B.N. Banerjee, J.
1. The three petitioners and respondents Nos. 7 to 14 are Chartered Accountants and carry on business in partnership under the name and style of Price Waterhouse Peat and Co., inter alia, at No. B/4, Gillander House, in the town of Calcutta, Respondents Nos. 3 and 4, N.R. Mookherjee and S. Kanungo and respondent No. 5, Prantosh Bakshi, are employees under the partnership Price Waterhouse Peat and Co.
2. There arose a dispute between the partnership and the respondents Nos. 3 to 5 represented by their trade union, firstly, over the offer of payment of bonus at reduced rate (which is referred to in the petition as an offer o ex gratia payment to respondent NOS. 3 and 4) and, secondly, over the discharge of respondent 'No. 5 on the ground of absence from office without leave. The dispute was ultimately referred by the respondent State Government to the First Industrial Tribunal foradjudication. The issues referred to the Tribunal were:
(1) Whether deduction of bonus granted toSri N. R. Mookerjee and S. Kanungo isjustified? To what relief are they entitled?
(2) Is the discharge of Sri Prantosh Bakshijustified? What relief is he entitled to?
3. The petitioners took a preliminary objection before the Tribunal to the effect that as persons practising as Chartered Accountants they did not carry on any industry within the meaning of the Industrial Disputes Act and that employees under Chartered Accountants were not workmen within the meaning of the said Act. As such it was contended that the Industrial Disputes Act had no application to the dispute and that the reference was incompetent.
4. The preliminary objection was overruled by the Tribunal by an interim award, dated May 9, 1956. The petitioners moved against the interim award before the Court, under Article 226 of the Constitution, and obtained a Rule, which was numbered as Matter No. 93 of 1956. In disposing of the Rule, which came up for hearing before Sinha, J., his Lordship held that the activities of a Chartered Accountant did not in themselves as such constitute an industry within the meaning of the Industrial Disputes Act; but that if a firm of Chartered Accountants indulged in other business or businesses it might be held to constitute an industry. His Lordship accordingly directed the Tribunal to determine, upon evidence, whether the firm, of which the petitioners were some of the partners, carried on any other business.
5. Respondents Nos. 4 and 5 appealed against the judgment and order of Sinha, J., which was numbered as appeal from Original Order No. 196 of 1958 (N.R. Mukherji v. Arnold Hartman Just, : AIR1961Cal95 ). The Court of appeal, consisting of Lahiri, C. J., and Bachawat, J., reversed the judgment of Sinha, J. with the observation that the Tribunal and Sinha, J. were both wrong in deciding, without evidence, the question whether the activities of a Chartered Accountant simpliciter constituted an industry within the meaning of the Industrial Disputes Act. The Court of Appeal set aside the judgment of Sinha, J., and quashed the interim award by the Tribunal and further directed the Tribunal to determine, on evidence, whether the activities of a firm of Chartered Accountants constituted an industry, within the meaning of the Industrial Disputes Act. The Appellate Court further directed the Tribunal to decide the preliminary objection and also the issues referred to it by one and the same award. The petitioners attempted to obtain leave to appeal to the Supreme Court against the appellate order but this Court refused the application for leave. An attempt to obtain Special leave to appeal to the Supreme Court also failed.
6. Thereafter, the Tribunal, presided over by Mr. S. N. Guha Roy, took evidence upon the issues referred to it and came to the following conclusions :
(1) 'The activities of the firm of Messrs. Price Waterhouse Peat and Co., constitute an industry within the meaning of the term in Section 2(j) of the Industrial Disputes Act. The Governmenthad jurisdiction to refer the dispute under Section 10 and this Tribunal has jurisdiction to entertain it.'
(2) 'That the non-payment of bonus to SriNupur Ranjan Mookherjee and Sri S. Kanungo isjustified and that they are not entitled to anyrelief.''
(3) 'On the facts that were before the firm, it had to proceed to consider how far the absence of Prantosh Bakshi could be treated as casual leave with pay and whether or not the remainder could be treated as casual leave without pay and if a part of that leave could not be treated as casual leave or any other kind of leave available under the rules, what action should be taken against him for absence for that particular period. As the firm did not proceed in that manner I am inclined to think it ignored its own rules relating to the leave of employees and to that extent it must be held to have been guilty of a basic error * * * My award, therefore, on the issue is that Prantosh Bakshi's discharge is not justified and that he is entitled to his wages and other emoluments from 7th May, 1955 to 9th January, 1958.'
7. The period was fixed upto 9th January, 1958, because thereafter Prantosh Bankshi had taken up another employment.
8. The Tribunal made an award in accordance with the aforesaid findings. The petitioners have moved against the award and have prayed for a Writ of Centiorari for the quashing of the award and for a Writ of Mandamus on the respondent Tribunal and the respondent State Government restraining them from giving effect to the award or from enforcing the same.
9. Before I take up for consideration the arguments advanced by Mr. Ginwala, learned Advocate for the petitioners, in support of the Rule, I have to dispose of two preliminary objections raised by Mr. P. K. Sanyal, learned Advocate for respondents Nos. 3 to 5. Mr. Sanyal contended that petitioners Nos. 1 to 3 and respondents Nos. 7 to 14 together constituted the partnership, known as Price Waterhouse Peat and Co., and since all the partners did not join as petitioners and the three who joined as petitioners did not apply in the name of the firm, the Rule must fail. There is a reason given in the petition as to why all the partners could not be impleaded as petitioners, namely, that the respondents Nos. 7 to 12 were permanently resident in the United Kingdoms or in Austria and respondents Nos. 13 and 14 were out of India for the time being. Nevertheless, respondents Nos. 7 to 14 entered appearance in the Rule, through Messrs. Orr Djgnam and Company, Solicitors for the petitioners, and through their Advocate Mrs. Diptikana Bose supported the petitioners. This branch of the preliminary objection raised by Mr. Sanyal is not of substance. As a general rule, it is true, that partners suing in their individual names ought all to join as co-plaintiffs or co-petitioners. At the same time one partner only may sue in the name of the firm, if the other partners do not object to his so doing. If they object, they may apply for indemnity against costs.
