Council Of Institute Of Chartered ... vs Praveen Kumar Katyal,Fca & Anr.
2011 Latest Caselaw 5349 Del

*                THE HIGH COURT OF DELHI AT NEW DELHI

+                              CHAT A. REF. No.1/2009

                                            Reserved on : 21.07.2011
                                          Pronounced on : 04.11.2011

COUNCIL OF INSTITUTE OF
CHARTERED ACCOUNTANTS
OF INDIA                                              ...... PETITIONER

                               Through:      Mr.    Rakesh           Aggarwal,
                                             Advocate

                                      Versus

PRAVEEN KUMAR KATYAL,FCA & ANR.                       ...... RESPONDENTS

                               Through:      Nemo


CORAM:
HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MR. JUSTICE M.L. MEHTA


1.      Whether Reporters of local papers may be
        allowed to see the judgment?                             Yes
2.      To be referred to the Reporter or not ?                  Yes
3.      Whether the judgment should be reported
        in the Digest ?                                          Yes

M.L. MEHTA, J.

1. This reference has been made by Council of Institute of

Chartered Accountants of India ("the Council" for short). There

were certain complaints made to the petitioner against

respondent Praveen Kumar Katyal regarding his professional

misconduct. The respondent Praveen Kumar Katyal was called

upon by the Council to submit his written submissions as per

Regulation 12(7) of Chartered Accountants Regulations, 1988

("the Regulations" for short). He submitted his written statement

to which rejoinder was submitted by the complainant Dr. Sunila

Mehta. The respondent then submitted his comments. The

Council considered all these documents and prima facie was of

the view that the respondent Praveen Kumar Katyal was guilty of

professional misconduct besides other misconducts and decided

to hold an inquiry in the matter by the Disciplinary Committee.

Consequently, the Disciplinary Committee was constituted which

conducted inquiry proceedings and gave its report dated 3.2.2006

holding the respondent Praveen Kumar Katyal guilty of

professional misconduct falling within the meaning of Clause 11 of

Part-I of First Schedule and also other misconducts under Section

22 read with Section 21 of the Chartered Accountants Act, 1949

("the Act" for short). The Committee, however, did not find him

guilty under Clause 7 of Part-I of II Schedule of the Act. Copy of

Disciplinary Committee was forwarded to the complainant Dr.

Sunila Mehta as well as to respondent Praveen Kumar Katyal

calling upon them to submit written representations, if any and

also to appear before the Council, if they so desired. The parties

were informed about the date of the meeting of the Council. Both

the sides submitted their representations on the report of the

Disciplinary Committee. The Council considered the report of the

Disciplinary Committee and also written representations of both

sides and decided to accept the report of the Disciplinary

Committee and accordingly held respondent Praveen Kumar

Katyal guilty on two counts viz. (i) professional misconduct falling

within the meaning of Clause 11 of Part-I of First Schedule of the

Act, 1949; and (ii) other misconducts under Section 22 read with

Section 21 of the Act. In respect of first count, the Council

afforded opportunity of hearing to the respondent under Section

21(4) of the Act. The respondent neither appeared nor submitted

his representation. On consideration of the matter, the Council

ordered the name of the respondent Praveen Kumar Katyal to be

removed from the List of Members for a period of 3 months. In

respect of second count, the Council decided to recommend to

this Court the name of the respondent to be removed from the

List of Members for a period of one year. That is how this

reference has been made to this Court under Section 21(5) of the

Act.

2. The respondent filed counter affidavit and challenged the

veracity of the report of the Disciplinary Committee and also the

decision of the Council. He also alleged the complainant Dr. Sunila

Mehta to be having no locus standi to file the complaint inasmuch

as she had no professional dealing with him. He also alleged the

inquiry report to be vitiated making that no proper opportunity

was ever granted to him to cross examine Dr. Sunila Mehta. With

regard to the allegation that he was engaged in other business

activities being the Director of some companies, he stated that he

was merely a Director and had no role to play in those companies.

3. None appeared for the respondent before us when the

matter was listed for final hearing on 21.07.2011. We heard the

learned counsel for the petitioner and reserved the matter with

liberty given to the respondent to file synopsis of his written

submissions, if any. We have waited for considerable time, but no

written submissions have been filed by the respondent. We,

therefore, have decided to dispose of this reference.

4. The allegations on which the inquiry came to be instituted

against the respondent were on the basis of complaint made by

Dr. Sunila Mehta whose mother was getting her income tax

returns filed through the respondent as his client. The

complainant also desired that her first income tax return to be

filed through him. The respondent advised her to invest her

money with him at the return of 27% per annum as against 14%

per annum which the complainant was getting on the investments

already made by her. Consequently, she gave him cheques of `1

lac and `5 lac. The respondent also gave her two post-dated

cheques dated 29.5.1997 and 18.6.1997. Both these cheuqes

were signed by him as Director of M/s Dhan Kuber Mutual Benefit

Limited. On presentation these cheques were bounced because of

insufficiency of funds. The complainant pursued with the

respondent for return of the money, but of no avail. It was also an

allegation against him that he did not file the return of the

complainant in time on 1.9.1997 despite that all the papers and

documents were given to him in March, 1997. The other

allegations against him were that being the Director he was

running various companies from his office of Chartered

Accountant.

