Delhi High Court

Council Of The Institute Of ... vs Rishi K. Gupta on 20 July, 2000

Equivalent citations: 2001 112 TAXMAN 307 Delhi

JUDGMENT

This is a reference under section 21 of the Chartered Accountants Act, 1949 (hereinafter referred to as 'the Act') by the Institute of Chartered Accountants of India (hereinafter referred to as `the Institute'). Proceedings were initiated against Shri Rishi K. Gupta, F.C.A., a member of the Institute (the respondent), alleging that he was guilty of professional misconduct. Starting point for the same was a complaint received by the Council of the Institute from General Manager (Inspection and Finance), State Bank of Patiala, (hereinafter referred to as 'the complainant'), alleging that Rishi Gobind & Associates, Chartered Accountants of which the respondent was a partner, had submitted bogus bills/receipts in respect of their claim of halting allowances and expenses for the audit of bank's four branches for the year ended 31-12-1984. Disciplinary Committee constituted under the Act came to the conclusion that the respondent was guilty of professional/other misconduct within the meaning of sections 21 and 22 of the Act, read with clause (1) of Part 1 of Second Schedule to the Act, as he had contravened the said clause (1). Report of the Disciplinary Committee was placed before the council which concurred with the Disciplinary Committee's findings. Ultimately recommendation was made for removal of the respondent's name from the register of members for a period of fifteen days. As aforesaid, reference has been made under section 21(5) of the Act.

2. Chapter V of the Act deals with 'misconduct'. Section 21 deals with procedure in inquiries relating to misconduct of members of the Institute. Section 21 so far as relevant reads as follows:

"21. Procedure in inquires relating to misconduct of members of Institute-

(1) to (3) ** ** **

(4) Where the finding is that a member of the Institute has been guilty of a professional misconduct specified in the First Schedule, the Council shall afford to the member an opportunity of being heard before orders are passed against him on the case, and may thereafter make any of the following orders, namely :

(a) reprimand the member;

(b) remove the name of the member from the Register for such period, not exceeding five years, as the council thinks fit:

Provided that where it appears to the council that the case is one in which the name of the member ought to be removed from the Register for a period exceeding five years or permanently, it shall not make any order referred to in clause (a) or clause (b), but shall forward the case to the High Court with its recommendations thereon.

(5) Where the misconduct in respect of which the council has found any member of the Institute guilty is misconduct other than any such misconduct as is referred to in sub-section (4), it shall forward the case to the High Court with its recommendations thereon."

3. We are concerned with sub-sections (4) and (5). This appears to be a case which is covered by sub-section (5), as the council has found the respondent to be guilty of misconduct of a category other than those referred to in sub-section (4). On reference the High Court has power under subsection (6) to pass any of the following orders :

(a) direct that the proceedings be filed, or dismiss the complaint, as the case may be;

(b) reprimand the member;

(d) refer the case to the council for further inquiry and report.

4. 'Professional misconduct' has been defined in section 22 of the Act. Intendment and object of the Act is to maintain standard of the profession at a high level, and consequentially a code of conduct has been prescribed. Misconduct implies failure to act honestly and reasonably either according to the ordinary and natural standard, or, according to the standard of a particular profession. Chartered Accountants' profession occupies a place of pride amongst the various professions of the world. That makes observance of professional duties and propriety more imperative. When conduct of a member of the profession is contrary to honesty, or opposed to good morals, or is unethical, it is misconduct warranting consequence indicated in the statute. An auditor holds a position of trust. Any breach of the confidence is a stigma not only on the individual concerned, but also is likely to have effect on the credibility of the profession as a whole. That is why the anxiety of the Legislature to punish the erring individual. It is to be noted that by breach of trust by a person entrusted with property or dominion over it, action under criminal law can be taken. As observed by the Apex Court in the context of professional misconduct of an advocate, an act which is done otherwise than with utmost good faith is unprofessional - Pandurang Dattatraya Khandekar v. Bar Council of Maharashtra AIR 1984 SC 110. The test of what constitutes 'grossly improper conduct in the discharge of professional duties' has been laid down in many cases. In the case of In re A Solicitor Ex parte the Law Society (1912) 1 KB 302, Darling, J. adopted the definition of 'infamous conduct in a professional respect', on the part of a medical man in Allison v. General Council of Medical Education & Registration (1894) 1 QB 750, applied to professional misconduct on the part of solicitor, and observed:

"If it is shown that a medical man, in the pursuit of his profession, has done some thing with regard to it which would be reasonably regarded as disgraceful or dishonourable by his professional brethren of good repute and competency, then it is open to the General Medical Council to say that he has been guilty of 'infamous conduct in a professional respect'.

The Privy Council approved of the definition in George Firer Frahame v. Attorney General, Fiji AIR 1936 PC 224 and this court in the matter of P. An Advocate has followed the same."

5. We have heard the learned counsels appearing for the parties. defense of the respondent was to the effect that identity of the defaulting persons even with the help of documents sent to them could not be made out. But there were no manipulations made by any of the partners of the firm and bills were raised to the bank as submitted to them by the staff. The explanation by no stretch of imagination is plausible. Even if for the sake of argument it is accepted that members of staff had submitted the bills, it was the bounden duty of the respondent to ensure that there was no false or inflated claim. By throwing the blame on members of staff respondent cannot dilute his responsibility. Considering the nature of the allegations and the stand of the respondent' there can be no manner of considering the nature of the allegations and the stand of the respondent' there can be no manner of doubt that a clear case of professional misconduct has been made out. The proposed action of removal of the respondent's name from the register of members for a period of 15 days also does not appear to be unreasonable and harsh. We accept the reference.