10. This was the view which was taken in England in the case of Seal and Edgelow v. Kingston, (1908) 2 KB 579 and I quote below a relevant extract from the judgment:
'It is clear upon the authority of (1834) 2 C. and M. 318, Whitehead v. Hughes that Seat had the right as one of the partners in the firm to use the name of the other partner for the purpose of bringing an action to recover a debt due to the firm, on giving his partner an indemnity against costs.'
The view aforesaid was followed by a Division Bench of this Court in Bhadreswar Coal Supply Co. v. Satis Chandra Nandi : AIR1936Cal353 . In the instant case, however, the petitioners have not used the firm name in the cause title. But a pleading has to be read as a whole. If the cause title be read with paragraphs 1 to 5 of the petition, it appears that the application, was really made on behalf of firm Price Water house Peat and Co. by the three petitioning partners. This, in my opinion, they were entitled to make. Moreover, the other partners, namely, respondents Nos. 7 to 14, have entered appearance in this Rule and through their Advocate have expressly supported the petitioners. Therefore, the objection, on ultimate analysis, boils down to a mere technicality and I overrule the same.
11. The other preliminary objection, raised by Mr. Sanyal, was that the findings, arrived at by the Tribunal, were findings of fact, based on appraisement of the evidence and this Court, exercising the Constitutional Writ Jurisdiction, must not sit in appeal over the findings of fact. This argument is attractive but does not ultimately stand in the facts and circumstances of the case. The question whether the business of a Chartered Accountant is an industry or not is one of jurisdictional fact and if in deciding such a fact the Tribunal went wrong, this Court may go into the question of fact and correct the wrong decision. This view was emphasised by the Supreme Court in Raman and Raman Ltd. v. State of Madras, (S) : 1SCR256 , in the following language:
'....there may be cases where the jurisdiction of an inferior tribunal may depend upon the fulfilment of some condition precedent or upon the existence of some particular fact. Such a fact is collateral to the actual matter which the inferior tribunal has to try and the determination of whether it exists or not is logically and in sequence prior to the determination of the actual question which the inferior tribunal has to try. In such a case, in certiorari proceedings, a Court can enquire into the correctness of the decision of the inferior tribunal as to the collateral fact and may reverse the decision if it appears to it, on the material before it to be erroneous.'
The same view was reiterated by the Supreme-Court in Lila Vati Bai v. State of Bombay, (S) : 1SCR721 . In the instant case, it was necessary for the Industrial Tribunal to determine first of all the jurisdictional fact as to whether a firm of Chartered Accountants did carry on an industry, so as to assume jurisdiction over the issues referred to it. It is, therefore, competent for this Court to go into the correctness of the finding of the Tribunal on this collateral fact, on which only the propriety of assumption of jurisdiction by the Tribunal on matters before it depends. I, therefore, overrule the second branch of the preliminary objection as well.
12. Having cleared the ground of the two preliminary objections, I take up for consideration the principal argument by Mr. Ginwala that Chartered Accountants do not carry on any industryat all and as such the dispute with their employees,of the nature referred to the Tribunal, would notconstitute an industrial dispute.
13. Section 2(j) of Industrial Disputes Actdefined the expression 'industry' in the following language:
'industry means any business, trade, under-staking, manufacture or calling of employers and includes any calling, service, employment, handicraft or industrial occupation or avocation of workmen.'
Section 2(k) of the said Act defines the expression 'industrial dispute' as hereinbelow set out:
' 'industrial dispute' means any dispute ordifference between employers and employers or between employers and workmen or between workmenand workmen, which is connected with the employment or non-employment or the terms ofemployment or with, the conditions of employmentof any person.'
Since the Act defines the expression 'industry' and thus provides a dictionary, I have, in the first place, to look to that dictionary for the meaning of the word. That meaning is of very wide import, includes as it does not only business, trade and manufacture but even an undertaking, calling or service. In considering the scope of the word 'industry', as defined in the Act, the Supreme Court observed in the case of State of Bombay v. Hospital Mazdoor Sabha, : (1960)ILLJ251SC :
'Prima facie if the definition has deliberately used words of such wide import, it would be necessary to read those words in their wide denotation.'
But however wide the import of the word industry may be, the individual still survives in a world of his own the world of private endeavour, personal service and individual calling, say for example, the services rendered by a lawyer or a medical man. In the Hospital Mazdoor Sabha case : (1960)ILLJ251SC (Supra) itself, the Supreme Court recognised this limitation of the expression 'industry,' and observed (pp. 614-15):
'that though Section 2(j) uses words of very wide denotation, a line would have to be drawn in a fair and just manner so as to exclude some callings, services or undertakings. If all the words used are given their widest meaning all services and callings would come within the purview of the definition; even service rendered by a servant purely in a personal or domestic-matter or evenin a casual way would fall within the definition. It is not and cannot be suggested that in its widesweep the word 'service' is intended to include service howsoever rendered in whatsoever capacity andfor whatsoever reason.'
14. In dealing with the somewhat difficult question of drawing a line between undertakings which are industries or are constituted on industrial basis and those which are not, the Supreme Court further observed in the above-mentioned case (p. 616): -
'* * * as a working principle, it may be stated that an activity systematically or habitually undertaken for the production or distribution of goods or for the rendering of material services to the community at large or part of such community with the help of employees is an undertaking. Such an activity generally involves the co-operation of the employer and the employees, and its object is the satisfaction of material human needs. It must be organised or arranged in a manner in which trade or business is generally organised or arranged. It must not be casual nor must it be for one self nor for pleasure. Thus the manner in which the activity in question is organised or arranged, the condition and the co-operation between the employer and the employee necessary for its success and its object to render material service to the community can be regarded as some of the features which are distinctive of activities to which Section 2(j) applies.'
