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Sunderdas Thakersey and Bros. Vs. P.K. Mukherji - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata High Court
Decided On
Case NumberMatter No. 298 of 1964
Judge
Reported inAIR1966Cal468,[1965(11)FLR167]
ActsChartered Accountants Act, 1949 - Section 21(1); ;Chartered Accountants (Amendment) Act, 1959
AppellantSunderdas Thakersey and Bros.
RespondentP.K. Mukherji
Appellant AdvocateB.K. Ghosh, Adv.
Respondent AdvocateParty-in-person
Cases ReferredR. B. Basu v. P. K. Mukherji
Excerpt:
- p.b. mukharji, j. 1. this matter comes up before us under section 21(5) of the chartered accountants act, 1949. the council of the institute of chartered accountants held the respondent p.k. mukherji, a member of the institute, guilty of misconduct under clauses 7 and 10 of part i of the second schedule of the act. clauses 7 and 10, part i of the second schedule of the act read as follows:--'professional misconduct in relation to chartered accountants in practice requiring action by a high court. a chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he- 7. is grossly negligent in the conduct of his professional duties; 10. fails to keep moneys of his client in a separate banking account or to use such moneys for purposes for which they are.....
Judgment:

P.B. Mukharji, J.

1. This matter comes up before us under Section 21(5) of the Chartered Accountants Act, 1949. The Council of the Institute of Chartered Accountants held the respondent P.K. Mukherji, a member of the Institute, guilty of misconduct under Clauses 7 and 10 of Part I of the Second Schedule of the Act. Clauses 7 and 10, Part I of the Second Schedule of the Act read as follows:--

'Professional misconduct in relation to Chartered Accountants in practice requiring action by a High Court.

A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he-

7. is grossly negligent in the conduct of his professional duties;

10. fails to keep moneys of his client in a separate banking account or to use such moneys for purposes for which they are intended.'

2. According to the procedure the Disciplinary Committee investigated the complaint in this case. The complainants did not chose to appear before the Disciplinary Committee and sent a letter dated 25th January 1963 requesting that the complaint should be dropped. The letter dated 25th January 1963 from the complainants reads as follows:--

'The Secretary,

The Institute of Chartered Accountants of India, Mathura Road, New Delhi--1.

Dear Sir,

We have read the Statement of Sri P.K. Mukherji respondent and have made inquiries of the facts stated by him.

We appreciate his difficulties and think the same to be genuine. Mr. Mukharji, Co-liquidator of Messrs. Pashupati Textile Mills Ltd. (in liquidation), Sri K. Bhattacharjee who we understand is in East Pakistan has let him down by not handing over the necessary papers and accounts to Mr. Mukherji.

In the circumstances we feel no useful purpose will be served by our proceeding against Mr. Mukherji. As. such, we shall feel obliged if the complaint is dropped.

Thanking you for the trouble taken by your council.

Yours faithfully,

For Sunderdas Thakersey and Bros.,

Sd. Illegible

Partner.'

3. This letter did not dissuade the Disciplinary Committee from proceeding with the matter. But the Disciplinary Committee did not apparently realise how severely handicapped it was by the non-appearance of the complainants and by the absence of any evidence in support of the very complaint, it was supposed to judge.

4. The complaint briefly, was a complaint against the Chartered Accountant acting as a liquidator. The facts briefly on this point are as follows:

By a decree of this Court in Suit No. 503 of 1953--Messrs. Sunderdas Thakersey and Bros. v. Messrs. Pashupati Textiles and Hosiery. Mills Ltd., the plaintiffs had a first charge on one of the machines being a loom of the State Government as security for payment of the decretal amount and costs. The decree was for a sum of Rs. 6,800/- and the costs were for Rs. 1,000/-. It was alleged in the complaint that as early as in November 1955, the complainants came to know that the respondent had wrongfully and without the knowledge and consent of the complainants disposed of the machine which was duly charged in their favour. The main charge in the complaint was that in spite of promises the respondent did not pay the sale proceeds of the machine which was sold and on which there was a charge in favour of the complainants. In the last paragraph of the complaint, the complaint prayed for 'necessary action against P.K. Mukherji for misappropriation of funds held by him as the Official Liquidator appointed by the Calcutta High Court'. There was a written statement of the Chartered Accountant in which there was a denial of misappropriation.

