The Council Of The Institute Of ... vs Shri D R Bahl And Another
2011 Latest Caselaw 6 Del

*               IN THE HIGH COURT OF DELHI AT NEW DELHI

+                           {CHAT. A. REF. NO.1 OF 2000}

%                                       Judgment delivered on:03.1.2011


THE COUNCIL OF THE INSTITUTE OF                            .... APPELLANT
CHARTERED ACCOUNTANTS OF INDIA

                            Through :          Mr.  Brijender   Chaha, Sr.
                                               Advocate with Mr. Rakesh
                                               Agarwal, Advocate

                                  VERSUS


SHRI D R BAHL AND ANOTHER                              ....RESPONDENTS
                            Through:           Mr.   Sandeep   Sethi,  Sr.
                                               Advocate with Mr. Sindhu
                                               Sinha and Mr. Nikhil Bhalla,
                                               Advocates

CORAM :-

        HON'BLE MR. JUSTICE A.K. SIKRI
        HON'BLE MR. JUSTICE M.L. MEHTA

        1.      Whether Reporters of Local newspapers may be allowed
                to see the Judgment?
        2.      To be referred to the Reporter or not?
        3.      Whether the Judgment should be reported in the Digest?


A.K. SIKRI, J. (ORAL)

1. Council of Institute of Chartered Accountants of India (hereinafter

referred to as the „Council‟) have made this reference under the

provisions of Section 21 (5) of the Chartered Accountants Act, 1949

(hereinafter referred to as the „Act‟) for confirming/approving the

punishment of "Reprimand" recommended by the Council in its meeting

held on 5th December, 1996. The background under which the aforesaid

recommendation came to be made is summarized as under.

2. The respondent no.1 herein is a Chartered Accountant by

profession and at the relevant time i.e. in the year 1992, he was one of

the Associates Chartered Accountant of M/s R.N. Marwah & Co.

(hereinafter referred to as the „Chartered Accountants‟). M/s Pure

Drinks (New Delhi) Ltd. and sisters concern were the clients of the

Chartered Accountants. These Chartered Accountants were in fact the

auditors of the Pure Drinks (New Delhi) Ltd. The Chartered Accountants

audited the accounts and balance sheets of these companies for the

year ending 31st March, 1991.