15. Therefore, however wide may be the meaning and the scope of the omnivorous expression 'industry', in a modern industrialised world and civilisation, two things clearly fall out of its ambit namely, things which are product of personal endeavour and skill and things which are the result of individual efforts and knowledge, even though the individual receives some personal services permanent or casual in the matter of achieving the result. This view was also expressed by the Supreme Court in D.N. Banerjee v. P. R. Mookerjee, : 4SCR302 (Para 10) where Aiyar, J., said
'It is also clear that every aspect of the activity in which the relationship of an employer and employee exists or arises does not thereby become an industry as commonly understood. We hardly think in terms of an industry when we have regard, for instance, to the rights and duties of master and servant.'
16. Having excluded what is not industry from the expression 'industry', I now need look to the positive aspect of the expression 'industry'. A significant and distinctive test of industry is the cooperation between labour and capital. The employer provides the capital or the raw material. The workers provide the labour and thus convert the raw material into finished products. The final product, therefore, is the product of the co-operation between labour and capital. This was the view which was expressed in Federated Municipal and Shire Council Employees Union of Australia v. The Lord Mayor, Alderman, Councillors and the citizens of the City of Melbourne, (1918-19) 26 CLR 508, in which Isaccs and Rich. JJ, observed:-
'It implies that 'industry' to lead to an industrial dispute is not as the claimant contends merely an industry in abstract sense, as if it alone affected the result, but it must be acting and be considered in association with its co-operator capital in some form so that the result is, in a sense, the outcome of their combined efforts.'
17. The above view was also followed in two decisions of this Court, namely, by Sinha, J., in B. M. Bagaria v. N. C. Chatterjee : (1958)IILLJ190Cal and by P. B, Mukharji, J., in D. P. Dunderdale v. G. P. Mukherjee : AIR1938Cal465 . The above characteristic is certainly the dominant characteristic when the industry is a manufacturing business or a trade or undertaking.
18. In the last mentioned case P. B. Mukherjee, J., observed (p. 491 (of Cal WN) : (p. 469 of AIR)):-
'The context of industry in the Industrial Disputes Act must be understood within the frame ofthe reference of the Industrial Disputes Act. Fundamental to the action of industrial dispute is thenotion of an industry where conflict between labourand capital has to be avoided. Industrial DisputesAct has for its aim in the preamble 'settlement ofindustrial disputes.' * * *The normal inequality of bargaining power is one ofthe reasons why the statute in a welfare democracytoday intervenes to help and safeguard labour tosolve the disputes. The principle on which thisintervention is based is not far to seek. It is thatthe product of industry is regarded on the jointventure of labour and capital.'
19. Services rendered by Physicians, counsel and solicitors, based on their individual skill and experience, do not satisfy the above description of industry and therefore, need be kept outside the scope of industry. Vide the decision of the Supreme Court in National Union of Commercial Employees v. Meher Industrial Tribunal, Bombay, : (1962)ILLJ241SC .
20. Keeping in view the above meaning of the expression 'industry', I have now to consider whether the services rendered by a Chartered Accountant or a firm of Chartered Accountants constitute an 'industry'. The profession of Chartered Accountants is now governed by an Act known as the Chartered Accountants Act, 1949. Under Section 2(b) of the Act:-
'Chartered Accountant means a person who is a member of the Institute.'
Section 2(e) of the Act defines Institute as the Institute of Chartered Accountants of India, constituted under the Chartered Accountants Act, 1949.
21. Under Section 2(2) of the Act:-
'A member of the Institute shall be deemed 'to be in practice', when individually or in partnership with Chartered Accountants in practice, he, in consideration of remuneration received or to be received, --
(i) engages himself in the practice of accountancy; or
(ii) offers to perform or performs services involving the auditing or verification of financial transactions, books, accounts or records or the preparation, verification or certification of financial accounting and related statements or holds himself out to the public as an accountant; or
(iii) renders professional services or assistance in or about matters of principle or detail relating to accounting procedure or the recording, presentation or certification of financial facts or data.
(iv) renders such other services as, in the opinion of the Council, are or may be rendered by a Chartered Accountant in practice; and the words 'to be in practice' with their grammatical variations and cognate expressions shall be construed accordingly.
Section 4 of the Act provides for entry of names of Chartered Accountants in a Register and Section 6 of the Act provides that no member of the Institute shall be entitled to practise unless he obtains a certificate of practice. Section 8 of the Act lays down the disabilities, disqualifying a person from being entered in or his name being borne on the Register -- such disabilities include minority, mental unsoundness, insolvency, conviction of an offence involving moral turpitude and professional or other misconduct. Section 15 of the Act empowers the Council of the Institute to prescribe qualifications for entry in the Register 'and for examination of candidates for enrolment' and Section 20 empowers the Council to remove names of Chartered Accountants for disabilities, particularly misconduct, including professional misconduct dealt with in Chapter V of and in the first Schedule to the Act.
22. There are certain statutory regulations framed under the Act, of which Regulations 78and 79 are to the following effect :-
'78. Other function of Chartered Accountants -- Without prejudice to the discretion vested in the Council in this behalf, a Chartered Accountant in practice may act as liquidator, trustee, executor, administrator, arbitrator, receiver, adviser or as representative for costing financial and taxation matter or may take up an appointment that may be made by Central or State Governments and Courts of Law or any Legal Authority or may act as Secretary in his professional capacity not being an employment on a salary-cum-full time basis.
'79. A Chartered Accountant in practice shall not be engaged in any business or occupation other than the profession of Accountancy unless permitted to be so engaged by a general or a specific resolution of the Council:
Provided that a Chartered Accountant who was engaged in any business or occupation other than the profession of Chartered Accountants at the commencement of the Act may continue to engage himself in such business or occupation only up to 30th June, 1954.
