Bench: S.J. Vazifdar, K.R. Sriram
Mr.Iqbal Chagla, Sr.Counsel along with Mr.Naval Agarwal,
Mr.Rohan Rajadhyaksha, Mr.Girish Dave, Mr.Hussain S. i/by
Dave and Girish and Co. for the petitioners.
Mr.D.J.Khambatta, Sr.Counsel along with Mr.J.S.Bakshi, Mr.Afroz
Shah, Mr.Shreyas Patel i/by Little & Co. for respondent nos.1,
2,3, 3A, 3C & 4.
CORAM : S.J. VAZIFDAR &
K.R. SHRIRAM, JJ
1. The petitioners seek a blanket stay against the respondents
V/s. The Institute
igof Chartered Accounts of India
(Ramkrishna's appeal). The petitioners are not parties to that
2. Petitioner no.1 is a partner of Price Waterhouse and Co., a
firm of Chartered Accountants. (hereinafter referred to as
PWC). PWC were the statutory auditors of the Global Trust
Bank Ltd., of the respondents' firm. The petitioner no.2 is a
Senior Manager of the said firm. Both the petitioners are
3. Respondent no.1 is set up under the Chartered Accountants
Act, 1949 (hereinafter referred to as the said Act).
Respondent nos.3A, 3B and 3C are the members.
respondent. Respondent no.5 is the Union of India.
4. Sometime in 2004, the 1st respondent received information
from the Reserve Bank of India (RBI) about certain
various documents from respondent no.1 and the RBI. PWC
matter to its Disciplinary Committee respondent no.3. The
Disciplinary Committee proceeded to hold an enquiry. On or
Notice to the petitioners. In October-2007 the Council gave
petitioners prima facie to be guilty. The Disciplinary
Committee held hearings beWPL2673tween January-
February 2009 and April-2010. Thereafter nothing happened
till February-2013. The 1st respondent issued to the
5. In the meantime, on or about 17 th November-2006, the
and penalties, underwent substantial modification and
6. Section 21 of the un-amended Act is as under :-
(6) On receipt of any case under sub- section (4) or sub-
section (5), the High Court shall fix a date for the hearing of
the case and shall cause notice of the date so fixed to be
given to the member of the Institute concerned, the Council
and to the Central Government, and shall afford such
member, the Council and the Central Government an
opportunity of being heard, and may thereafter make any of
the following orders, namely:--
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(a) direct that the proceedings be filed, or dismiss the
complaint, as the case may be;
(b) reprimand the member;
(c) remove him from membership of the Institute either
permanently or for such period as the High Court thinks fit;
(d) refer the case to the Council for further inquiry and report.
(7) Where it appears to the High Court that the transfer of
any case pending before it to another High Court, will
promote the ends of justice or tend to the general
convenience of the parties, it may so transfer the case,
subject to such conditions, if any, as it thinks fit to impose,
and the High Court to which such case is transferred shall
deal with it as if the case had been forwarded to it by the
Council.
Explanation I.-- In this section" High Court" means the highest
civil court of appeal, not including the Supreme court,
exercising jurisdiction in the area in which the person whose
conduct is being inquired into carries on business, or has his
principal place of business at the commencement of the
inquiry: Provided that where the cases relating to two or
more members of the Institute have to be forwarded by the
Council to different High Courts, the Central Government
shall, having regard to the ends of justice and the general
convenience of the parties, determine which of the High
Courts to the exclusion of others shall hear the cases against
all the members.
Explanation II.-- For the purposes of this section" member of
the Institute" includes a person who was a member of the
Institute on the date of the alleged misconduct although he
has ceased to be a member of the Institute at the time of the
inquiry.
(8) For the purposes of any inquiry under this section, the
Council and the Disciplinary Committee shall have the same
powers as are vested in a civil court under the Code of Civil
Procedure, 1908 (5 of 1908 .), in respect of the following
matters, namely:--
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(a) summoning and enforcing the attendance of any person
and examining him on oath;
(b) the discovery and production of any document; and
(c) receiving evidence on affidavit.
