Talluri Srinivas vs The Institute Of Chartered ...
2011 Latest Caselaw 1456 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                    Judgment reserved on:   31.01.2012

%                   Judgment delivered on: 13.03.2012

+             W.P.(C) 8945/2011 & C.M. No. 20184/2011


       TALLURI SRINIVAS                                ..... Petitioner
                       Through:      Mr. Neeraj Kishan Kaul, Senior
                                     Advocate with Mr R. Sudhinder &
                                     Ms. Prerana Amitabh, Advs.
                      versus

       THE INSTITUTE OF CHARTERED ACCOUNTANTS
       OF INDIA                                   ..... Respondent
                       Through: Mr. Arvind Nigam, Senior Advocate
                                with Mr. J.S.Bakshi & Mr. Amitesh S.
                                Bakshi, Advocates


       CORAM:
       HON'BLE MR. JUSTICE VIPIN SANGHI


                               JUDGMENT

VIPIN SANGHI, J.

1. The petitioner has preferred this writ petition under Article

226 of the Constitution of India to seek a restraint against the

respondent, Institute of Chartered Accountants of India (ICAI) from

proceeding to pass any orders against the petitioner in disciplinary

enquiry being held in Information Case No.DD/1/S/INF/09/DC/40/-09,

arising out of the prima facie opinion dated 17.09.2009, without

complying with the principles of natural justice. The petitioner also

seek a writ of mandamus to direct the respondent to provide adequate

and effective opportunity to the petitioner to defend himself and to

permit him to cross examine the witnesses, who have deposed against

him in the aforesaid disciplinary case.

2. In the year 2000, M/s. Price Water House, Chartered Accounts

were appointed as the statutory auditors of Satyam Computers

Services Limited (referred to as „Satyam‟). The petitioner, who was

working with M/s Price Water House, submits that for the years 2001-

2007, the audit of Satyam was conducted by one Mr. Gopalakrishnan,

and the audit for the financial year 2007-08, and for the quarters

ended 30.06.2008 and 30.09.2008 of the financial year 2008-09 were

conducted by him.

3. On 07.01.2009, the then Chairman of Satyam, Mr. B.

Ramalinga Raju informed the Board of Directors of Satyam of the

systematic fudging of accounts of the said company by him. This

disclosure, which was widely publicized, was acted upon as information

against the petitioner under Section 21 of the Chartered Accountants

Act, 1949 (CA Act).

4. The CID Hyderabad registered a criminal case under Section

120B read with Sections 406, 420, 467, 471 and 477A IPC as Crime

No.02/09 against the Chairman and Directors of Satyam and other

accused persons, including the petitioner. The petitioner was arrested

by the police on 23.01.2009. Thereafter, the case was transferred to

the Central Bureau of Investigation (CBI) for investigation, and R.C.

No.4(S)/2009 was registered against the petitioner and eight others by

the CBI, Hyderabad.

5. The subject of misconduct of a chartered accountant is dealt

with in Chapter V of the CA Act. Section 21 of the said Act reads as

follows:

"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.

(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." (Emphasis supplied).

6. The Director (Discipline) acted on the information which came

to him. The Director (Discipline) arrived at a prima facie opinion dated

17.09.2009 on the occurrence of alleged misconduct falling under the

second schedule of the Act against the petitioner. Consequently, the

council of the ICAI constituted a Disciplinary Committee in terms of

Section 21B of the Act, which reads as follows:

"21B. Disciplinary Committee

(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." (emphasis supplied).

7. The procedure to be adopted by the Disciplinary Committee

is prescribed in Rule 18 of the Chartered Accountants (Procedure of

Investigations of Professional and Other Misconduct and Conduct of

Cases) Rules, 2007 (referred to as the Rules).

8. Rule 18 of the Rules being relevant, is reproduced herein

below:

"18. Procedure to be followed by the Committee.--

(1) The Committee shall be guided by the principles of natural justice and shall follow the procedure in dealing with all cases before it, as laid down in this Chapter.

(2) If the Committee decides to proceed further under clause (b) of sub-rule (2) of rule 9 or if it receives a reference from Board of Discipline under clause (b) of sub-rule (3) of rule 9, it shall expeditiously cause to deliver to the respondent and the complainant, a copy each of the following, -

(a) prima facie opinion formed by the Director; and

(b) particulars or documents relied upon by the Director, if any, during the course of formulation of prima facie opinion.

(3) The Committee shall inform the respondent, as the case may be to file a written statement, within such time as may be specified:

Provided that the Committee may give him additional time for submitting his written statement, on application by the respondent on his adducing sufficient reasons to the satisfaction of the Committee for seeking additional time:

Provided further that such additional time shall not be given more than once and if the respondent still does not submit a written statement, the Committee shall presume that he has no further submissions to make and shall proceed to decide the case on merits.

(4) The respondent shall send a copy of his written statement, along with supporting documents and a list of witnesses, to the Director and the complainant within the stipulated time.