23. So far as the petitioners' firm is concerned it is alleged in paragraph 12 of the petition as follows: -
'By far the greatest portion of the fees of thefirm is derived from for services performed as auditors of limited Companies. The purpose of suchaudit is not to check the arithmetical accuracy ofthe accounts maintained by the Companies, whichchecking can be and is performed by the accountants who are in the permanent employment ofsuch companies. The purpose of such audit is thatthe Company concerned may be enabled to producea certificate from the firm embodying a report andopinion in the terms required by Section 227 of theCompanies Act, 1956. The fee paid by the Company is paid for such report, and/or opinion and/orcertificate and it is immaterial to the company inwhat manner the firm satisfies itself that it canproperly make such a report or express such anopinion * * ** * * The opinions expressed in such report are opinions dependent on matters of law and principle and it is onthese points that the partner principally has tosatisfy himself. With regard to mere arthimetical accuracy of the accounts, if the company's accounts have been maintained in a proper system whereby discrepancies are automatically detected by the failure of the books to balance and/or by the internal control exercised by the Company an elaborate checking of every item in the books is wholly unnecessary and it may be considered sufficient to carry out a sample check in respect of a period of perhaps one month in the year.'
24. Apart from auditing, the petitioners in their business also render services to their clients in taxation matters and in secretarial works but auditing work is said to comprise 95 per cent of the work done in their office and the other works constitute the remainder, namely, about five per cent. In addition to such works, the petitioners and the other partners of the firm, in their individual capacity, are liquidators in a few cases, of which again six are completed and the other six remain to be done. So far as taxation is concerned, the work of the firm consists of giving advice about taxation implications in the filing of returns, and the Cling of appeals against assessment orders, of representing clients in taxation appeals and of scrutinising schemes on behalf of clients from taxation point of view. The secretarial assistance is given in the form of working as Secretaries to certain provident funds and associations and there also the work comprises of keeping the books in order and of advising the trustees in the matter of granting loans. In a few cases the firm does the work of Manager of certain provident funds or associations and in such capacity advises the trustees, in the matter of investment of surplus fund through brokers.
25. The percentage of works other than auditing and the nature of such works as stated by the petitioners are not disputed by the respondent workmen. I have, therefore, to see whether the major part of the work, namely, auditing, satisfies the test of industry.
26. On behalf of the petitioners, petitioner No. 1, Rabindra Nath Sen, has deposed. He says that out of 140 clerks in the office about 10 people are employed in taxation and secretarial work, and the rest are employed in the auditing department. The way in which the auditing work is carried on is stated by this witness as :
(a) 'We are appointed in the case of limited companies which form very nearly the whole of professional auditing for reporting to the shareholders in accordance with the Companies Act and therefore, all that we expect to do is to get our report in accordance with law. Before we issue the report, however, we, for our own satisfaction get some work done for us by our employees. We report that we have audited the above balance-sheet and the annexed profit and loss Account with the books and records and that in our opinion and to the best of our knowledge and belief the accounts have been prepared in accordance with the Companies Act, 1956. The different types of work that are done by the employees are: Casting, Posting, Vouching and Verification. When we get new audit job, we discuss the accounts and the scope of our duties and the internal control etc., of the Company who is perhaps to appoint us as auditors. One of the Partners of our firm discusses these things with theDirector of the Firm before we actually start the audit work and after the work is settled by one of the partners some of the employees are asked to do the casting, that is to say, 'addition' and posting which means comparing entries in a book with entries in another book and vouching which means comparing the entries in the cash book or the purchase or sales registers with receipts bills invoices etc., and verification means checking the items on the balance-sheet and profit and loss account with supporting documents. These items of work are done and we are satisfied that we have saved our position about the arithmetical accuracy etc.'
(b) 'The liability of the Chartered Accountant in practice when he signs the report, is unlimited. One of the first things that the signing partner has to be sure about is, if balance-sheet and profit and loss account had been drawn up in the form prescribed by Companies Act in force. Some of the other more important points they are to see if premium on shares had been debited with expenses other than preliminary expenses; if proper provision has been made for taxation, or if extra amounts have been put in provisions for taxation which is now in the form of reserve; they have to see if all the liabilities have been provided for and if the commission provided for the directors or the managing, agents has been calculated in accordance with law. They have to ascertain if the policy pursued by the clients is resulting in dividends being distributed out of capital which will involve a breach of law.'
(c) 'I am explaining the function of the time ledger. The time spent by the employees who are doing the routine work for the partners and those of the partners themselves, are written up in this ledger in terms of hours to provide us with the basis of the cost for a particular job. The time record of work done on audit, is actually the summary of the time ledger translated into a notional money value, that is to say the hours that have been recorded in the time ledger, are evaluated on purely notional value for us, that is to say the partners assess the size of the junior work.'
In cross-examination he further says:-
(d) 'There are six audit groups in the office each headed by a group-leader with a number of employees under him. It is not quite correct to say that each of our clients is assigned to one of the these six groups. It is, however, correct to say that the junior work in respect of a particular client is assigned to a particular group and as the group does not include a partner, the partners' work, in respect of the concern assigned, cannot be done by group.
The audit programme is drawn up under the direction of a partner. I would agree with the point that the audit programme is drawn up at first by the clerk.
The audit programme is drawn up either by a typist or by an audit clerk under the direction of a partner.'
(e) 'As the programme is drawn up under the direction of a partner, it is not necessary however, to consider or approve the statement after it is drawn up. Certain clerks are then put to do some of the works, put on into the audit programme. Each clerk entersin his diary the kind of work he docs and the time he spends on that kind of work.'
(f) 'The final accounts are prepared by the clients before the audit begins.
The normal verification work as I have indicated above, is done by audit assistant or by senior clerk but the final audit itself is done by partners concerned.
The function of the group leaders is largely administrative. They get 25/30 clerks, each one of them under their control and they have to ensure that they themselves or their qualified assistants or the clerks do the work of casting, posting, vouching and the verification. The group leaders supervise the routine work allotted to the employees put under their charge. The group leaders very often do the verification work.'
27. On behalf of the Labour Union of the respondent workmen, Hiranmoy Samadder deposed and in his evidence he says:
(a) 'I have been a senior clerk for the last five years.
