Supreme Court made a distinction as between (a) regal and (b) municipal functions of the Corporation, the latter being held analogous to business or trade.

7. We now come to the Hospital Mazdoor Case, : (1960)ILLJ251SC , which constitutes a landmark. This precedent attempted to evolve a working test, and, perhaps, the best manner in which the decision could be explained would be the citation of a passage, not from this decision itself, but from a subsequent commentary furnished by the Supreme Court in National Union of Commercial Employees v. Meher Industrial Tribunal, Bombay, : (1962)ILLJ241SC .

'When in the Hospital Case, : (1960)ILLJ251SC this Court referred to the organization of the undertaking involving the co-operation of capital and labour or the employer and his employees, it obviously meant the co-operation essential and necessary for the purposes of rendering material service or for the purpose of production. It would be realised that the concept of industry postulates partnership between capital and labour or between the employer and his employees. It is under this partnership that the employer contributes his capital and the employees their labour and the joint contribution of capital and labour leads directly to the production which the industry has in view. In other words, the co-operation between capital and labour or between the employer and his employees which is treated as a working test in determining whether any activity amounts to an industry, is the co-operation which is directly involved in the production of goods or in the rendering of service. It cannot be suggested that every form or aspect of human activity in which capital and labour co-operate or employer and employees assist each other is an industry. The distinguishing feature of an industry is that for the production of goods or for the rendering of service, cooperation between capital and labour or between the employer and his employees must be direct and must be essential.'


'In the hospitals, the service to the patients begins with proper diagnosis followed by treatment, either medical or surgical, according to the requirements of the case. In the-case of medical treatment, the patient received medical treatment according to the prescription and are kept in the hospital for further treatment. In surgical cases, the patients receive surgical treatment by way of operation and then are kept in the hospital for further treatment until they are discharged. During the period of such treatment, all their needs have to be attended to, food has to be supplied to them, nursing assistance has to be given to them, medical help from time to time has to be rendered and all incidental services required for their recovery have also to be rendered. Now, in the case of the activities of an organised hospital, the co-operation of the employees is thus directly involved in rendering one kind of service or another which it is the duty of the hospital to render. It is true that the patients are drawn to the hospital primarily because of the doctors or surgeons associated with them. But there can be no doubt that the work of the hospital and its purpose are not achieved merely when a surgical operation is performed or medical prescription provided. After medical treatment is determined or a surgical operation is performed, the patient coming to a hospital as an indoor patient needs all kinds of medical assistance until he is discharged and the services rendered to him both initially and thereafter until his discharge are all services which the hospital has been established to render and it is in the rendering of the said services that the employees of the hospital co-operate and play their part. That is how the test of co-operation between the employer and his employees is satisfied in regard to hospitals which are properly organized and maintained. It is, of course, true that the quality, the importance and the nature of the service rendered by different categories of employees in a hospital would not be the same, but nevertheless, all the categories of service rendered by respective classes of employees in a hospital are essential for the purpose of giving service to the patients which is the objective of the hospital. That is how the hospitals satisfy the test of cooperation between the employer and his employees'.

8. In Ahmedabad Textile Industry Eesearch Association v. State of Bombay, : (1960)IILLJ720SC , the question arose whether an association for research maintained by the Textile Industry, and employing technical and other staff fell within the definition. The tests set forth in the Hospital Mazdoor Case, : (1960)ILLJ251SC were recapitulated, and applied to the context of facts. We might immediately pass on to : (1962)ILLJ241SC , which is important, as it held that though a solicitor's firm might be superficially organized like an industrial concern, the Legislature could not have intended to include a 'liberal profession' of that character in the definition of 'industry'. Their Lordships observed at p. 246:

'A person following a liberal profession does not carry on his profession in any intelligible sense with the active cooperation of his employees and the principal, if not the sole, capital which he brings into his profession in his special or peculiar intellectual and educational equipment. This is why on broad and general considerations which cannot be ignored, a liberal profession like that of an attorney must, we think, be deemed to be outside the definition of 'industry' under Section 2(j).'