5. This complaint has many peculiar features which, apparently, neither the Disciplinary Committee nor the Institute noticed. If the Official Liquidator appointed by the Calcutta High Court had misappropriated the funds of a company in liquidation, the obvious and natural course for an aggrieved person to follow is to approach for redress to the High Court itself, the primary authority and institution which appointed the liquidator and who acted under its orders, and jurisdiction, and not the Disciplinary Professional Institution under the Chartered Accountants Act. I am not suggesting that the Disciplinary Committee or the Institute of Chartered Accountants or their Council has no jurisdiction in appropriate cases. What I am saying is that an aggrieved person in such circumstances would normally and naturally proceed against the liquidator in the court which had appointed that liquidator and who it is alleged had misappropriated the fund of the aggrieved person. That was not done in this case.

6. The second striking feature about this complaint is that the sale of the charged machine took place as early as 12th January, 1954. Admittedly, even on the complaint itself, the complainants knew about it definitely by November, 1955. No action or proceeding was taken against the liquidator for long eight years. This complaint to the Institute was not made until the 24th July 1961. It is strange that the Council or the Disciplinary Committee failed to notice the stale character of this complaint. A person who is deprived of his money and who says that somebody has misappropriated his money, for him to wait for eight years without taking a proceeding, is, to say the least, extraordinary. We pointed out in Kishorilal Dutta v. P.K. Mukherji : AIR1964Cal131 , that great-responsibilities were imposed on the Council and the Disciplinary Committee in this respect and they must not so act as to become a convenient tool and an engine of oppression against a member of the profession and that the Council should be careful in setting the whole machinery of the Disciplinary Committee in operation on any complaint or any information received by it However old and however stale, without examining with at least some care to see if a prima facie case exists or not. This eight year old case, therefore, is a very strange feature of this complaint. An aggrieved person who wants the professional body to take steps to deprive a member of the profession from practising his profession should act promptly and should not allow such member to go on acting for eight years before he thinks of putting a complaint before the professional body. Naturally this leads to the accusation that this complaint was inspired and vindictive and for a collateral purpose.

7. That however is not the end of the trouble. The Disciplinary Committee, in spite of the complainants dropping the complaint, chose to proceed against the member. The result was that there was no complainant before the Disciplinary Committee to come and prove the allegations made in the complaint. The Disciplinary Committee took upon itself the task of playing the role of the Prosecutor and cross-examiner in this case. It adopted the procedure of inquisition. It called up the member and started cross-examining him and threw the entire onus of disproving the unproved complaint. The respondent member, the Chartered Accountant said in evidence before the Disciplinary Committee that except a small sum of Rs. 250/-, nothing else was due to the complainants, Sunderdas Thakersey and Bros. The complainants themselves by a letter dated 9th April 1963, addressed to the Secretary of the Institute of Chartered Accountants wrote as follows:

'Dear Sir,

We refer to your letter No. 25-CA(19)/61 addressed to Sri P.K. Mukherji, F. C. A., dated 11th February 1963 wherein you have demanded from him a letter certifying that a sum of Rs. 250/- (Rupees two hundred fifty only) is due and payable to our firm by him.

In this respect, we have to inform you that as we did not wish to ruin the career of a young man we had agreed to discharge Mr. Mukherji from his liabilities upon payment of Rs. 250/- (Rupees two hundred fifty only) which please note.

Thanking you,

Yours faithfully,

For Sunderdas Thakersey and Bros.

Sd. Illegible

Partner.'

8. In spite of this, the Disciplinary Committee came to the finding 'we are satisfied that no amount has been paid to the complainants over a period of eight years in spite of letters written by him to the liquidator'. This had led to a grave failure of justice. The member, Chartered Accountant in his evidence before the Disciplinary Committee said that not more than Rs. 250/- was due. There was no denial on both or any evidence by the complainant that it was not so. On the contrary the letter showed that the member Chartered Accountant was right. In that view of the matter the finding of the Disciplinary Committee was clearly erroneous. When the complaint was dropped, the Disciplinary Committee chose to proceed on its own by combining the role of the complainant prosecutor and the judge all together.