When the Audit work of a concern first comes to us, we first send letters to the concern for ascertaining the books kept by it and for drawing up an audit programme. There is a prescirbed form for drawing up audit programmes. The form is prescribed by the group leader. It is open to a group leader to prescribe the form in his own way.'
(b) 'We maintain daily diaries as to the work on audit we do and from those diaries the monthly summary is made.
At the end of every month we submit the diaries of the month together with monthly summary and from them, the time ledgers are prepared.
It is on the basis of the time spent on different kinds of work that the scale of charges for the audit of a concern is assessed. The final accounts are prepared by the clients and then we check those final accounts. Audit assistants party audit the final accounts and we, the senior clerks, audit the rest.
After we have done our job, we hand over the accounts together with our reports to the group leader. If the group leader has any query to make, he puts a query to us and on being satisfied with our replies, he submits the accounts with his report together with our reports if he considers necessary to file our reports to the partner.
The audit pogramme is finally settled by the group leader. The partners do not approve of the audit programme.' In his cross-examination he says:
(a) 'Every act that a chartered accountant does, in the course of his profession, he does on his own personal responsibility. It is correct to say that the client of a Chartered Accountant is entitled to rely on the personal responsibility of the Chartered Accountant. If a mistake is committed by an audit clerk or any one subordinate to him, a fully qualified Chartered Accountant would accept responsibility to his client for that mistake of his subordinate but in the office he would be entitled to take action against that subordinate. The Chartered Accountant would also be responsible to the Institute of Chartered Accountants for any such mistake committed by any office subordinate. Ex. A is the basis of the Audit programme of every company. If in any concern to be audited, all the books are kept, then this programme will be the actual programme, if on the other hand any of the books are not kept by a particular concern, the programme will have to be modified accordingly. As far as I can say, this programme Ex. A includes all the books maintained by a concern. All the books kept by some concern are shown here.'
(b) 'It is not a fact that there is no set audit programme nor that a set audit programme has to be drawn up in each case in consideration, of the particular facts of that case.
I have said that the group leader finalises the audit programme. I have no personal knowledge if the group leader consults a partner before finalising an Audit Programme. It is correct to say that the main purpose of an audit programme is to see that the books maintained by a concern are internally consistent.
Besides this, we have also to verify the accounts to satisfy ourselves if they are all correct. It means that we have to satisfy ourselves that every entry is vouched for, for otherwise if there is a payment, we have to satisfy ourselves that there is corresponding receipt over the payment. But verification is not vouching. The question of verification comes for, for example, when we have to see whether the liabilities have been fully provided for.'
28. From the evidence it appears that before an auditor gives the report on audit to his client, some sort of verification, checking and scrutinization of the books of accounts of the concern, which is audited, has to be made. The two witnesses differ on the items to be included in the audit programme and as to the manner of verification and the purpose for which it is made. But the fact remains that the firm of the petitioners, as auditors, employ clerks and assistants in the matter of verification, checking and scrutinization of accounts, which in the technical language of auditors comprise of testing the casting (addition) and posting and also of vouching and of verification of accounts. Therefore, the position is that auditing work has two parts, firstly, the preliminary or the spade work of scrutinization of accounts and secondly, on the picturization so obtained the report or the certification by the auditor. But even then the question arises how much is the report dependent on the scrutinization of the accounts or in other words how much is an auditor dependent upon the services rendered by his employees in the matter of scrutinization of the accounts, when making out the report.
29. The essential features of audit, argued Mr. Ginwala, are,
(a) 'to make a critical review of the system of book-keeping, accounting and internal control (by internal control is meant not only internal check and internal audit but the whole system of controls, financial and otherwise, established by the management in order to carry on the business of the Company in an orderly manner);
(b) 'to make such tests and inquiries as the auditors consider necessary to form an opinion as to the reliability of the records as the basis for the preparation of accounts;
(c) 'to compare the profit and loss account and balance sheet with the underlying records in order to see whether they are in accordance therewith;
(d) 'to make a critical review of the profit and loss account and the balance sheet in order that a report may be made to the members stating whether, in the opinion of the auditors, the accounts are presented and the items are described in such a way that they show not only true but also a fair view of and give in the prescribed manner the information required by the Act.
'The auditors should aim to reduce their detailed checking to the minimum consistent with the system of the internal control and the state in which they find the record. If their inquiries and tests satisfy them that the system is sound in principle and is carried out in practice, then no useful purpose is served by extensive detailed checking. If on the other hand the system is not sound and is not properly carried out then the auditors must first reach a conclusion as to the nature of the short-comings before they can decide upon the nature and extent of the detailed checking which they should undertake.'
* * * *
'The nature and extent of the tests which theauditors apply will vary according to the strengthand weakness of the system of the internal control and the nature of the internal checks whichexists. * * *It is important to include examination in depthamong the tests to be applied. Examination indepth involves tracing a transaction through itsvarious stages from origin to conclusion, examiningat each stage to an appropriate extent the vouchers,records, and authorities relating to that stage andobserving the incidents of internal checks anddelegated authority * * *It is sound practice toreduce progressively the number of transactionsselected for examination as the depth of the examination increases * * * For a small company thetests which the auditors make will normally covera greater proportion of the transactions than isnecessary for a larger company where a more comprehensive system of control can be and is operated. * * *The purpose of the work of the auditors is to enable them to express an opinion asto whether the accounts presented to the members show a true and fair view.' (The Accountant,Vol. CXLV pages 242-243).