9. In Harmagar Cane Farm v. State of Bihar, : (1963)ILLJ692SC the agricultural operations of a cane farm purchased by a sugar factory and worked as a department for the supply of sugar-cane, were held to amount to an 'industry' on the facts, though agriculture could not be termed an 'industry' irrespective of circumstances. In University of Delhi v. Ramnath, : (1963)IILLJ335SC it was held that educational institutions do not constitute an 'industry' within the Act. In the Kerala case, 1966 2 Lab LJ 613 AIR 1967 Ker 31, emphasis has been laid on the dicta of Judges in English decisions, upon what would constitute a 'profession' or a 'liberal profession'. There were extensive citations from the judgments of Scrutton, L. J., in Commissioners of Inland Revenue v. Maxse, 1919 1 KB 647 and Currie v. Inland Revenue Commissioners. 1921 2 KB 332.

10. Subsequently, we have the Gymkhana Club Case. C. A. No. 572 of 1966= : (1967)IILLJ720SC . Before proceedinff to an analysis of this case, certain possible misconceptions might have to be removed. One argument sought to be advanced, on the facts themselves, by the first respondent was that Messrs. Fraser & Ross actually carried on certain activities, which could not be purely characterised as those within the scope of a reputed Firm of Chartered Accountants and Auditors. For this purpose, several records were called for and scrutinised, and emphasis was placed on certain of the documents in an additional statement in the Lower Court. But. as Mr. Thyagarajan, for the petitioner Firm, has now 'made it clear beyond doubt, those items of work really relate either to assignments of Liquidation, or Receivership and Managership, most of which were executed many years previously, prior to the Chartered Accountants Act, 1949, and derived from orders of Court. We are fully satisfied that Messrs. Fraser & Ross have only been conducting the business of the profession, or strictly legitimate extensions of such business, as advisers of firms upon taxation matters, provident fund structures, etc.

11. Another misconception can be very easily resolved, in terms of the case-law itself. This is that the Firm cannot claim that it is not included within the definition, because here we have a group of Chartered Accountants and Auditors, registered as a partnership firm and carrying on business as such, and not an individual practitioner of the profession, assuming that it is a 'learned profession'. But this distinction was repelled as unsubstantial by their Lordships of the Supreme Court in : (1962)ILLJ241SC .

'In our opinion, the distinction sought to be drawn by Sri Chari between professional service rendered by an individual acting by himself and that rendered by a firm is not logical for the purposes of the application of the test in question. What is true about a firm of solicitors would be equally true about an individual solicitor working by himself. As the firm engages different categories of employees, a single solicitor also engages different categories of employees to carry out different types of work and so the presence of co-operation between the employees working in a solicitor's office and their employer, the solicitor, could be attributed to the work of a single solicitor as much as to the work of the firm; and, therefore, if Sri Chari is right and if the firm of solicitors is held to be an industry under the Act, the office of an individual solicitor cannot escape the application of the definition of Section 2(j).'

12. The true argument of Mr. Dolia for the first respondent is not this. It la obvious that, so long as the learned profession of the law was strictly being pursued by the persons constituting the partnership, a partnership of lawyers will not be an 'industry' within the meaning of the definition, merely because there are two or more lawyers, and not a single lawyer. Clearly, the same argument will hold good for members of the medical profession. The true argument of Mr. Dolia is that, even if the learned professions are to be excluded, they should be limited to the three Institutions, the Law, Medicine, and the Church, to which the appellation was originally employed. As far as Chartered Accountants and Auditors are concerned, it is stressed that there is intimate co-operation between the Chartered Accountants themselves, and the clerical staff, which carries out a great deal of the routine work of actual scrutiny of accounts and effective preparation of the audit material. Without this co-operation, which is substantial, of the employee forces or of labour, whichever it might be termed, the Chartered Accountant could not function at all. It is this which led Banerjee, J., in : AIR1963Cal310 to hold that a firm of Chartered Accountants did come within the definition. The learned Judge stated at p. 579 (of Lab LJ)=(at pp. 319-20 of AIR):

'A Chartered Accountant doing audit work assisted by stenographers, personal clerks and menial servants, that is to say, doing the entire auditing work, from examination of accounts to the making of the report, all by himself, but only with such subsidiary and incidental help as may be rendered by his stenographers, typists, personal clerks and servants, may not be carrying out an industry. But if a Chartered Accountant carries on auditing work in a magnified scale, with more clients than he can himself manage, and is perforce compelled to have a division of labour, his clerks doing the examination of accounts and he himself drawing up the audit report, on the result of such examination, it may not be said that this type of co-operation is not industry'.