9. This was not the only failure of justice in the procedure adopted by the Disciplinary Committee in this case. The Disciplinary Committee appears to have disbelieved the respondent-member that there was no public notification for public auction in the local newspaper for the sale of that machine. Therefore it says.

'When asked to produce the newspaper copy, he has not been able to produce it. But a typed copy said to be an advertisement in the Hindusthari Standard, Calcutta of the 5th January 1954 was shown to us'.

This is the result again of the Judge playing the role of the prosecutor and the Disciplinary Committee playing the role of the complainant against its own member. No doubt, the respondent member produced a typed copy of the advertisement, but if the Disciplinary Committee was not satisfied with the typed copy, it should have called for the actual newspaper from the newspaper office. They did not choose to do so. It had the power under the Rules to subpoena the Newspaper. The newspaper, namely, the Hindusthan Standard dated the 5th January 1954 as well as the Dainik Basumati of the 6th January 1954 have been produced before this Court carrying this advertisement openly and publicly inviting sale by a public auction. We direct that these two newspapers with the advertisement marked red in each of these papers be filed with the records of this court as a part of this proceeding. It conclusively proves that that finding of the Disciplinary Committee was wrong and was vitiated by the wrong procedure it adopted.

10. Thirdly, the Disciplinary Committee landed itself in another finding which does not appear at all to be justified. That finding is 'Further no proper records relating to the accounting, of the liquidation were maintained by the respondent'. It raises fundamental questions. First, who is the statutory body to examine and find that the liquidation accounts are erroneous or not of a company in liquidation? Is it the Council or the Disciplinary Committee of the Chartered Accountants? To that question we shall address ourselves later on. But on the merits, the important point is that the liquidator's statements were filed before the Registrar of the Joint Stock Companies as required on statutory forms and they are Exhibits before the Disciplinary Committee. To hold that the liquidator's statements filed on statutory forms are not proper records and therefore to debar a professional member is an extreme act on the part of the Disciplinary Committee and the Council. A good deal has been said about the liquidator's statement of accounts. That they were sent to the Registrar of the Joint Stock Company is amply proved by Ext. 73 which is a receipt dated 2nd September, 1960 by the Registrar of the Joint Stock Company acknowledging six statements of accounts from 15th June 1953 to 14th June 1959. No doubt, the letter of the 22nd March 1963 to the Secretary of the Institute by the Registrar of the Company said that those were not available in their office because they had not been taken on record as yet. Upon that the Disciplinary Committee came to the finding of fact on presumption that they must have been returned to the liquidator for some defects. But the question is that they were sent to the Registrar of the Joint Stock Company on statutory forms. They are exhibits in this case and they show disbursements of Rs. 4100/- and Rs. 2100/- and other disbursements of smaller amounts. It is the case of the member respondent that these disbursements included the payment to the complainants. No doubt the names of the creditors paid do not appear but that apparently is not a requisite in the statutory forms. It is not possible to come to any finding of fact holding the member respondent guilty when the complainant himself did not come to give evidence to say that they did not receive any moneys at all and that the member respondent's evidence on the point was wrong. Indeed the member respondent's whole case was that no receipt was given by the complainant of these moneys as they had promised to give a total receipt when all claims including the outstanding amount of Rs. 250/- had been paid. It is likely in the course of human conduct that a person aggrieved would not wait for long eight years unless he had been paid substantially. What is most curious of this point is that before coming to such finding of fact about accounts the Disciplinary Committee should have called upon the complainants to produce their books of accounts, but that was not done.

11. For these reasons it is rather difficult to uphold the finding of the Disciplinary Committee both on the grounds of merit and on the ground of procedure adopted by the Disciplinary Committee.

12. But there are other serious aspects of this case. The first question is that technically speaking Clauses (7) and (10) of Part I of theSecond Schedule are not applicable. Clause (7)is gross negligence in the conduct of 'professional duties'.