30. Relying on the above quotation, Mr. Ginwala tried considerably to minimize the help rendered by employees to Chartered Accountants. He suggested that a Chartered Accountant could as well himself do what the employees did in order to make out his report and the fact that he employed others was simply because by so doing he could more usefully employ his time in preparing the opinions, which he sold to his clients, and in handling more cases. He went further and argued that the audit report prepared by the auditor was the production of the skill, integrity and learning of the auditor himself and in the preparation of such a report the employees played no part. By utilizing the employees in the examination of the accounts, an auditor merely took personal services and utilization of such personal services would not make the report the product of an industry. He strongly relied on the observation of the Supreme Court in the Solicitor's case (National Union of Commercial Employees' case, : (1962)ILLJ241SC (supra) ) in which the Supreme Court observed:
'But it must be remembered that the service rendered by a Solicitor functioning either individually or working together with partners is service which is essentially individual; it depends upon the professional equipment, knowledge and efficiency of the Solicitor concerned. Subsidiary work which is purely of an incidental type and which is intended to assist the Solicitor in doing his job has no direct relation to the professional service ultimately rendered by the Solicitor. For his own convenience a Solicitor may employ a clerk because a clerk would type his opinion; for his convenience, a Solicitor may employ a menial servant to keep his chamber clean and in order; and it is likely that the number of clerks may be large if the concern is prosperous and so would be the number of menial servants. But the work done either by the typist or the stenographer or by the menial servant or other employees in a Solicitor's firm is not directly concerned with the service which the Solicitor renders to his client and cannot, therefore, be said to satisfy the test of cooperation between the employer and employees which is relevant to the purpose. There can be no doubt that for carrying on the work of a solicitor efficiently accounts have to be kept and correspondence carried on and this work would need the employment of clerks and accountants. But has the work of the clerk who types correspondence or that of the accountant who keeps accounts any direct or essential nexus or connection with the advice which it is the duty of the solicitor to give to his client? The answer to this question must, in our opinion, be in the negative. There is, no doubt, a kind of co-operation between the solicitor and his employees, but that co-operation has no direct or immediate relation to the professional service which the solicitor renders to his client. Therefore, in our opinion, it is difficult to accept the plea that a solicitor's firm carrying on the work of an attorney is an industry within the meaning of Section 2(j). There is, no doubt, that the words used in Section 2(j) are very wide, but as has been held by this Court in the case of hospitals, it is necessary to draw a line in a fair and just manner putting some limitation upon the width of the said words and a working test has been enunciated in that behalf. The application of the said test to the facts in the present appeal leads to the conclusion that the work of solicitors which the respondents are carrying on as a firm is not an industry under Section 2(j) of the Act.'
31. But is the work of a Chartered Accountant so very similar, and so very individualistic as that of a solicitor? From the evidence in the case, which I have a ready set out, as well as from the books of authority, relied upon by Mr. Ginwala, it appears that the services rendered in auditing by the employees of a Chartered Accountant are not wholly of that subsidiary type which a Solicitor receives from his stenographer, typists, accounts clerk, correspondence clerk or menial servants. The report prepared by the auditor may be a production by the auditor himself, the responsibility for the correctness of the report may be of the auditor's own. But even then the services rendered by the audit group of clerks have a direct bearing on the preparation of the report. Admittedly it is the duty of the auditor to compare the profit and loss account and balance sheet with the underlying records, so as to see that they are in accordance therewith. Under Section 227 of the Companies Act, 1956. the powers and duties of auditors are as follows:
'Powers and duties of auditors.
(1) Every auditor of a company shall have a right of access at all times to the books and accounts and vouchers of the company, whether kept at the head office of the company or elsewhere, and shall be entitled to require from the officers of the company such information and explanations as the auditor may think necessary for the performance of his duties as auditor.
(2) The auditor shall make a report to the members of the company on the accounts examined by him, and on every balance sheet and profit and loss account and on every other document declared by this Act to be part of or annexed to the balance sheet or profit and loss account, which are .laid before the company in general meeting during his tenure of office, and the report shall state whether, in his opinion and to the best of his information and according to the explanations given to him, the said accounts, give the information required by this 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 and loss for its financial year.
(3) The auditor's report shall also state:
(a) Whether he has obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purpose of his audit;
(b) whether, in his opinion, proper books of account as required by law have been kept by the company 'so far as appears from his examination of those' books, and proper returns adequate for the purposes of his audit have been received from branches not visited by him;
(c) whether the company's balance sheet and profit and loss account dealt with by the report 'are in agreement with the books of accounts and returns'.
(4) Where any of the matters referred to in Clauses (i) and (ii) of Sub-section (2) or in Clauses (a), (b) and (c) of Sub-section (3) is answered in the negative or with a qualification, the auditor's report shall state the reason for the answer.
(5) Where the Company is one which is not required to disclose any matters by virtue of any provisions contained in this or in any other Act, if the balance sheet and the profit and loss account specify those provisions and if, in the opinion of the auditor and to the best of his information and according to the explanations given to him. they give the information required by this Act in the manner so required and, subject to the provisions aforesaid, give a true and a fair view, in the case of the balance sheet, of the state of the company's affair as at the end of its financial year, and in the case of the profit and loss account, of the profit or loss for its financial year, the auditor's report shall state that in his opinion and to the best of his information and according to the explanations given to him, the accounts of the company are properly drawn up so as to disclose the state of the company's affairs as at the date of its balance sheet and its profits or loss for its financial year ending on that date, so far as is required by the provisions of this on any other Act applicable to the company.'
(Underlined by me (here into ' ') for emphasis)
32. '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' (Halsbury -- Laws of England, Vol. VI, Article 751 --Simond's Edition). Since under the scheme of auditing, the checking of the accounts is both an important and an integral part, although the manner of checking may vary in degrees in individual cases, the persons who do the checking of the accounts also contribute to the making of the report. A report which is not preceded by the checking of accounts is not worthy of the name of audit report. Therefore, if an auditor receives service from his employees in the matter of the checking of the accounts, he does not merely receive by way of subsidiary work, which is purely of an incidental type, such as a solicitor receives from his stenographer, clerk or menial servants. It is within the scheme of the Chartered Accountants Act to have the examination of accounts done by his employees. This will appear from Item (2) of Part I of the Second Schedule to the Act, which reads as follows:
'A chartered Accountant in practice shall be deemed to be guilty of pofessional misconduct if he
(1) X X X X
(2) certifies or submits in his name or in the name of his firm a report of an examination of financial statements unless the examination of such statement and the related records has been made by him or by a partner 'or an employee' in his firm or by another Chartered Accountant in practice.'