(5) The complainant or the Director may, after receipt of the written statement, submit a rejoinder to the Committee, with a copy to the respondent, along with supporting documents, if any.

(6) The Presiding Officer of the Committee shall fix a date, hour and place of hearing, which shall not ordinarily be later than 45 days from the date of receipt of prima facie opinion and the committee shall cause a notice to be sent of such date, hour and place to the Director, respondent and complainant and require them to appear before it in person to make oral submissions, if any. Explanation. - For the purpose of this rule, the appearance includes, unless and otherwise directed, appearance by an advocate or through any authorized representative, who may be a Chartered Accountant, Cost Accountant or Company Secretary.

(7) During the first hearing, the Committee shall read out the charge or charges to the respondent along with the

summary of prima facie opinion arrived at by the Director, and ask the respondent whether he pleads guilty to the charge or charges made against him:

Provided that if the respondent does not appear for the first hearing even after one adjournment, the reading out of charge or charges along with the summary of prima facie opinion shall be made in his absence and the case proceeded with in accordance with the provisions of this Chapter.

(8) If the respondent pleads guilty, the Committee shall record the plea and take action as per provisions under rule 19.

(9) If the respondent does not plead guilty, then the Committee shall fix a date for examination of witnesses and production of documents.

(10) The Committee may, on application of the Director, issue notice for appearance to any of his witnesses directing him to attend or to produce any other document or material evidence.

(11) On the date so fixed, the Committee shall proceed to take all such evidence as may be produced by the Director, including oral examination of witnesses and production of documents:

Provided that the Committee may permit the cross- examination of any witness to be deferred until any other witness or witnesses have been examined or recall any witness for further cross-examination. (12) After the presenting of evidence by the Director is over, the complainant shall be given an opportunity, if present during the hearing, to present any additional evidence after satisfying the Committee that such evidence is relevant and has not been brought forward during the presentation by the Director.

(13) The respondent shall be then called upon to enter upon his defence and produce his evidence.

(14) If the respondent applies to the Committee to issue any notice for compelling attendance of any witness for the purpose of examination or cross-examination, or the

production of any document or any material object, the Committee shall issue such notice unless it considers that such application should be refused on the ground that it is made for the purpose of vexation or delay or for defeating the ends of justice and such ground shall be recorded by it in writing.

(15) The witnesses summoned at the instance of the complainant under sub-rule (12) or the respondent under sub-rule (14) shall not be eligible for reimbursement of expenses incurred for attending the hearing.

(16) After evidences have been presented, the Director and the respondent shall present their arguments before the Committee:

Provided that after the Director has presented his argument, if the complainant, provided he is present during the hearing, feels that any vital argument has been left out by the Director, may present the argument, after convincing the Committee of the same.

(17) The Committee shall consider the evidences and arguments produced before it and arrive at a finding on whether the respondent is guilty or not of any professional or other misconduct.

(18) The Committee may, at the request of any of the parties before it or due to other reasons, and on such terms as it thinks fit, and at any stage of the proceedings, adjourn the hearing:

Provided that such adjournment shall not be given more than once at any stage of the proceedings.

Explanation. - For the purpose of this rule, inability of the complainant, advocate, authorized representative or witness, to appear shall not be treated as a valid reason for adjournment of a hearing." (emphasis supplied).

9. The Disciplinary Committee after considering the prima facie

opinion dated 17.09.2009 in its meeting held on 23.09.2009, decided

to proceed further in the matter under Chapter V of the Rules.

10. The respondent sent a letter dated 08.10.2009 to the

petitioner, calling upon him to submit his written statement alongwith

supporting documents, if any, and a list of witnesses, if any, that the

petitioner may desire to examine under Rule 18(4) of the Rules. The

petitioner did not respond to the said communication, presumably

because he was still behind bars, and was granted bail by the Supreme

Court only on 04.02.2010.

11. After the petitioner was released on bail, as aforesaid, he was

served with a letter dated 06.04.2010, directing him to appear before

the Disciplinary Committee on 18.04.2010.

12. The petitioner preferred a writ petition being W.P.(C.)

No.2505/2010 before this Court against the holding of the disciplinary

enquiry, primarily on the ground that on the same subject matter the

petitioner could not be simultaneously proceeded with in criminal

proceedings and in disciplinary proceedings. He claimed that the same

would be violative of his fundamental rights under the Constitution of

India. This Court vide order dated 16.04.2010 stayed the aforesaid

disciplinary proceedings.

13. During the pendency of the aforesaid writ petition, the

Supreme Court directed that the trial in the criminal proceedings be

conducted on a day to day basis. The petitioner‟s writ petition being

W.P.(C.) No.2505/2010 was eventually dismissed by the learned Single

Judge on 22.11.2010.

14. On 29.11.2010, the respondent issued a notice to the

petitioner requiring him to appear before the Disciplinary Committee

on 15.12.2010. In the meantime, the petitioner preferred a Letters

Patent Appeal being LPA No.886/2010. The Division Bench issued

notice on the said appeal to the respondent, and directed the

petitioner to appear before the Disciplinary Committee, and to accept,

or deny the charges.