13. But this argument cannot be really sustained, for a very important reason. The true criterion is not the degree of co-operation between the employee personnel and the employer or em-plovers, in the process, which has to be judged for inclusion in the definition, whether it results in a product or service. As we shall see a little later, that has been very clearly laid down in the Gymkhana Club Case, C. A. No. 572 of 1966= : (1967)IILLJ720SC Logically. It will be almost impossible to draw a line, concerning the degree or the quality of the co-operation, from case to case. Again, the entire argument really overlooks the actual organization of the profession of Chartered Accountants, and the equipment necessary for the practice of this profession, taken in conjunction with the quality of the service rendered. All these features, as we shall presently see, make this profession a 'learned' one, almost indistinguishable from the profession of the lawyer, with a high code of professional ethics, and a firm structure within which the members of the profession have to function,

14. It is not necessary here to define the word 'profession'. English cases make it unambiguous that even a description may not suffice. But as Scrut-ton. L. J., observed in 1919 1 KB 647, the essential idea of 'learned profession' which cannot, in the modern context, be merely limited to the original categories of Church, Medicine and Law, is that it is the pursuit of an avocation or occupation, substantially involving the intellect. There is a complementary feature to this, that the services rendered by a 'learned profession' are primarily characterised by an equipment of learning, skill or judgment, acquired through intellectual means; the employment of capital for this purpose is, or should be, largely subsidiary or incidental in character. So long as these criteria are fulfilled, such a profession is a 'learned profession'. Persons organizing this profession, whether singly or banded together, do not constitute an 'industry', within the scope of the definition. They may employ other persons, for the skilful accomplishment of their tasks; such a labour force may be large, or small. Its services may even be considerable, in the quantitative sense. But, ultimately, if the qualitative contribution is distinct and supreme, this is not an 'industry', within the meaning of the Act. This appears to be established beyond doubt, relegating, in such cases, the test of co-operation between capital or the employer, and labour, to a relatively minor magnitude.

14-A. This is very clear from the following discussion in the Gymkhana Club Case, C. A. No. 572 of 1966= : (1967)IILLJ720SC and we have set forth verbatim these passages, which serve to bring out the essential criteria in terms of the latest formulation by their Lordships of the Supreme Court.

'Of these categories 'undertaking' is the most elastic. According to Webster's Dictionary, 'undertaking1 means 'anything undertaken' or 'any business, work or project which one engages in or attempts, as an enterprise'. It is this category which has figured in the cases of this Court. It may be stated that this Court began by stating in Banerjee's case, : [1953]4SCR302 that the word 'undertaking' is not to be interpreted by association with the words that precede or follow it but after the 'Solicitor's' and the 'University' cases. 'It is obvious that liberal arts and learned professions educational undertakings and professional service dependent on the personal qualifications and ability of the donor of services are not included'. (Emphasis ours (here into '')). Although business may result in service, the service is not regarded as material. That is how the service of a Solicitor firm is distinguished from the service of a building corporation. Otherwise what is the difference between the services of a typist in a factory and those of another typist In a Solicitor's office or the service of a bus driver in a municipality and of a bus driver in a University. The only visible difference is that in the one case the operation is a part of a commercial establishment producing material goods or material services and in the other there is a non-commercial undertaking. The distinction of an essential or direct connection does not appear to be so strong as the distinction that in the one case the result is the production of material goods or services and in the other not.' Again:-- 'Too much insistence upon partnershipbetween employers and employees isevident in the Solicitor's case and toolittle in the Association case. And yet itis impossible to think that this test isuniversal. What partnership can existbetween the Company and or Board ofDirectors on the one hand and menialstaff employed to sweep floors on theother? What direct and essential nexusis there between such employees andproduction? This proves that what mustbe established is existence of an industry'viewed from the angle of whatthe employer is doing' (emphasisours (here into ' ')) and ifthe definition from the angle of the em-plover's occupation is satisfied, all whorender service and fall within the definition of workmen come within the foldof industry irrespective of what they do............ What matters is not the nexus between the employee and the product of the employer's efforts but the nature of the employer's occupation. If his work cannot be described as an industry, his workmen are not industrial workmen and the disputes arising between them are not Industrial disputes. The cardinal test is thus to find out whether there is an industry according to the denotation of the word in the first part. ............'

15. It will thus be dear that, if Chartered Accountants and Auditors can be considered as members of a 'learned profession' rendering professional services essentially 'dependent on the personal qualifications and ability of the donor of services' (Gymkhana Club Case, C.A. No.572 of 1966= : (1967)IILLJ720SC ), they will not come within the definition. The simple further question is, whether the material placed before us justifies the assumption that Chartered Accountants and Auditors are members of a profession rendering service in this sense, and, therefore, not within the ambit of the definition. We have no doubt whatever that this must be answered in favour of the writ petitioner Firm.