(Underlined by me (here into ' ') for emphasis).
33. Therefore, if in proper professional conduct, it is permissible for a Chartered Accountant to utilise employees in the examination of accounts, on which his report is to be based, it cannot be said that such a report is his individualistic production, having no connection with the labour put in by his employees.
34. I desire, however, to make one position clear. 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 maybe rendered by his stenographers, typists, personal clerks and servants may not be carrying out an industry. But if a Chartered Accountant carrieson 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 hehimself drawing up the audit report, on the resultof such examination, it may not be said that thistype of co-operation is not industry.
35. Mr. R.N. Sen, in his fairness, described the works put in by his employees as 'junior work' -- in my opinion rightly so. It will be a mistake to exclude this 'junior work' as no part of the work of an auditor.
36. In the five cases decided by the Supreme Court on the meaning of the word 'industry', namely : 4SCR302 , Baroda Borough Municipality v. Its workmen, (S) : (1957)ILLJ8SC , : (1960)ILLJ251SC , Corporation of City of Nagpur v. Its Employees : (1960)ILLJ523SC and Ahmedabad 'Textile Industry' Research Association v. State of Bombay : (1960)IILLJ720SC the Supreme Court has no doubt attached a very wide import to theword 'industry'. But at the same time, in itswisdom, desisted from laying down any set pattern. In the last mentioned case the Supreme Court observed:
'The manner in which the activity in question is organised or arranged, the condition of theco-operation between the employer and employee necessary for its success and its object to render material service to the community could be regarded as some of the features which would bedistinctive of activities to which Section 2(j) applied.'
37. Applying that test to the organisation of the business of the petitioners and keeping in view the co-operation which the petitioners obtain from their employees in the matter of auditing. I hold that the petitioners carry on an 'industry'. I further hold that to a dispute between the petitioners and their employees the Industrial Disputes Act will apply.
38. Although I do not agree with the examples of an artist and a sculptor, as given by the Tribunal as illustrative of industry, I agree with the final conclusion of the Tribunal that the business of the petitioners is organised on an industrial basis. Mr. Gunwale's argument suffers from the infirmity that he confines himself to only one stage of the productive process of auditing, namely, the final stage when the report is prepared and minimizes the value of what precedes it. For the reason aforesaid I have to overrule this branch of the contention of Mr. Ginwala and affirm the findings by the Tribunal as to jurisdiction as in Issue No. 1.
39. I have now to turn to the other issue, namely, whether the discharge of Prantosh Bakshi was justified and to what relief, if any, was heentitled The dispute on this point is confined within a very smart compass. Admittedly the employee began to absent himself from April 11, 1955 and on the same date applied for leave on theground of illness. He sent a medical certificateshowing that he had an attack of colitis and was advised to rest. He wrote another letter, onApril 18, 1955, repeating that he was suffering from illness and asking for sick-leave from April 11, 1955 until recovery. With this letter also there was a medical certificate attached. The firm of the petitioners called upon the employee to produce a medical certificate in support of his illness from the Civil Surgeon of Howrah, by April 27, 1955, at the cost of the petitioner's firm, to be paid later on. The petitioner did not supply the certificate. On April 26, 1955, however, the employee wrote to the firm of the petitioners that he was better and would be in a position of health to rejoin his duties by the next week, but then he asked for casual leave for 9 days, from May 2 to May II, 1955, to enable him to appear at the Final Chartered Accountancy Examination. Thereupon, on April 27, 1955, the firm of the petitioners called upon the employee to show cause why his services should not be terminated, on the ground of his failure to furnish the certificate from a Civil Surgeon in support of his prayer for leave on the plea of illness. To this letter the employee sent no reply. Then, on May 7, 1955, the firm of the petitioners wrote to the employee that inasmuch as he had failed to reply to the first letter, dated April 27, 1955, and was continuing to absent himself without leave, his services were dispensed with immediate effect. Simultaneously, the employee replied contending that inasmuch as he had not had himself treated by the Civil Surgeon, who also lived at a distance, it was not possible for him to produce such a certificate. He further contended that he had informed the office about his illness and had also submitted a certificate from a registered medical practitioner and that he must not be treated as having had absented himself without leave. In spite of the protest made by the employee, the order dispensing with his services remained unaltered, although later on the employee submitted a Certificate from a Civil Surgeon.
40. The Tribunal referred to the leave rules of the firm of the petitioners, copies whereof are annexed to the petition. The relevant portion from the said leave rules is to the following effect:
(a) 'Regarding leave.-- All the parties hereto agree to the modified leave rules which are as follows:
(a) Regarding casual leave (14 days); in addition, the workmen having, completed 25 years' continuous service are entitled to a further seven days' casual leave.
(b) Regarding sick leave: 14 days on full pay and 28 days on half pay.
(c) It will be permitted to carry forward casual or sick leave not taken in any one year for two years, while absence, when sick, may be treated as casual if desired. The alteration will apply in respect of periods commencing from the 1st of July 1953.'
(b) '(a) Casual leave: All members of the Indian staff may be granted leave for fourteen working days during each year (ending June 30). This is not cumulative, i.e., it cannot be carried forward from one year to another. For casual leave in excess of fourteen days, no salary may be paid.
(b) Sick leave: This will be granted if supported by (a) medical certificate (s) satisfactory to the firm. For fourteen days of such leave.the full salary will be paid; during any additional period of such leave not exceeding twenty-eight days half salary will be paid. If in any year sick leave in excess of forty-two days is granted no salary will be payable during the period of any such excess.
Any leave taken without the production of an adequate medical certificate will be considered as casual.
The terms of settlement attached to an award in an industrial dispute, (Ex. 59) expressly modified parts of the leave rules as follows:
(a) Casual leave: In place of 14 days' non-cumulative casual leave a year under Ex. 62 the agreement provides for 14 days' casual leave, capable of accumulation for two years at the option of the employee and for 7 days' more casual leave for those in service for 25 years or more.