15. On 15.12.2010, the petitioner appeared before the

Disciplinary Committee at Hyderabad, and denied the charges read out

by the Disciplinary Committee. On 30.05.2011, the petitioner‟s LPA

was dismissed. However, the Division Bench directed that the

respondent shall proceed with the disciplinary enquiry keeping in view

the convenience of the petitioner and affording him adequate

opportunity to put forth his case.

16. The petitioner was again issued notice by the respondent on

01.06.2011 requiring him to appear before the Disciplinary Committee

on 18.06.2011. The petitioner, vide letter dated 11.06.2011, sought an

adjournment on the ground that the criminal trial was at a crucial

stage and he was facing genuine difficulty in appearing before the

Disciplinary Committee, as he required adequate time and opportunity

to face the enquiry. The request for adjournment was accepted by the

respondent.

17. The respondent vide letter dated 15.06.2011 informed the

petitioner that the next hearing was fixed on 09.07.2011. The

documents including those relied upon by the Director (Discipline)

while forming prima facie opinion viz. SEBI investigation report, CBI

main charge sheet, two supplementary charge sheets, along with the

list of witnesses which were likely to be examined on 09.07.2011 were

also enclosed with the aforesaid letter. However, once again, on

04.07.2011, the petitioner sought deferment of the enquiry on the

same ground, as aforesaid. This letter was received by the respondent

on 08.07.2011 and the said request was rejected by the respondent on

the same day.

18. On 09.07.2011, the petitioner appeared before the

Disciplinary Committee through his authorized representative. During

the hearing also, the representative of the petitioner sought deferment

of the hearing, which was rejected by the respondent. The respondent

proceeded with the examination of 12 witnesses and thereafter gave

the counsel for the petitioner an opportunity to cross examine them.

However, the counsel for the petitioner opted not to participate in the

hearing and withdrew himself.

19. The petitioner was again issued notice by the respondent on

18.07.2011 informing him that the next hearing had been fixed for

31.07.2011. In the meantime, on 25.07.2011, the petitioner preferred

a Special Leave Petition being Special Leave Petition (C)

No.20915/2011 against the judgment in LPA No.886/2010. Advance

copy of the same was served on the respondent. The said Special

Leave Petition was listed before the Supreme Court on 29.07.2011.

However, one of the Hon‟ble Judges on the bench recused himself from

the matter. The matter was listed before another bench on 01.08.2011.

20. The petitioner then sent a letter dated 29.07.2011 to the

respondent seeking deferment of the proceedings fixed on 31.07.2011,

as the Special Leave Petition of the petitioner was pending in the

Supreme Court. The said request of the petitioner was also rejected by

the respondent on 30.07.2011, and he was asked to appear before the

Disciplinary Committee on 31.07.2011.

21. On 31.07.2011, the petitioner appeared through his

authorized representative before the Disciplinary Committee. The

authorized representative again sought deferment of the proceedings.

This request was rejected by the Disciplinary Committee and it went

ahead to record the deposition of one witness, Mr. A.Y.V. Krishna,

D.I.G., CBI who was produced to prove the charges against the

petitioner. The petitioner‟s representative was thereafter given the

opportunity to cross-examine the said witness. However, he refused to

do so.

22. On 01.08.2011, the Supreme Court disposed of the

petitioner‟s Special Leave Petition, in the following terms:

"Learned counsel for the parties are agreed that this petition can be disposed of by directing the respondent - Institute to commence the disciplinary proceedings from the week commencing 3rd October, 2011. We order accordingly. We may however, add that if by that date trial in criminal cases No.CC1/10, CC2/10 and CC3/10, in progress in the Court of XXI ACMM, Hyderabad is not completed for any reason, the respondents shall ensure that the dates of hearing fixed by them do not clash with the dates fixed by the trial court".

23. The respondent issued notice dated 23.09.2011 requiring the

petitioner to appear before the Disciplinary Committee on 16.10.2011.

On 12.10.2011, the petitioner sent his preliminary reply to the

respondent. The petitioner also sought the documents which formed

part of the SEBI investigation report, the main CBI charge sheet and

the two supplementary charge sheets, relied upon by the Director

(Discipline) for forming the prima facie opinion. The petitioner also

demanded the transcripts of the statements of witnesses whose

evidence had been recorded on 09.07.2011 and 31.07.2011.

24. On 16.10.2011, the petitioner was represented through his

representative before the Disciplinary Committee. The petitioner

requested for recall of witnesses who had already deposed before the

Disciplinary Committee along with copies of "Notes of Hearings",

wherein examination of witnesses had taken place. The request for

supply of the aforesaid documents was reiterated. The respondent

informed the petitioner‟s representative that the documents requested

for would be supplied and that his submissions would be appropriately

considered. However, at the same time, it rejected the request for

cross examination, as it considered that adequate opportunities had

been given to the petitioner, which were not availed of by him.