3. Pointing out certain purported infirmities and irregularities in the

said balance sheets of these companies and particularly M/s Pure Drinks

(New Delhi) Ltd. and M/s Southern Bottlers Pvt. Ltd., a complaint dated

5th February, 1992 was received by the Council from Mrs. Kaval Rajdeep

Singh, one of the Directors of M/s Pure Drinks (New Delhi) Ltd. In this

complaint, as many as six irregularities in the aforesaid balance-sheets

were alleged. After receiving this complaint, the Council addressed

letter dated 23rd March, 1992 to the Chartered Accountants requesting

them to disclose the name of the member answerable and also

requesting that the said member should send his written statement

directly to the Council. Since respondent no.1 herein was admittedly

involved in the preparation of these balance sheets, he responded to

the aforesaid complaint by submitting his written statement on 19 th

June, 1992. In the written submissions, he denied all the allegations and

submitted that there was no lapse, irregularities or inaction on his part

in discharging his duties as Chartered Accountant while preparing the

balance sheets. This written statement was forwarded to the

complainant, who gave her rejoinder on 8th August, 1992. After eliciting

comments of the respondent no.1 on the said rejoinder and considering

the same, the Council in its meeting held in February, 1994 came to a

prima-facie opinion that the respondent no.1 was guilty of professional

and other misconducts. It, thus, referred the matter to the Disciplinary

Committee for enquiry. The Disciplinary Committee conducted the

enquiry in which full opportunity was given to respondent no.1 to

defend. After the conclusion of the enquiry, the Disciplinary Committee

submitted its report on 11th January, 1995 finding this respondent guilty

of gross negligence under Clause (7) of Part I of IInd Schedule of the Act

in terms of Section 21 read with Section 22 of the Act. This was in

respect of two allegations out of six made by the complainant in her

complaint. In so far as other four allegations are concerned, the report

of the Disciplinary Committee did not find any lapse on the part of the

respondent no.1 and exonerated him of those charges. This report was

forwarded by the Council to respondent no.1 for making representation,

if any. The respondent no.1 submitted his representation dated 15 th

May, 1996. The representation of the complainant was also sought for

the Council and which was submitted by her on 18th August, 1996 and

25th November, 1996. Thereafter, meeting of the Council was held on

5th December, 1996 in which the report of the Committee alongwith the

representation of respondent no.1 as well as complainant were

considered. On considering the entire matter, the Council accepted the

report of the Disciplinary Committee and recommended that

respondent no.1 be "reprimanded". It is this recommendation which is

forwarded by the Council to this Court by means of present Reference.

4. The respondent no.1 has opposed the prayer made in this

reference on various grounds. Apart from questioning the findings on

merits, two other submissions are made by the respondent no1 which

are as follows:-

(i) It is stated that Council is guilty of latches in proceedings as it left the matter hanging in fire without taking prompt action in making reference. In this behalf, it is pointed out that the complaint is of February, 1992 and it took two years to the Council to take prima facie view in its meeting held on 26th February, 1994. It is also pointed out that though the report of the Disciplinary Committee is of 11th January, 1995 which was accepted by the Council on 5th December, 1996, it took four years for the Council to make present reference and this delay is wholly unexplained. It is thus stated that from the date of making the complaint till the date when the reference was made, more than eight years passed by which has resulted in extreme prejudice to the respondent. The submission of learned Sr. Counsel appearing for the respondent no.1 is that this reference petition be not accepted and in support of this plea, reliance is place on a Division Bench of this Court in the matter of Council of Chartered Institute of India Vs. Dinesh Kumar, 1991 (21) TRJ 238.

(ii) Another submission which is made by the respondent no.1 is that the Council has merely accepted the report of the Disciplinary Committee without arriving at its own finding and giving its own reasons. In support of this submission, it is contended that though opportunity was given to the respondent to file his written submissions which were in fact filed

but n the findings of the Council, none of the contention raised by respondent no.1 have been dealt with and thus it not only showed non- application of mind but the report also becomes non-speaking.

5. After hearing the counsel for the parties, we are of the opinion

that this reference petition needs to be filed and it is not a fit case

where this Court should exercise its discretion because of latches and

delays which remained unexplained. As pointed out above, though the

meeting of the Council was held in December, 1996, this reference is

made only in July, 2000. There is not even a whisper as to why the

Council took more than 3 ½ years in making present reference. On

these facts, the ratio of the decision of this Court in the case of Dinesh

Kumar (supra) squarely applies wherein this Court returned the

reference and directed it to be filed under almost similar

circumstances. That was a case where Disciplinary Committee

prepared the report in December, 1993 which was communicated to

the concerned respondent in April, 1997. The Council had considered

the said report after four years. Since this delay was not explained,

this Court was of the view that there were unexplained latches in the

matter and in these circumstances directed the proceedings to be filed.

6. In the present case, we find that the complaint is of the year

1992. The reference was made in the year 2000. Even otherwise, the

charges allegedly proved against the respondent no.1 are not of

serious nature. We have also gone through the representation/reply

submitted by the respondent no.1 to the enquiry report of the

Disciplinary Committee. In this representation, the respondent no.1

has made an endeavour to demonstrate that he had not committed any

wrong and in fact had discharged his duties with due diligence and had

complied with all the provisions in preparing the balance sheets.

7. Be as it may, even the Council has also recommended only

"reprimand". Going by these facts coupled with the aforesaid latches,

we are of the opinion that it may not be proper to approve the

aforesaid recommendation when almost 19 years have passed since

the complaint was made. We thus direct the reference be filed.

8. There shall be no order as to costs.

(A.K. SIKRI) JUDGE

(M.L. MEHTA) JUDGE JANUARY 3, 2011 skb