(b) In place of 14 days' sick leave on full pay, and 28 days' sick leave on half pay and of any such leave in excess of 42 days in a year without pay, the agreement provides for 14 days' sick leave on full pay and 28 days' sick leave on half pay and gives an employee the option of treating sick leave as casual leave.
41. On the interpretation of the rules the. Tribunal came to the following conclusions:
'The firm was fully within its rights to demand the certificate of the Civil Surgeon, Howrah, because Ex. 62 entitles the firm to grant sick leave if the application for such leave is supported by a medical certificate considered satisfactory by the firm. This necessarily implies that where acertificate is not considered satisfactory by the firm it is entitled to call for the certificate of adoctor which would be satisfactory in its judgment. When, however, Prantosh Bakshi failed to furnish the certificate was the firm entitled straightway to dismiss him? The answer to this question depends on the concluding clause in Ex. 62 which remained unaffected by the subsequent modification of the leave rules as embodied in the terms of settlement in Ex. 59. This concludingclause is that 'any leave taken without the production of an adequate medical certificate will beconsidered as casual leave'. Of course, Prantosh Bakshi had not taken any leave. All that he had done was to ask for a certain amount of leave, partly sick leave and partly casual leave. Neither the sick leave nor the casual leave was actually granted so that it is certainly true to say that Prantosh Bakshi had not taken any leave. But, then, as already stated, all that an employee cando is to ask for leave and whether to grant it or not to grant it depends entirely on the employersso that the correct interpretation of this clause, if it is to be given any meaning at all, must be that any leave to be taken or applied for without the production of an adequate medical certificate will be considered as casual. If I am correct inthis construction of this clause, it means that the firm was under the obligation imposed by its own rules, to consider on Prantosh Bakshi's failure to furnish a medical certificate adequate in its own opinion whether he had any casual leave to his credit and, if so, how much of the leave he had asked for could be treated as casual leave due tohim and how much of the period of absence would have to be treated as absence without leave. The total period of absence from the nth April to the 7th May was 27 days. If he had casual leave to his credit for this period as a result of the accumulation of casual leave for the preceding year, he would be entitled to this leave at his option and the firm should have given him an opportunity to exercise this option. In any event, it was the duty of the firm to consider this aspect of the question, but there is no indication either in the oral evidence or in the correspondence exhibited that it did so.
In this connection it is not out of place to point out that there is a provision in Ex. 62 for casual leave in excess of 14 days in a year being treated as absence without pay. How far it stands superseded by any clauses in the terms of settlement annexed to Ex. 59 is far from clear. That was also a matter for consideration by the firm; if it took a negative view on this point, it would be its duty to consider howmuch of the period of absence of Prantosh Bakshi would be treated as absence without pay. Of course, if it took the view of this clause of Ex. 62 having been superseded it would not be necessary for it to consider that. The materials before me do not show that this aspect of the matter struck the firm at all. It does not appear to have struck the learned Advocates of either of the parties, for the point was not even touched on by either. To the extent that the firm did not proceed to examine the case of Prantosh Bakshi's absence in the light of the relevant portions of its own rules, its action in terminating his services seems to me to smack of hastiness.'
42. On the above findings, the Tribunal held that the employer was guilty of a basic error in dismissing the employee for absence. Since the employee did not want to be reinstated, the Tribunal made an award for payment of his wages from the date of his dismissal to the date when he obtained another employment elsewhere.
43. Mr. Ginwala argued that there was no case of basic error, particularly in the face of the other findings by the Tribunal, namely, that there had been no want of good faith on the part of the employer, nor any attempt at victimisation or unfair labour practice and further that the findings were not baseless or perverse. Mr. Ginwala is right to this extent that a finding that the dismissal order was not bad for baselessness or perversity and a finding that the dismissal was vitiated by basic error ill go together. Added to that there is the further fact, as the Tribunal itself found, that the employee had not taken any leave prior to the time when he began to absent himself.
44. The expression 'leave' means leave of absence, that is to say, the permission obtained by an employee from his employer relieving him from the duty of attending his works. In cases where leave is governed by leave rules, leave must be obtained according to the requirements of the rules. Even where the rules do not prescribe a procedure for obtaining leave, it is reasonable to expect that an employee obtains leave before he goes on leave. To this reasonable procedure there may be one exception, namely when the employee falls ill and then asks for sick leave. Illness is often unanticipated and sick leave may not be asked for in anticipation. In all other cases leave should be obtained as a pre-requisite to going on leave, unless prevented by unavoidable reasons. In the instant case, the leave rules provide that casual leave must be so arranged as to cause the minimum interruption of work. There is an additional indication that casual leave must have to be first obtained before availing of the same.
45. In the case of the delinquent employee be had at first asked for sick leave but did not produce the Civil Surgeon's certificate, as he was called upon to do, until too late. The Tribunal itself found that it was within the competence of the firm of the petitioners to insist upon satisfactory evidence of illness, under the terms of the leave rules. They insisted upon a Civil Surgeon's certificate, which the employee did not produce in due time. Therefore, no sick leave was granted to the employee. That notwithstanding, and without even having rejoined after his absence on the plea of illness, the employee asked for casual leave from May 2 to May 11, 1955 and absented himself without having his leave granted. It may be that he might have been relieved on leave, either with or without pay, under the leave rules, but the rules do not certainly contemplate that an employee may take leave without having his leave granted.
46. Even where the leave rules provide for a period of leave annually, an employee may not avail of the leave at any time he chooses. This is all the more so, in the instant case, because the leave rules provide that casual leave may be granted without causing interruption to work. Therefore, the employer had a say in the matter. The employee Prantosh Bakshi was not right in taking casual leave, without having his application first granted.
47. For the reasons aforesaid I hold that the Tribunal was wrong in importing the theory of basic error in the facts and circumstances of the case and in upsetting the decision of the domestic authority.
48. I, therefore, quash the award of the Tribunal on Issue No. 3 and uphold the rest of it.
49. Let a Writ of Certiorari accordingly issue. There will be no order as to costs.