25. Vide notice dated 02.12.2011, the proceedings were again

fixed on 18.12.2011. On 05.12.2011, the petitioner was served with

documents running into more than 3000 pages. The petitioner was

also provided transcripts of some of the hearings.

26. On 14.12.2011, the petitioner moved two applications before

the Disciplinary Committee - the first to seek permission to cross

examine the witnesses produced by the Director (Discipline) in the

enquiry proceedings, and the second for identification of documents

supplied by the Director (Discipline) to the petitioner. On 15.12.2011,

the petitioner reiterated the prayers in these applications.

27. On 18.12.2011, the disciplinary proceedings were attended by

the authorized representative of the petitioner. It was informed by the

Director (Discipline) during the course of hearing that the only

document relied upon by him in forming the prima facie opinion were

the CBI charge sheet, the SEBI investigation report and the statement

given by Mr. Ramalinga Raju. The Disciplinary Committee observed

that the petitioner had already been supplied these documents and

proceeded to close the case of the petitioner. Consequently, this

petition has been preferred.

28. The grievance of the petitioner is that he was not given an

opportunity to cross examine the witnesses and to file a detailed reply.

His grievance is that he was disabled from either filing a written

statement or from cross examining the witnesses, as he was not

provided the relied upon documents and he was supplied a host of

documents belatedly, which prevented him from preparing his

defence.

29. The submission of Mr. Neeraj Kishan Kaul, learned senior

counsel for the petitioner is that the order of the Supreme Court dated

01.08.2011 was that the institute shall "commence" the disciplinary

proceedings from the week commencing 03.10.2011. He submits that

the Supreme Court adjourned the disciplinary proceedings, since the

petitioner was pre-occupied in defending the criminal trial. It is

submitted that the Supreme Court recognized the petitioner‟s plight of

having to defend the criminal proceedings and the disciplinary

proceedings at the same time, both of which were time and resource

consuming. It is also submitted that the "commencement" of the

disciplinary proceedings meant that the petitioner was entitled to cross

examine the witnesses, who had already been examined by the

respondent on two dates, i.e. 09.07.2011 and 31.07.2011.

30. Mr. Kaul submits that the respondent, despite repeated

opportunities, did not provide all the documents relied upon by the

Director (Discipline) in forming his prima facie opinion. After repeated

requests these documents, running into about 3000 pages, were

provided for the first time on 06.12.2011, i.e. ten days before the date

of hearing which was fixed for 18.12.2011. He submits that the

petitioner could not understand the relevance of the said documents

as these had not been identified. Consequently, the petitioner moved

two applications on 14.12.2011, i.e. to seek permission to cross

examine the witnesses produced by the Director (Discipline) in the

earlier enquiry proceedings, and for identification of documents

supplied by the Director (Discipline) to the petitioner.

31. Mr. Kaul submits that Rule 18(2)(b) specifically provides that

the Disciplinary Committee, which shall be guided by principles of

natural justice, shall "expeditiously cause to deliver to the respondent

and the complainant, a copy each of the following, -

          (a)       .... .... ....

          (b)       particulars or documents relied upon by the Director, if

any, during the course of formulation of prima facie

opinion",

if the Committee decides to proceed under Rule 9(2)(b), i.e.

where the Committee agrees with the prima facie opinion of the

Director (Discipline).

32. Mr. Kaul submits that Rule 18(2)(b) was not complied with as

voluminous documents, relied upon for formation of the prima facie

opinion, were not provided earlier, and were provided only after the

recording of the evidence of the respondents witnesses.

33. Mr. Kaul further submits that the transcripts of the statement

of the witnesses, whose statements were recorded on 09.07.2011 and

31.07.2011 were given to the petitioner only in December 2011. The

denial of the same also handicapped the petitioner in effectively

participating in the enquiry proceedings. Mr. Kaul submits that the

recording of statement of the witness on 31.07.2011 should have been

deferred, since the Special Leave Petition of the petitioner, to the

knowledge of the respondent, was coming up before the Supreme

Court on 01.08.2011. Unfortunately, when the Special Leave Petition

was listed on 29.07.2011, the same could not be heard, as one of the

Hon‟ble Judges had decided to recuse and consequently the case was

adjourned to 01.08.2011.

34. The petition is vehemently opposed by the respondent. It is

submitted by Mr. Arvind Nigam, learned senior counsel for the

respondent that the petitioner‟s sole attempt is to delay and scuttle

the disciplinary proceedings. It is submitted that the petitioner has

repeatedly approached the Court to put a spoke in the wheel, so as to

see that the enquiry proceedings do not progress.

35. Mr. Nigam submits that the petitioner first preferred W.P.(C.)

No.2505/2010 on the ground that since the criminal proceedings is

pending against him, the disciplinary proceedings cannot proceed.

This petition was dismissed on 22.11.2010. The petitioner obtained

stay in these proceedings, which continued to operate to stall the

disciplinary proceedings between 16.04.2010 and 22.11.2010.