7 By the amended Act, Section-21 of the un-amended Act was
replaced with sections 21, 21-A, 21-B, 21-C and 21-D. 21-D
is a transitional provision. Section 21, 21-A,21-B, 21-C & 21-D
read as under :-
"MISCONDUCT
21 Disciplinary Directorate.
(1) The Council shall, by notification, establish a Disciplinary
Directorate headed by an officer of the Institute designated
as Director (Discipline) and such other employees for
making investigations in respect of any information or
complaint received by it.
(2) On receipt of any information or complaint along with
the prescribed fee, the Director (Discipline) shall arrive at a
prima facie opinion on the occurrence of the alleged
misconduct.
(3) Where the Director (Discipline) is of the opinion that a
member is guilty of any professional or other misconduct
mentioned in the First Schedule, he shall place the matter
before the Board of Discipline and where the Director
(Discipline) is of the opinion that a member is guilty of any
professional or other misconduct mentioned in the Second
Schedule or in both the Schedules, he shall place the matter
before the Disciplinary Committee.
(4) In order to make investigations under the provisions of
this Act, the Disciplinary Directorate shall follow such
procedure as may be specified.
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(5) Where a complainant withdraws the complaint, the
Director (Discipline) shall place such withdrawal before the
Board of Discipline or, as the case may be, the Disciplinary
Committee, and the said Board or Committee may, if it is of
the view that the circumstances so warrant, permit the
withdrawal at any stage.
21A. Board of Discipline.
(1) The Council shall constitute a Board of Discipline
consisting of--
(a) a person with experience in law and having
knowledge of disciplinary matters and the profession, to be
its presiding officer;
(b) two members one of whom shall be a member of the
Council elected by the Council and the other member shall
be nominated by the Central Government from amongst
the persons of eminence having experience in the field of
law, economics, business, finance or accountancy;
(c) the Director (Discipline) shall function as the Secretary
of the Board.
(2) The Board of Discipline shall follow summary disposal
procedure in dealing with all cases before it.
(3) Where the Board of Discipline is of the opinion that a
member is guilty of a professional or other misconduct
mentioned in the First Schedule, it shall afford to the
member an opportunity of being heard before making any
order against him and may thereafter take any one or more
of the following actions, namely:-
(a) reprimand the member;
(b) remove the name of the member from the Register up to
a period of three months;
(c ) impose such fine as it may thinks fit which may extend
to rupees one lakh.
(4) The Director (Discipline) shall submit before the Board of
Discipline all information and complaints where he is of the
opinion that there is no prima-facie case; and the Board of
Discipline may, if it agrees with the opinion of the
Director (Discipline), close the matter or in case of
disagreement, may advise the Director (Discipline) to
further investigate the matter.
21B. Disciplinary Committee.
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(1) The Council shall constitute a Disciplinary Committee
consisting of the President or the Vice-President of the
Council as the Presiding Officer and two members to be
elected from amongst the members of the Council and two
members to be nominated by the Central Government from
amongst the persons of eminence having experience in the
field of law, economics, business, finance or accountancy:
Provided that the Council may constitute more Disciplinary
Committees as and when it considers necessary.
(2) The Disciplinary Committee, while considering the cases
placed before it shall follow such procedure as may be
specified.
(3) Where the Disciplinary Committee is of the opinion that
a member is guilty of a professional or other misconduct
mentioned in the Second Schedule or both the First
Schedule and the Second Schedule, it shall afford to the
member an opportunity of being heard before making any
order against him and may thereafter take any one or more
of the following actions, namely: -
(a) reprimand the member;
(b) remove the name of the member from the Register
permanently or for such period, as it thinks fit;
(c) impose such fine as it may think fit, which may extend to
rupees five lakhs.
(4) The allowances payable to the members nominated by
the Central Government shall be such as may be specified.
21C. Authority, Disciplinary Committee, Board of
Discipline and Director (Discipline) to have powers of
civil court.