16. Perhaps, the best account of the profession and its setting, is to be found in N. E. Merchant v. The Bombay Municipal Corporation, : AIR1968Bom283 . This account runs as follows at P. 763 (of Bom LR)=(at p. 287 of AIR):

'We further think that in considering whether an , activity is a profession or not, we may perhaps be guided by the fact that the Church, the Medicine and the Law have been for centuries regarded as learned professions. In each of these three, the individual activity is characterised by personal skill and intelligence and is dependent on personal study, character and integrity. These qualities displayed by the practitioners of these learned professions inspire confidence in persons approaching them for advice or guidance. The first is approached for spiritual comfort and guidance, the doctor for physical or mental ailment and the lawyer for legal advice. But in each case the person who approaches them chooses them according to his own conception of the skill, intelligence and integrity, of the person approached, and since he approaches in entire confidence, the priest, the doctor and the lawyer have a corresponding obligation not to betray the confidence and advise his client as best as he can. The same element of trust and confidence must be a test in more or less degree in modern professions. A Chartered Accountant Is approached by his client for advice and guidance in his problems with regard to trade, business or industry, and it is expected that the Chartered Accountant, to the best of his ability, would be in a position to help him in his difficulties and not betray the confidence that is placed in him. This, in our opinion, is one of the elements which should be sought when considering whether a particular person is practising a profession or is merely doing a business. 'A rapid survey of the general functions performed by a Chartered Accountant in practice will go to show that the functions are of a highly individualistic character requiring the personal skill, intelligence and integrity on the part of a Chartered Accountant. The Company Law requires that the accounts of a company should be audited by auditors. Section 226 of the Companies Act, 1956, lays down the qualifications and the disqualifications of auditors. Under that section an auditor will not be qualified unless he is a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949. Section 227 then prescribes the powers and the duties of the auditors. Every auditor of a company has a right of access at all times to the books of accounts and vouchers of the company and is entitled to require from the officers of the company such information and explanation as the auditor may think necessary for the performance of his duties as an auditor. In carrying out these duties, he cannot be cowed down either by the managing director of the company or the managing agents because his duties require that he shall faithfully carry out his duties as an auditor without fear or favour and audit the accounts of the company in such a manner that the shareholders get a correct picture of the financial position of the company. Punishment is also provided under Section 233 of the Indian Company Law if the Auditor's report is made otherwise than in conformity with the requirements of Sections 227 and 229 of the Act. In other affairs, also relating to companies, a Chartered Accountant plays a very vital role. Being trained to maintain costing records he can ascertain the cost of production and of process at different levels of operations in the manufacture of a product. He can by his expert knowledge help a manufacturing company. His services are also frequently sought in connection with the formation and the financial structure in liquidation of limited companies. He is also called upon to carry out investigation to ascertain the financial position of a business in connection with matters such as new issues of share capital, the purchase or sale of a business, reconstructions and amalgamations. He is also fitted to undertake valuation of shares of public and private companies when amalgamations or reorganisations take place. In other words, the Chartered Accountant plays a very valuable role in relation to the financial aspects of the business of a company. He is also well equipped for advising the preparations of tax returns. Drastic forms of taxation are being introduced. The Chartered Accountant has to keep himself abrest of the current and continuing tax information. Section 288 of the Income-tax Act, 1961, shows that a Chartered Accountant is entitled to appear before the Income-tax Authorities as the authorised representative of the assessee.'

17. This description shows the highly responsible character of the vocation, the intellectual standards underlying the nature of the services of a Chartered Accountant, the equipment of learning that he has to obtain before he can practice his profession, and the rigid structure of the profession along with a strict code of professional ethics, as can be easily gleaned from the Chartered Accountants Act, 1949 and the Regulations of 1964. In H. A. K. Rao v. Council of Institute of Chartered Accountants of India, : [1967]2SCR256 , the following passage at p. 1258 refers to the importance of this profession, and its organization as a profession requiring, primarily, the use of intellectual faculties:

'Before we consider the relevant provisions of the Act it is necessary to notice at the outset the nature and objects of the Institute. The Institute is a statutory body having perpetual succession and a common seal. It is governed by the Act and the Chartered Accountants Regulations, 1949, hereinafter called the Regulations. The Central Council of the Institute shall be composed of not more than 24 members elected by the members ot the Institute from among the fellows thereof and 6 persons nominated by the Central Government. There are Regional Councils which function in their respective regions subject to the control, supervision and direction of the Central Council or any of its committees. Elections to the Councils are held once in three years. Therefore, the Act. through its provisions, regulates the profession of Chartered Accountants. It establishes an Institute of Chartered Accountants and provides for the constitution of a Council for carrying out the objects of the Act. The Central Council, inter alia, has the power to admit members to the Institute, to take disciplinary action, and to regulate and maintain the status and standard of the professional qualifications of the members of the Institute. It is needless to say that the profession of Chartered Accountant is a respectable one and the duties of Chartered Accountants are onerous and responsible. They are all educated and qualified men and on their efficiency and integrity depends the stability of many of the institutions in the country. It cannot, therefore, be gainsaid that the candidates seeking to become members of the said Council which regulates the conduct of Chartered Accountants shall necessarily be persons of high integrity and above criticism.'

18. In addition to this, we may set forth the following passages from 'The Accountant in Public Practice' by K. L. Milne, and from Halsbury's Laws of England, Third Edition, Volume 6.

(1) K. L. Milne's Book:--

'Today public accountants carry tremendous responsibility as auditors of vast enterprises, as trustees in bankruptcy, as liquidators, and as financial advisers in all kinds of ways. The care which accountants take to improve their service, the organization of national and international congresses, the effort that is made to train new members, are but a few of the ways in which accountants indicate how seriously they take their responsibilities. It can truthfully be said, therefore, that a sense of mission exists for accountants, and that it is developing more and more as greater responsibility is placed upon them,'

(Page 18, Para 2).

'The accountant is expected to have & knowledge of commercial law, particularly company law, bankruptcy law and taxation law, not for the purpose of Interpreting it (the province of the lawyer) but for the purpose of implementing it. An accountant can make his knowledge useful only after several years of ardous study and practical experience. Furthermore, in common with other intellectual services, his study must continue throughout his career as the technique of his calling develops and laws affecting it alter. It is largely the professional man's ability to keep abrest of the developments of his calling which brings him success and makes his service of value.'

'The service provided by the accountant is essentially that of a trained mind. He needs a mental capacity above the average to practice accountancy effectively, and accountants are beginning to realise that a broad academic training is of tremendous value in an accountancy career.'

(Page 18, para 4)

'The leading societies set a very high standard in their administration and in their activities. It is safe to say, therefore, that the leading accountancy bodies, in English speaking countries at least, qualify as professional bodies for the purpose of this definition'.

(Page 23, Para 2).

'Since health, finance, engineering, teaching and justice are the five main fields of professional endeavour, it follows that accountancy is not only a profession, it is one of the major learned professions of our time. The challenge to Accountants is therefore clear and inescapable.'

(Page 51, Para 1).

(2) Halsbury.

'Para 748. Auditor's Report. The auditors of a company must make a report to the members on the accounts examined by them, and on every balance-sheet, every profit and loss account and all group Accounts laid before the company in general meeting during their tenure of office. In this context 'balance-sheet' and 'profit and loss Account' include any notices thereon and documents annexed thereto giving information which is required by the Act and thereby allowed to be so given. The Directors' report, if it gives information required by the Act to be given in accounts but permitted thereby to be given in a statement annexed is to be annexed to the Accounts but the auditors are only to report thereon so far as it gives that information.

'The report must state (1) whether they have obtained all the information and explanations which to the best of their knowledge and belief were necessary for the purposes of their audit; (2) whether, in their opinion, proper books of account have been kept by the company so far as appears from their examination of those books and proper returns adequate for the purposes of their audit have been received from branches, not visited by them (3) whether the company's balance-sheet and (unless it is framed as a consolidated profit and loss Account) profit and loss Account dealt with by the report are in agreement with the books of Account and returns: (4) whether in their opinion and to the best of their information and according to the explanations given them, the accounts give the information required by the Act in the manner so required and give a true and fair view (i) in the case of the balance-sheet of the state of the Company's affairs as at the end of its financial year; and (ii) in the case of the profit and loss account, of the profit or loss for its financial year; or, as the case may be, five a true and fair view thereof subject to the non-disclosure of any matters (to be indicated in the report) which by virtue of the exceptions for special classes of company set forth previously are not required to be disclosed; and (5) in the case of a holding company submitting group accounts whether, in their opinion, the group accounts have been properly prepared in accordance with the provisions of the Act so as to give a true and fair view of the state of affairs and profit or loss of the company and its subsidiaries dealt with thereby so far as it concerns members of the company or as the case may be, so as to give a true and fair view thereof subject to the non-disclosure of any matters ......... which by virtue of the exceptions for special classes of company set forth previously are not required to be disclosed.