Eventually, this writ petition was dismissed by the learned Single

Judge. The petitioner then preferred a Letters Patent Appeal being LPA

No.886/2010, and the Court again granted stay of the disciplinary

proceedings, which operated between 14.12.2010 and 30.05.2011,

when the LPA was dismissed. Mr. Nigam submits that the Supreme

court while disposing of the petitioner‟s Special Leave Appeal did not

issue any direction to the effect that the petitioner would be given an

opportunity afresh to cross examine those witnesses who had already

been examined before the Committee, and in respect whereof the

petitioner had not availed of the opportunity to cross examine them.

36. Mr. Nigam submits that even thereafter the petitioner did not

cooperate with and participate in the disciplinary proceedings. He has

not filed his written statement till date, despite expiry of the period

within which the same could be filed. The proceedings were fixed on

09.07.2011, sufficiently in advance, vide notice dated 15.06.2011.

Despite that, the petitioner did not participate in the proceedings on

that date to cross examine the witnesses.

37. Mr. Nigam submits that these witnesses are officers who have

investigated the case, and they are posted all over the country in

different positions. With great difficulty and at substantial costs, these

witnesses could attend the hearing at Hyderabad. He submits that the

proceedings were being conducted at Hyderabad only for the

convenience of the petitioner, as he is based in Hyderabad and the

criminal trial also is proceeding at Hyderabad. Mr. Nigam submits that

Mr. A.Y.V.Krishna, Chief Investigating Officer in the Satyam trial is

presently posted as D.I.G, Assam. He is not easily available looking to

the disturbance in the said State. Even earlier he could appear before

the Committee only after 2-3 adjournments. To require him, and the

other witnesses to again appear before the Committee for their cross

examination could indefinitely delay the conclusion of the disciplinary

proceedings against the petitioner.

38. Mr. Nigam submits that the tenure of the present Disciplinary

Committee would expire in February 2012. He submits that the

President of the Disciplinary Committee constituted under Section 21B

(1) would demit his office on 11.02.2012. This would lead to further

delays, as the new committee would have to be constituted in terms of

Section 21B, which would have to de novo proceed in the matter. He

submits that the Disciplinary Committee has already furnished its

report based on the evidence recorded by it, and the submissions

made before it on 03.01.2012. A copy of the said report has been

tendered by the respondent in Court during the course of the

arguments. It is submitted that the matter is now at the stage of

Section 21B(3) of the C.A. Act. It is also submitted that the petitioner

was the team leader which conducted the audit of Satyam at the

relevant time. He submits that another member, Ravindranath, who

was a member of the team of which the petitioner was a team leader,

has already been punished under Section 21B.

39. Mr. Nigam submits that the grant of the right to cross

examine the witnesses examined by the respondent, at this stage,

would mean that these witnesses, who are all busy with their

respective assignments would have to leave their other responsibilities

and work, and travel to Hyderabad. Their lodging and boarding

arrangements would have to be made in Hyderabad. Even the

respondents would have to arrange for the members of the Disciplinary

Committee and the support staff to travel to Hyderabad from various

parts of the country, wherever they are located. Tape recording and

transcript facilities would have to be arranged. All these would entail a

huge amount of expenditure and there is no reason why the

respondents should be subjected to the said expenditure all over

again, merely because the petitioner chose not to cross examine the

witnesses when they were offered for that purpose to him. Mr. Nigam

further submits that the witnesses examined during the course of

enquiry had also been examined during the course of the criminal trial.

The petitioner had cross examined these witnesses during the criminal

trial. At the highest, the petitioner may be permitted to rely upon their

statements i.e. examination- in-chief and the cross examination of

these witnesses recorded during the criminal trial, as even according

to the petitioner, the charges in the criminal case and the disciplinary

proceedings are over lapping and identical.

40. Mr. Nigam submits that the petitioner has been given

sufficient opportunity in terms of Rule 18. He further submits that the

petitioner has a statutory right of appeal, in case the Disciplinary

Committee decides to impose any of the penalties referred to in sub-

section (3) of Section 21A, and subsection (3) of Section 21B. Mr.

Nigam submits that all the issues raised by the petitioner in the

present petition can also be raised before the appellate authority

constituted under Section 22A of the C.A. Act. Mr. Nigam submits that

the petitioner has an efficacious alternative remedy available to him

and this Court should, therefore, not interfere with either the

disciplinary proceedings or the report formulated by the Disciplinary

Committee during the pendency of the writ petition, at this stage.

Reliance is placed on the judgments of the Supreme Court in Chanan

Singh vs. Registrar, AIR 1976 SC 1821; State of Madhya Pradesh

vs. Nerbududda Valley, (2010) 7 SCC 751; Haryana Financial

Corporation vs. Kailash Chander Ahuja, 2008 (9) SCC 31;

Kanhaiya Lal vs. State of Maharashtra, Criminal Appeal Nos. 338-

340/2011 and of this Court in Akkhilesh R Bhargava vs. The

Institute of Chartered Accountants of India & Anr., W.P.(C )No.