13. The Liquidator in this case was not an auditor of the Company in liquidation. He was, therefore, not practising his professional duties. Failure to discharge the Liquidator's duties qua liquidator alone cannot come strictly within the meaning of 'professional duties' as mentioned in Clause (7) of Part I of the Second Schedule of the Chartered Accountants Act. Similarly Clause (10) is failure to keep moneys of his 'client' in a separate banking account. On this point we shall have to say a little more later on. For the time being what is necessary to say is that the Company in liquidation is not a 'client' of the liquidator appointed by the Court. The liquidator is not a 'client' of the complainants within the meaning of Clause (10) of. Part I of the Second Schedule of the Act.

14. Failure to keep money in a separate banking account so far as the liquidator is concerned is clearly provided in Section 554 of the Companies Act which reads as follows:

'Neither the Official liquidator nor any other liquidator of a company shall pay any moneys received by him in his capacity as such into any private banking account.'

Therefore, if there was really any grievance on that point the complainants could have petitioned to this Court in the Company jurisdiction for taking appropriate steps against the liquidator. That step is clearly provided in Section 543 of the Companies Act which gives power to the Court to examine even the accounts of the liquidator and compel him to repay or restore money or property which has been misapplied or misused. No such step was taken by the complainant against the respondent for the last eight years.

15. Pursuing this point further a relevant fact to remember is that the respondent is a joint liquidator along with somebody else. That other coliquidator who is jointly and severally responsible has not been proceeded against. The Disciplinary Committee and the Council of the Institute say that the other liquidator was not a chartered accountant and, therefore, no proceeding was taken up by the Disciplinary Committee or the Council against a non-member. That is perhaps right. But then the question arises that where there are joint liquidators and where one of them is a member and a chartered accountant and if only the liquidator's duties alone are in question and not the general duty of the chartered accountant in the profession then which will be the forum. Clearly the company Court under the Companies Act should be the sole and exclusive jurisdiction to deal with the liquidator. The liquidator from that point of view is an officer of the Court and is responsible to the Court. The Court appoints him. In this case the evidence is that it was a voluntary liquidation to begin with and afterwards it was a court liquidation with the same liquidators.

16. Finding this difficulty Mr. Ghoshwho very ably represented the case of the Council of Institute of Chartered Accountants relied on the Supreme Court decision in Council of the Institute of Chartered Accountants v. B. Mukherjea, reported in : [1958]1SCR371 for the proposition that reading Regulation 78 together with Section 2(2)(iv) of the Chartered Accountants Act, a chartered Accountant working as a liquidator under an order of the High Court should be deemed to be in practice within the meaning of Section 2(2) and that while acting as a liquidator he must be deemed to be in practice as a chartered accountant and that misconduct while working as a liquidator would amount to professional misconduct on the part of the chartered accountant even in the narrow and restricted sense of the term arid that he would be dealt with on that basis and the High Court could pass on appropriate order under Section 23(3) of the Act. That decision is also an authority for the proposition that the misconduct alleged on the part of a chartered accountant may not attract any of the provisions in the Schedule and may not, therefore, be regarded as falling within the first part of Section 22, as the definition given by Section 22 itself purports to be an inclusive definition and as the section itself in its latter portion specifically preserves the larger powers and jurisdiction conferred upon the Council to hold enquiries by Section 21(1) of the Act to enquire into the conduct of the member of the Institute in 'any other circumstance'.

16a. Here, however, no other circumstance was alleged. There in the Supreme Court the liquidator had been discharged by the Court and therefore there was no question of proceeding against the liquidator any more in the Court under the Companies Act. Again there was no question of another co-liquidator who was not a chartered accountant and who was equally responsible for the liquidation of its account. These therefore, are features which distinguish that case from the facts of this case. Here it must be distinctly understood that no other circumstance, no other misconduct was involved. The Disciplinary Committee proceeded on the ground of professional misconduct and on no other. They applied Clauses (7) and (10) which deal only with 'professional misconduct' requiring action by a High Court and limited to negligence in professional duties and failure to keep moneys of the client in a separate banking account as mentioned above. 'Professional misconduct in relation to chartered Accountants in practice' is in Part I of the First Schedule. PartII deals with 'professional misconduct in relation to members of the Institute in service' and PartIII deals with 'professional misconduct in relation to members of the Institute generally'. These are the three parts of Schedule I. Schedule II contains two parts--first part we have already mentioned and the second part relates to 'professional misconduct in relation to the members of the Institute generally requiring action by a High Court'.