5. On receipt of copy of the complaint from the Institute, the

respondent submitted his written statement. In his statement

before the Disciplinary Committee, the respondent admitted that

M/s Dhan Kuber Mutual Benefit Pvt. Ltd. was incorporated in 1995

and he was one of its Directors. The respondent had also

admitted that he was the director of other two companies namely

M/s Katyal Leasing and Investment Company and Katyal

Consultancy Private Limited. He admitted that all these

companies are carrying on their businesses from his office. He

stated that his wife and father were the other Directors. He

admitted that he was authorized signatory of these companies

and that these companies were carrying their businesses from his

office address. Further in answer to a question asked by the

Committee, he admitted that M/s Dhan Kuber Mutual Benefit

Private Limited was promoted by them. He also admitted that he

has been signing cheques on behalf of these companies as

authorized signatory. Not only this, he also admitted that he was

taking decisions on behalf of M/s Katyal Consultancy and was

actively involved in this company by attending its Board

meetings. In his counter-affidavit also, the respondent admitted

himself to be the director of these companies, though he had

denied to be having any role in those companies. From the

admissions, as made by the respondent before the Committee as

noted above, there does not remain any doubt with regard to the

fact that the respondent had incorporated these companies and

was not only their Director simplicitor, but was actively involved

in the decision making affairs of these companies. This was

absolutely in violation of Clause 11 of Schedule I of the

Regulations and the Committee has rightly found him guilty on

this count.

6. With regard to the finding of the Committee about his other

misconduct under Section 22 read with Section 21 of the Act, it is

noted that respondent nowhere denied about the investments by

the complainant amounting to `6 lac with M/s Dhan Kuber of

which he was the Director. The respondent was provided by the

Disciplinary Committee copies of all the documents filed by the

complainant. His written statement and representations and also

the comments were duly considered by the Committee. The

respondent did not lead any evidence to rebut the allegations

leveled against him by the complainant Dr. Sunila Mehta. Not only

that the respondent attended the proceedings of the Disciplinary

Committee, but was afforded due opportunities to present his

case and defend himself.

7. It is seen that the complainant was examined on 5.7.2004

and the respondent was examined on 24.8.2004. The plea that he

was not afforded an opportunity to cross examine the

complainant is absolutely an afterthought and highly belated

inasmuch as the respondent had given his written comments and

also representation to the Disciplinary Committee which

submitted its report on 03.02.2006. It was only much after that

the respondent in his written representation dated 2.3.2006 made

to the Council alleged that he was not given an opportunity to

examine the complainant. The respondent had been attending

the proceedings and never raised any such grievance before the

Disciplinary Committee.

8. We have gone through the record and it is seen that the

Disciplinary Committee as also the Council followed due

procedure as prescribed in Section 21 of the Act. We could not

see any reason to find the report of the Inquiry of Disciplinary

Committee to be vitiated on any ground.

9. The respondent being a CA was bound by the professional

conduct. The respondent in his position as CA of the mother of the

complainant for many years, lured the complainant to invest in

his company at return of 27% per annum as against 14% per

annum which the complainant was getting from her previous

investments. In such circumstances, anyone was likely to be lured

with such an offer. The respondent by such representations made

to the complainant to invest ` 6/- lac in his company, accelerated

his business activity. He also gave post-dated cheques with

interest from his company M/s Dhan Kuber of which he was not

only the Director, but authorized signatory. Both these cheques

were admitted to be signed by him as Director of this Company.

The cheques on presentation got dishonoured because of

insufficiency of funds and that would undoubtedly point finger

towards the bad intentions of the respondent in making the

complainant part with the huge amount of money. This conduct of

the respondent would apparently amount to misconduct within

the ambit of „other misconduct‟ as per Section 22 read with

Section 21 (5) of the Act.

10. From all this, we are of the considered view that the

Disciplinary Committee was right in holding the respondent guilty

of „other misconduct‟ as well under Section 22 read with Section

21 of the Act and the Council was right in accepting the report of

the Disciplinary Committee after providing due opportunity of

hearing to the respondent. Keeping in view the nature and gravity

of the misconduct, we are in agreement with the punishment

awarded to the respondent by the Council. Accordingly, the

reference made by the Council for removal of respondent Praveen

Kumar Katyal from the List of Members for a period of one year is

hereby approved. Ordered accordingly.

11. The reference stands disposed of.

M.L. MEHTA (JUDGE)

ACTING CHIEF JUSTICE

November 04, 2011 rd