4809/2011; Jagmal Singh vs. Delhi Transport Corporation, 59

(1995) DLT 604 (DB); and Arun Kumar Nigam vs. DIG. GENL.

Central Indus. Security Force & Ors., W.P. (C) No. 2646/1990.

41. In his rejoinder, Mr. Neeraj Kishan Kaul, Senior Advocate, on

instructions from his client, submits that the petitioner cannot agree to

rely upon the statements of these very witnesses, including their cross

examination, as recorded during the criminal trial and would need to

cross examine these witnesses again for the purpose of the disciplinary

proceedings. He further submits, on instructions, that the petitioner is

willing to bear the expenses that may be incurred for summoning and

examining the witnesses again for their cross examination. Mr. Kaul

submits that the mere existence of an alternate remedy by way of an

appeal is no ground to reject the present petition, as according to the

petitioner, the present is a case of violation of principles of natural

justice during the conduct of the enquiry proceedings. He relies upon

the judgment of the Supreme Court in Whirlpool Corporation V.

Registrar of Trade Marks, Mumbai & Ors, (1998) 8 SCC 1, to

submit that in cases where there is, inter alia, breach of the principles

of natural justice, existence of an alternate remedy would not create a

bar to exercise of its jurisdiction by the Court under Article 226 of the

Constitution of India. Mr. Kaul submits that merely because the term

of the President of the Disciplinary Committee would come to an end in

February 2012, is no ground to deny the petitioner the right to cross

examine the witnesses. He submits that the reconstitution of the

Committee would not lead to the proceedings being undertaken de

novo. In this regard he points out that the present Committee (as at

the time of hearing of the final arguments on 18.01.2012) was entirely

different from the one that started hearing the case. He has referred

to the constitution of the Committee during the hearings held on

14.12.2009, 30.03.2010 and 15.12.2010.

42. When the arguments were concluded, I had asked learned

counsel for the respondents to provide to this Court the expenditure

that may be incurred, in case the petitioner was to be permitted to

cross examine the witnesses. The respondents have tendered a sheet

showing the extent of expenses that is likely to be incurred in case the

12 witnesses are recalled for their cross examination once again. The

said statement reads as follows:-

        "A.    Expenses on the travelling, boarding
               and lodging of five members of
               Disciplinary Committee                   Rs.2,50,000
        B.     Expenses on the travelling, boarding
               and Lodging of          the staff of
               Disciplinary Directorate                 Rs.2,00,000
        C.     Expenses on the travelling, boarding
               and    Lodging    of    witnesses   @
               Rs.30,000 per head                       Rs.3,60,000
        D.     Other    Misc    Expenses    including
               recording and Incidental costs              Rs.50,000
                                                        Rs.8,60,000"

43. Having heard learned counsel for the parties, perused the

provisions of the C.A. Act and the rules framed thereunder, the record

of the case and considered the submissions of the parties, in the

interest of justice, I am inclined to grant one, and only one opportunity

to the petitioner to cross examine all the witnesses examined by the

respondent, however subject to the conditions mentioned hereinafter.

44. I may observe at this stage itself that strictly speaking the

petitioner is not entitled to the said relief in respect of the witnesses

whose examination-in-chief was recorded on 09.07.2011, and the

petitioner is solely responsible for landing himself in the present state.

However, since the petitioner has agreed to bear the expenses that

would be incurred for permitting the petitioner to cross examine these

witnesses, so as to provide ample opportunity to the petitioner, even

at this stage, I am inclined to grant one and only one opportunity to

the petitioner to cross examine the respondent‟s witnesses, subject to

conditions.

45. Section 21B(3) of the C.A. Act read with Rule 18 of the Rules

makes it clear that the Disciplinary Committee is obliged to offer the

member, whose conduct is under examination, an opportunity of being

heard and to comply with the principles of natural justice. In the

present case, the period during which the interim stay of the

disciplinary proceedings remained in force, the petitioner cannot be

faulted for delaying the proceedings. The petitioner was entitled to

agitate his legal rights, and merely because that led to deferment of

the disciplinary proceedings, the said fact cannot be held against the

petitioner.

46. However, the Division Bench vacated the stay with the

dismissal of the petitioner‟s LPA No.886/2010 on 30.05.2011.

Therefore, for the period after 30.05.2011, the non-participation of the

petitioner in the disciplinary proceedings cannot be viewed lightly.

Vide notice dated 01.06.2011, the petitioner was required to appear

before the Disciplinary Committee on 18.06.2011. However, the

petitioner sought an adjournment vide letter dated 11.06.2011 on the

ground that the criminal trial was at a crucial stage. This request of

the petitioner was acceded to. The developments which took place

thereafter are of some significance. The respondent, vide letter dated

15.06.2011 informed the petitioner that the next hearing had been

fixed on 09.07.2011. Therefore, the petitioner had over three weeks‟

notice of the next hearing. He was also provided with the documents,

including those relied upon by the Director (Discipline) while forming

the prima facie opinion, namely, the SEBI investigation report, the CBI

main charge sheet and the two supplementary charge sheets along

with the list of witnesses who were likely to be examined on

09.07.2011. The petitioner again sought an adjournment of this

hearing vide letter dated 04.07.2011. This request was rejected.