17. But the problem in the facts of this case is not here about the definition of professional misconduct as that point has already been settled by the decision of the Supreme Court as quoted above. The point here is, can one liquidator beproceeded in preference to the other and outside the jurisdiction of the Company Court where the liquidation is still pending. It is plain then that in that event the Company Court may accept a liquidator's accounts to be proper, appropriate and lawful and at the same time the Disciplinary Committee may hold that it is improper, inappropriate and justifies suspension of the member of the profession of the chartered accountant. This will lead to a very serious conflict between the Court on the one hand and the Disciplinary Committee of the Council of the Institute on the other. A construction should therefore be avoided, if possible, to avert plurality of forums deciding such a question. Looking at it from the other point of view an official liquidator is an officer of the Court and if his duties and functions as liquidator are interfered with by bodies other than the court and the Registrar of Joint Stock Companies, such statutory bodies like the Council and the Disciplinary Committee, then they might well throw themselves open to the charge for contempt of court. Liquidators appointed by the Court but not favoured by the Institute may, therefore, find themselves in the unenviable position of divided loyalties and double forums for accountability.

18. It would have been necessary to decide all these points if we were not satisfied on the merits and procedure that the Council's finding could not be supported as in this case; but as we find that their findings could not be supported on the merits and the procedure adopted, it is unnecessary for us to decide the questions raised in the argument as mentioned herein before.

19. But then one more point calls for a reference. It has been argued by the chartered accountant member as the respondent who appeared in person before us that where the information or the complaint has been brought under Section 21 of the Act the jurisdiction of the Council or the Disciplinary Committee ceases. The foundation of the proceedings under Section 21 of the Act is the information or complaint. That really sets the Council in motion. It is contended that if the information or complaint is dropped then the proceeding under Section 21 of the Act cannot continue any further. The relevant dates of this point may be recalled. The complaint is dated 24th July, 1961. The Disciplinary Committee first heard it on the 29th January, 1963 and its report is dated 12th September, 1963. But before this the complaint had been dropped by the 25th January, 1963. Question, however is: Is that permissible? Section 21 of the Act reads as follows:

'Where on receipt of information by, or of a complaint made to it, the Council is prima facie of opinion that any member of the Institute has been guilty of any professional or other misconduct, the Council shall refer the case to the Disciplinary Committee, and the Disciplinary Committee shall thereupon hold such inquiry and in such manner as may be prescribed, and shall report the result of its inquiry to the Council.'

In this case the Council made reference to the Disciplinary Committee on the 10/11 September, 1962 which was a date before the complaint was dropped. Therefore, that reference was competent within the meaning of Section 21(1) of the Act. Once that reference was competent, the language of the Act says, the Disciplinary Committee shall thereupon hold such enquiry. Therefore, tentatively, it would appear, that this enquiry by the Disciplinary Committee was within the language of the Act.