'In addition, where the accounts do not give such particulars of directors' salaries and pensions or loans to officers as required by the Act, it is the duty of the auditors to include in their report, so far as they are reasonably able so to do a statement giving the required particulars.'

'The auditors' report must be read, before the company in general meeting and must be open to inspection by any member.'

'Para 749. Attendance at general meetings. The auditors of a company are entitled to attend meeting of the company and to receive all notices of and other communications relating to any general meeting which any member of the company is entitled to receive and to be heard at any general meeting which they attend on any part of the business of the meeting which concerns them as auditors.'

'Para 751. Duties of auditors. It Is the duty of an auditor to verify not merely the arithmetical accuracy of the balance-sheet, but its substantial accuracy to see that it includes the particulars required by the articles and by statute, and contains a correct representation of the state of the company's affairs. While therefore, it is not his duty to consider whether the business is prudently conducted, he is bound to consider and report to the shareholders whether the balance-sheet shows the true financial position of the company. To do this he must examine the books and take reasonable care to see that their contents are substantially accurate. Except in special cases he should place before the shareholders the necessary information as to the true financial position of the company, and not merely indicate the means of acquiring it. Apart from his statutory duty, which cannot be removed by the articles or an agreement, the exact duties of an auditor are regulated by the contract under which he is employed, The statutory duty is not absolute but depends upon the explanations furnished and information given. But an auditor must ask for information on matters which call for further explanation. An auditor must take steps to learn his statutory duties and his duties under the articles. It is his duty to consider whether payments made by the company before the audit were authorised by the articles and he will be liable for improper payments made by the directors and naturally resulting from his breach of duty. So an auditor who reports confidentially to the directors the insufficiency of the sureties on which the capital is Invested and the difficulty of realisation, but who only reports to the share-holders that the value depends on realisation, with the result that the share-holders ignorantly approve an improper dividend, is liable to make good the amount paid. An auditor should not be content with a certificate that securities are in the possession of any person or body of persons however trustworthy, unless the certificate is given by a bank or other person who in the ordinary course of business would usually be entrusted with securities.'

19. Consequently, the argument of Mr. Dolia that, with regard to a firm like the writ petitioner, the work is largely made up of the scriptory and clerical duties of the staff employed under the Chartered Accountants, is totally misleading and unacceptable. In the affidavit of the first respondent, this argument has been expressed in the form that 'but for the assistance of the clerks and stenographers the audit report cannot be finalised, and the auditing work could not be carried by the petitioner firm'. Again, 'though the report and certification of the balance-sheet should be given by qualified auditor, the essential part of the main work which is to be performed prior to the finalisation of such report is turned out only by the employees viz., clerks and typists but for whose help the petitioner firm cannot prepare its audit report at all.'

This is clearly to misconceive the quality of the services rendered by those following the esteemable and intellectual profession of Chartered Accountancy. The pursuit of the profession not merely involves a high code of Ethics and very considerable responsibility, but it also involves, essentially value-decisions and judgments, which cannot possibly be derived from clerical assistance, or the performance of routine or arithmetical duties by subordinate staff. Indeed, we have taken the trouble, during the arguments, to obtain and scrutinise the several papers for the several subjects for the Examinations which culminate in entry into the restricted group of qualified Chartered Accountants who are members of the Institute. We are fully satisfied that they involve very high intellectual standards, comparable to the qualifications for the legal profession, and that there is very little to distinguish the two professions in that sense.

20. It follows that, in our view, theDivision Bench judgment of the KeralaHigh Court in 1966 2 Lab LJ 613 AIR1967 Ker 31) must be accepted with respect, as laving down the correct law:the excerpts from the judgment in theGymkhana Club Case, C. A, No. 572 of1966= : (1967)IILLJ720SC . that we haveset forth, further fortify this conclusion,and render it practically inevitable. SinceChartered Accountants and Auditors definitely do constitute a 'learned' or 'liberal profession', which cannot be termedan 'industry' within the definition, it Isa necessary consequence that the writpetition must be allowed, and this preliminary order of the Labour Court setaside. It is accordingly allowed.

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