47. On 09.07.2011, though the representative of the petitioner

appeared, he refused to participate in the proceedings and to cross

the witnesses whose examination-in-chief was recorded.

48. The submission of Mr. Kaul that the petitioner was not

provided with the documents relied upon by the Director (Discipline)

while forming the prima facie opinion dated 17.09.2009 does not

appear to be correct. Inter alia, the said documents were provided, as

aforesaid, by the respondent vide letter dated 15.06.2011.

49. Firstly, I may note that It is the categorical case of the

respondents that the only document relied upon by the Director

(Discipline) while forming the prima facie opinion were, firstly the

charge sheet filed by the CBI and the SEBI investigation report along

with the balance sheets. Pertinently, even at the stage of formation of

the prima facie opinion, the petitioner was given repeated

opportunities. However, he did not participate in these proceedings

and did not seek any document from the respondent. He repeatedly

sought adjournments which only delayed the proceedings. The

submission of the petitioner that the Director (Discipline) had only

provided copies of the SEBI investigation report and the CBI charge

sheet and supplementary charge sheets, and not the documents which

formed the basis of the said investigation report and the charge sheets

has no merit. The Director (Discipline) had merely to form a prima

facie opinion. At that stage it was not necessary for the Director

(Discipline) to have herself conducted a detailed enquiry and

investigation into the commission of professional misconduct by the

member of the institute. It was not incumbent on the Director

(Discipline) to have also examined or relied upon the documents

forming the basis of the SEBI investigation report or the CBI charge

sheet at the stage of forming the prima facie opinion. In fact, a perusal

of the prima facie opinion, which has been placed on record of the

writ petition, shows that the same primarily is based upon the letter

dated 09.01.2009 of Mr. B. Ramalinga Raju, the erstwhile Chairman of

Satyam and the annual reports and balance sheets of Satyam. The

supplementary charge sheets do not even appear to have been relied

upon while forming the prima facie opinion by the Director (Discipline).

Even before me, the petitioner has not pointed out any document,

which, according to the petitioner, has been relied upon while forming

the prima facie opinion and which was not available with the petitioner.

The supply of a large number of documents at a later stage i.e. on

06.12.2011, which are not the documents relied upon at the stage of

formulation of the prima facie opinion, therefore, does not in any way

vitiate the proceedings which took place before the Disciplinary

Committee on 09.07.2011. The non-participation of the petitioner in

the proceedings held on 09.07.2011 is wholly unjustified. The

petitioner did not participate in those proceedings at his own risk. It

cannot be said that the proceedings held on 09.07.2011 were not in

conformity with the order of the Division Bench dated 30.05.2011 in

LPA No.886.2010.

50. The position with regard to the cross examination of the last

witness i.e. Shri A.Y.V. Krishna on 31.07.2011, however, stands on a

different footing. The petitioner was not provided the transcripts of the

statements of the witnesses whose examination took place on

09.07.2011 and the said transcripts were provided to the petitioner

vide forwarding letter dated 05.12.2011. The three thousand odd

pages/documents which were provided to the petitioner on 06.12.2011

had been exhibited by the witnesses whose examination took place on

09.07.2011 and 31.07.2011. It is, therefore, apparent that when the

petitioner/his representative appeared before the Disciplinary

Committee on 31.07.2011, the petitioner was clearly handicapped,

because the petitioner was not possessed of the statements of the

witnesses, whose evidence had been recorded on 09.07.2011 and also

of the documents which the said witnesses (12 in number) had

exhibited. Without the said witnesses statements and copies of the

exhibits, the petitioner could not have effectively cross examined the

last witness, Sh. A.Y.V. Krishna on 31.07.2011.

51. To that extent, the grievance of the petitioner appears to be

justified and the petitioner should be granted an opportunity to cross

examine the last witness Sh. A.Y.V. Krishna, to prevent the breach of

the principles of natural justice.

52. The submission of Mr. Nigam that on account of the expiry of

the tenure of the President of the Disciplinary Committee in January

2012, the proceedings before the Disciplinary Committee would have

to commence de novo does not appear to be correct. The petitioner

has demonstrated that, from time to time, the constitution of the

Disciplinary Committee has undergone changes. The proceedings in a

case continue, irrespective of the changes that may come about with

the passage of time in the Disciplinary Committee. The same

phenomenon is experienced even in Courts. What is relevant is that

the Disciplinary committee which finally hears the arguments of the

parties, should render its decision.