20. But then when the information or the complaint is withdrawn or dropped before the actual reference by the Disciplinary Committee is heard then its task becomes difficult and it should so conduct the inquiry as not to be open to the charge of playing the role of the Judge, the prosecutor and the complainant at the same time. That is exactly where the procedure should be careful in that contingency. In our view this was what was not observed in the facts of the case. Section 21(8) of the Chartered Accountants Act gives power to the Council and the Disciplinary Committee to summon and enforce attendance of any person to examine him on oath and to discover and produce any document and to receive evidence on affidavit as in the Civil Procedure Code. In this case we feel that the Disciplinary Committee should have used these powers to summon and enforce attendance of the complainant and for production of his books as well as for the production of the documents of the liquidation proceeding, both from the Court as well as from the Registrar of Joint Stock Company, before throwing the onus upon the respondent and coming to the finding of fact in the absence of material witness or evidence. It is needless to mention that if the Company Court under the Companies Act would have been approached, and if it was satisfied on evidence, then it could have removed the liquidator under Section 515 of the Companies Act. It is noteworthy that Section 462 of the Companies Act provides for the audit of the liquidator's account. That section provides that the account shall be in the prescribed form and shall be verified by declaration in the prescribed forms, and that the Court shall cause such accounts to be audited in such manner as it thinks fit and for the purpose of audit the liquidator shall furnish to the Court such, vouchers and information as the Court may require and the Court may at any time require production and inspect any books of account kept by the liquidator. Indeed, it is also provided there that when the account has been audited one copy shall be filed and kept by the Court and the other copy shall be delivered to the Registrar for filing and each copy shall be open to inspection by any creditor, contributory or person interested. With those remedies and provisions it is strange that not one of them was chosen by the complainant during these long eight years, and neither the Disciplinary Committee nor the Council of the Institute took any notice of this significant feature.

21. In conclusion we consider it necessary to refer to one aspect of the case and that is the respondent's failure to keep moneys in separate banking accounts. Reference to the evidence of the respondent does not make the picture clear. In one place this is what was stated

'Q. Then you deposited the money into the bank?

Ans. No. It was not deposited. Some portion was with me and some portion with the co-liquidator.

Q. What were the proceeds?

A. About Rs. 11,000.' In another place his evidence is as follows:

'Q. But the whole of Rs. 11,000 was received in instalments?

A. Yes. That money was paid to the creditors. Substantial portion has been paid to the preferential creditors and other creditors were there'.

Lastly his evidence is as follows:

'Q. What did you do with the monies. You say you were keeping some Rs. 5,000. That man paid by cash?

A. Cash.

Q. Did you put it in your bank account or you kept in the safe?

A. I kept in my personal account.

Q. Which bank?

A. Imperial Bank. It was then Imperial Bank--now State Bank.

Q. Which branch?

A. Bhowanipore Branch.

Q. Do you have any pass book?

A. Not here.

Q. You please send us the pass book. This is a material question. If you have put it in your bank account, we would like to see the pass book and verify.

A. I have got another pass book--Metropolitan Bank.

Q. You put the funds for your personal use? What happened to that money?

A. That was paid to the complainant andother creditors also.'

Then again the evidence of the respondent is as follows:--

'Q. According to law, you are not supposed to touch the money. You admit that you had put the money in your personal account. The company in liquidation had a separate bank account?

A. That was closed.

Q. Where was the need for your keeping it in your personal account?

A. That was closed.'

It is not clear from the above evidence whether the money was actually put into the bank account and whether that account was the personal account of the respondent. Finally evidence on the pass book was not put in. It is not in evidence whether the liquidation account had already been closed as said by the respondent. The Disciplinary Committee did not issue any subpoena for their production. In fact, we asked Mr. Ghosh learned Counsel appearing for the Institute of Chartered Accountants to produce the records of the Company Court dealing with the liquidation in this case as also of the Registrar or the Joint Stock Company, but they have not been produced before us. The picture therefore is not quite clear as we would have liked to have, in order to come to a final and definite conclusion.

22. For the reasons stated above this Court sets aside the order of the Disciplinary Committee and the Council of the Institute of chartered Accountants in this case, but the Court reprimands the respondent by this warring that he should be more careful in future.

23. Mr. Ghosh has drawn our attention to the fact that the respondent in R. B. Basu v. P. K. Mukherji : AIR1957Cal449 was found guilty of misconduct for charging fees on the basis of percentage on the profits and that he was suspended from practice for a period of three months in that case after considering the fact that this Accountant, was a comparatively young man and that in committing that technical fault in that case, he was to a certain extent aided and abetted by the complainant himself. We do not think that the previous case should prejudice our mind and we have thought it right to dispose of this case on the merits and facts as are presented in this reference. This Court considers for the ends of justice, that a reprimand in the instant case is the appropriate punishment specially when the Disciplinary Committee adopted a procedure which was illegal and where it failed to find proper and adequate facts.

24. There will be no order as to costs.

Masud, J.

25. I agree.


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