For the purposes of an inquiry under the provisions of this
Act, the Authority, the Disciplinary Committee, Board of
Discipline and the Director (Discipline) shall have the same
powers as are vested in a civil court under the Code of Civil
Procedure, 1908, in respect of the following matters,
namely:-
(a) summoning and enforcing the attendance of any person
and examining him on oath;
(b) the discovery and production of any document; and
(c) receiving evidence on affidavit.
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Explanation.- For the purposes of sections 21, 21A, 21B, 21C
and 22, "member of the Institute" includes a person who
was a member of the Institute on the date of the alleged
misconduct although he has ceased to be a member of the
Institute at the time of the inquiry."
"21D. Transitional Provisions.
All complaints pending before the Council or any inquiry
initiated by the Disciplinary Committee or any reference or
appeal made to a High Court prior to the commencement of
the Chartered Accountants (Amendment) Act, 2006, shall
continue to be governed by the provisions of this Act, as if
this Act had not been amended by the Chartered
Accountants (Amendment) Act, 2006."
8 The effect/interpretation of the transitional provision is the
core issue in Ramkrishna's appeal before the Supreme Court.
This matter originated in the Delhi High Court in which the
learned single Judge held, based on the facts and
circumstances of the case, that the procedure prescribed in
the amended Act, Sections 21, 22, & 22-A would be
applicable to pending proceedings in information cases.
This was carried in appeal by the Respondent no.1. The
Division Bench allowed the appeal and held that the
procedure prescribed by Sections 21, 22 & 22-A of the un-
amended Act would be applicable to the pending
proceedings and information cases and not the procedure
prescribed by the amended Act. This was taken further by
the respondent to the said Appeal to the Supreme Court by
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way of the said SLP-Ramkrishna's Appeal. The Hon'ble
Supreme Court by its order dated 24 th August 2012 granted
leave, directed that the final order be not passed by the
Institute in so far as the appellant was concerned and posted
the appeal for hearing within one year from the date of the
order, i.e., 24th August 2012. The appeal is pending.
9 It is the case of the petitioners that even in their case the 1 st
respondent has initiated the inquiry based on information
received from the RBI and not on the basis of a complaint
and therefore, unless and until the Supreme Court decides
the matter, the proceedings adopted by the 1 st respondent
against the petitioners should be stayed.
10 The petitioners have not stated in the petition whether
according to them the amended or the unamended
provisions apply. We therefore, enquired of Mr.Chagla as to
which procedure is applicable according to the petitioners to
their case. He initially stated that the petitioners did not
wish to take a stand and merely sought to await the decision
of the Supreme Court. He stated that there is an element of
uncertainty at present and if respondent no.1 follows one
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procedure and the Supreme Court in P Ramkrishna's matter
decides that the other procedure was in fact applicable, the
entire exercise of recording evidence, holding hearings etc.
would be a waste of time and expense. Mr. Chagla also
relied upon the judgment of the Gujarat High Court in the
matter of Commissioner of Income Tax, Gujarat-II V/s.
Surendra Gulabchand Modi, reported in 1983 ITR (GUJ) 517
in support of his submissions that this Court should stay all
proceedings pending before the respondent no.1 and adjourn
the matter till the decision of the Supreme Court in
P.Ramkrishna's matter.
11 It was agreed that the procedure under the unamended
and the amended Act are substantially different. It is
therefore not necessary to set out the differences. The
provisions have already been reproduced. The only question
is whether in view of the appeal pending before the Supreme
Court the proceedings must be stayed.
12 As pointed out by the learned Advocate General this is a
matter which pertains to the financial investigation regarding
audit of a bank for the financial year ending 31 st March 2003.
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More than 10 years have passed since then. We do not
intend expressing any opinion as to which of the parties was
responsible for the delay. This issue has little bearing on the
question before us.
13 The Division Bench of the Delhi High Court has held that the
unamended provisions of the Act are applicable to such
cases. The Supreme Court has not stayed the judgment. Nor
did the Supreme court stay the proceedings before the
Council. While granting leave the Supreme Court continued
the interim order until disposal of the appeal. The interim
order only restrained the respondents from passing the final
order.
14 Mr.Chagla submitted that in the case before the Supreme
Court, the proceedings had almost concluded and only the
order remained to be passed and that it is for this reason
that the Supreme Court was required to grant a stay merely
against the passing of the final order.