53. The submission of Mr. Nigam that the petitioner has an

alternate efficacious remedy by way of an appeal also does not have

merit. It is well settled that a case involving breach of principles of

natural justice would be dealt with by the Court while exercising

jurisdiction under Article 226 of the Constitution of India and the

aggrieved party cannot be non suited merely because of the existence

of an alternate efficacious remedy. Reference may be made to the

decision of the Supreme Court in Whirlpool (supra) and to the

following extract from the said decision:

"Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this court not to operate as a bar in at least three contingencies, namely, where the Writ Petition has been filed for the enforcement of any of the Fundamental rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case law on this point..............."

54. The judgments relied upon by the respondent deal with entirely

different facts and circumstances as opposed to the present case and

are not relevant for the present purposes.

55. In Chanan Singh (supra) and Jagmal Singh (supra) writ

petitions had been preferred when the matter was only at the initial

stage of show cause, and for such reasons, the same came to be

dismissed as premature. Moreover, these cases did not consider the

impact on the maintainability of the Petition under Article 226 of the

Constitution in case of breach of principles of natural justice.

56. In Kanhaiya Lal (supra) writ petition had been preferred against

notice issued by the Assistant Registrar, directing the borrower to hand

over of the possession of mortgage properties on account of non-

payment of secured debt. Similarly in Nerbududda Valley (supra)

writ petition had been preferred against order passed by the Nazul

Officer, rejecting the application for grant of No Objection Certificate

(NOC) to raise construction on the leased land after changing the land

use from industrial purpose to commercial purpose. The writ petitions,

in both these cases, came to be dismissed on account of existence of

alternate efficacious remedy of appeal. However, it is relevant to note,

that in neither of these petitions, was the plea of violation of the

principles of natural justice considered by the Court.

57. In Akkhilesh R Bhargava (supra) this Court, unlike the present

case, dealt with the Act as it stood prior to the 2006 amendment

wherein the Council was required to forward the case to the High Court

along with its recommendation under Section 21 (5) [as it stood then],

when it found any member of the Institute guilty of Misconduct upon

receipt of a report of the Disciplinary Committee. The Petition had been

preferred on the ground of violation of principle of natural justice by

the Disciplinary committee. The same came to be dismissed as

premature since the Council had till then not acted upon the report of

the committee and tendered its recommendations. It is also pertinent

to mention that the High court while passing the order did not consider

the aforementioned decision of the Supreme Court in Whirlpool

(supra).

58. In Arun Kumar Nigam (supra), the petitioner assailed an order

imposing punishment on ground of violation of principles of natural

justice amongst others. However, since the petitioner could not prove

that he was prejudiced by the alleged violation, this Court dismissed

the petition. On similar grounds, the Supreme Court in Haryana

Financial Corporation (supra) set aside the order of the High Court,

wherein the High Court allowed the writ petition on ground of violation

of principle of natural justice without proof of prejudice. In the present

case, however, the petitioner has been able to establish the prejudice

suffered by him vis-à-vis the proceedings of the Disciplinary Committee

held on 31.07.2011.

59. Considering the fact that the petitioner is entitled to be

granted the opportunity to cross examine Sh. A.Y.V. Krishna, and, for

that purpose the Disciplinary Committee would need to reassemble, in

the interest of justice, I am inclined to grant to the petitioner one, and

only one, opportunity to cross examine the other witnesses as well,

subject to the following conditions:-

(1) The petitioner deposits with the respondent, an amount of

Rs.7.5 lakhs to meet the expenses that may be incurred in the

process of summoning the witnesses and holding the proceedings in

Hyderabad for two consecutive days. The same would also cover

the transportation, lodging and boarding expenses of the witnesses

and the Committee members and staff for holding the proceedings

at Hyderabad. The said amounts shall be deposited by the

petitioner within two weeks from the date hereof. The said amount

has been stipulated on the assumption that the petitioner shall

takes steps to summon the witnesses without default and the said

witnesses shall be cross examined on the dates they are

summoned for and that the petitioner shall not seek any deferment

or adjournment. If the overall expenses exceed the amount of

Rs.7.5 lakhs, the same shall be borne by the respondent. However,

if it is less than the said amount, the petitioner shall be refunded

the excess amount after adjusting the actual expenses incurred.

(2) The dates for holding the proceedings shall be mutually

agreed upon between the petitioner, the respondent and the

witnesses and, in any event, shall not be later than one month from

the date of hereof.

(3) Soon after the cross examination of the witnesses is concluded,

the hearing shall take place before the Committee without any

adjournment being sought by the petitioner.

60. In the light of the aforesaid, the report prepared by the

Disciplinary Committee dated 03.01.2012 is set aside. It is, however,

made clear that the Court has not gone into the merits of the case and

the Disciplinary Committee may make the fresh report without being

influenced by the observation of this Court in this judgment. However,

if the petitioner does not take steps in accordance with this judgment,

the report of Disciplinary Committee dated 03.01.2012 shall stand

revived. With these directions, the writ petition stands disposed of.

VIPIN SANGHI, J MARCH 13, 2012 sr