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15 It is not open to us to speculate the reasons for the Supreme
Court having passed a particular order. The order itself does
not indicate the same.
16 We appreciate that in the event of the Supreme Court
overruling the judgment of the Delhi High Court
inconvenience may be caused to the petitioners. However in
the facts and circumstances of the case we are not inclined
to accede to the petitioners' request. On the other hand in
the event of the judgment of the Delhi High Court being
upheld, precious time would have been lost. There is every
possibility of witnesses not being available at a later point of
time and the memory of the witnesses fading. On a balance
therefore, it is in the interest of justice that the proceedings
continue even assuming that there is a possibility of the
parties facing some monetary loss.
17 This is a case where the petitioners do not contend that
either the amended or unamended provisions of the Act
apply. They merely state that the proceedings ought to be
stayed till the Supreme Court decides as to which provisions
apply. If merely on this basis Courts grant a stay of
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proceedings it would result in innumerable proceedings
remaining dormant not merely under this Act but even under
other enactments, enquiries etc. We do not suggest that a
stay can never be granted. There may be certain cases
where the Court or Tribunal or Authority may adjourn the
hearing where a matter on a similar issue is pending before
the Supreme Court. It would depend upon the facts of each
case. Normally in such cases a party takes a stand as to the
position in law and as to the applicability of a particular
procedure. To accept the petitioners' contention would result
in a standstill of numerable proceedings before various
Courts and Tribunals all over the country merely due to the
pendency of appeals before the Supreme Court.
18 As regards the Gujrat High Court Judgment relied upon by
the petitioners, the Advocate General rightly submitted that,
that matter applied to a particular assessee and the issue
was on protective assessment. In that case the issue was
whether in the facts and circumstances of the case, the
Income Tax Tribunal rightly vacated the protective
assessment framed by the Income tax Officer. The Income
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Tax officer had made a protective assessment in order that
complications may not arise and the revenue may not suffer
any detriment if the Supreme Court took a different view on
the above question. The issue as to whether the HUF was
disrupted or not itself was pending before the Supreme
Court. The out-come of the appeal before the Tribunal
depended upon the ultimate decision of the Supreme Court.
It was the same party which was before the Supreme Court
and whose assessment
ig was being considered at the
departmental/tribunal level. It was for that reason that the
High Court concluded that multiplicity of proceedings should
be avoided and the proceedings before the tribunal should
be blocked. The stay granted there would apply only to that
particular assessee. It was a dispute on a question of fact
that did not affect any other party, much less a whole body
of litigants. Hence that case has no applicability to the
present petition.
19 We are in agreement with the submissions made by the
Advocate General. We see no reason to stop the inquiry
proceedings. As the interpretation of the transitional
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provision is not an issue before us we are not commenting
thereupon. In any case, even if the Hon'ble Supreme Court
comes to a conclusion that the procedure to be adopted by
the 1st respondent is different from what the 1 st respondent
adopts, still the entire evidence collected may be of use
even assuming it might necessitate holding a fresh inquiry
adopting new procedures. There is no reason therefore, for
our adjourning the proceedings before the respondent sine-
die.
20 Mr.Chagla contended that the respondents had in the
minutes/record of the proceedings interpolated reasons for
their order refusing the petitioners' application to stay the
proceedings. We do not express any views on this aspect. It
would be open to the petitioners to raise these contentions in
subsequent proceedings including in support of their
contention that the same evidences bias. No purpose would
have been served by further delaying the matter by
remanding the matter to the respondents. We therefore
heard Mr.Chagla at length in support of the application.
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21 In the circumstances, the petition is dismissed but with no
order as to costs. At the petitioners' request, it is directed
that the enquiry being conducted by the respondents shall
not be proceeded with until and including 17.12.2013.
This order does not prevent the petitioners filing a fresh
Writ petition to contend that the new procedure and not the
old procedure applies and for seeking interim reliefs in such
a petition.
(K.R.SHRIRAM,J) (S.J.VAZIFDAR,J)
