[Cites 12, Cited by 0]
Gujarat High Court
Council Of Institute Of Chartered ... vs Jignesh V Shah - C A on 25 March, 2026
Author: A. S. Supehia
Bench: A.S. Supehia
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Reserved On : 18/03/2026
Pronounced On : 25/03/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CHARTERED ACCOUNTANT REFERENCE NO. 2 of 2008
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
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Approved for Reporting Yes No
✔
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COUNCIL OF INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
Versus
JIGNESH V SHAH - C A
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Appearance:
MR. B.S. SOPARKAR FOR MRS SWATI SOPARKAR(870) for the
Applicant(s) No. 1
MR MRUGESH JANI(1984) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)
1. This is a case reference under Section 21(5) of the
Chartered Accountants Act, 1949 (hereinafter referred
to as "the Act") in respect of Shri Jignesh V. Shah,
Chartered Accountant, Smt. Prabha S. Prasad [General
Manager (V&I), Vijaya Bank], Bangalore (hereinafter
referred to as the "Complainant") made the following
allegations against Shri Jignesh V. Shah of M/s. Jignesh
V. Shah & Co, Chartered Accountants, Ahmedabad,
(hereinafter referred to as "the respondent").
BRIEF FACTS :
2. The respondent was appointed as Concurrent Auditors
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for the bank's Relief Road Branch, Ahmedabad for the
period 01.07.2003 to 30.06.2004. As per the
appointment letter / guidelines, he was required to
scrutinize the following aspects::
(a) Loans sanctioned/excess allowed beyond the
delegated powers of the Branch Manager.
(b) Are all the documents correctly executed in the
latest revised document formats and properly
stamped wherever necessary in terms of Stamp Act
and as per book on "Guidelines on the loan
documents".
(c) Whether there is a shortfall in the
securities/missing of securities or deterioration in
the quality of chargeable current assets.
(d) Whether the excesses granted have been reported
in OD reports on the same day?
(e) Whether the excess reported in the OD reports is
within the delegated powers, whether approval has
been obtained in such cases?
(f) Other irregularities / defects if any.
(g) Whether interest is recovered properly, if not
period (no. of quarters) during which it was not
recovered in detail. Whether credits in the account
are sufficient to cover the interest, if not what is
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the amount of shortfall.
(h) Report on overdue irregular inland bills,
purchased, CBP, DBP, SBP including cheques in
general and PIBC/instant credit scheme (IPAP).
(i) Report on overdue inland bills discounted.
(j) Whether prior permission from the competent
authority was obtained for operation in the
accounts where either renewal or review is
pending?
3. The Internal Inspectors of the bank during their
inspection held in October, 2003 came across several
serious deficiencies which the Respondent had failed to
report, which are as under:
i) CCH Limit of M/s.Varsha Textiles (Prop. Paramount
Polycot Pvt. Ltd.) - Against the sanctioned limit of
Rs.260.00 lakhs, branch has allowed excess limit
continuously with a maximum of Rs.3,38,15,730/-.
Excess OD report not submitted to Controlling
Office for approval. The balance amount
outstanding in the account as on 30.09.2003 was
Rs.2,93,690/-. Branch has purchased 9 bills of
M/s.Varsha Textiles under supply bills purchased
account amounting to Rs.258.04 lakh having no
delegated power, of which 8 bills amounting to
Rs.258.04 lakh having no delegated power, of
which 8 bills amount to Rs.229.54 lakhs are
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overdue.
ii) CCM limit of M/s.Shree Umiya Enterprises against
the sanctioned limit of Rs.10.00 lakhs, branch has
allowed excess continuously with a maximum of
Rs.19,74,116/- without submitting OD report to
Controlling Office.
iii) Apart from the above limit Branch Manager has
purchased 7 cheques under CBP amount to Rs.
6,71,006/- beyond his delegated powers which
were returned unpaid and were kept pending for 6
months without reporting to Controlling Office and
subsequently debited to the CCM account of the
party.
iv) CCM account of M/s.Rajni Comburtion Pvt. Ltd.
Branch has received the renewal sanction with
enhancement of limit from Rs.30 lakhs to Rs.70
lakhs but without execution of renewal documents
branch has simply modified that DP in computer
from Rs. 30 to 70 lakhs without fulfilling 13
sanction terms and conditions. Excess allowed
continuously with a maximum of Rs. 89.97 lakhs
and OD reports were not sent to the Controlling
Office.
v) Supply Bills Purchased account of M/s.Ashima Ltd.
Manager has purchased 13 local Supply Bills of the
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party to the extent of Rs.2,08,16,481/- without
sanctioned limit and delegated powers. Out of the
13 bills, 5 bills amount to Rs.74.47 lakhs are still
outstanding and the matter was not reported to
Controlling Office.
vi) SBP account of M/s.Paramount Industries Branch
Manager has purchased 2 bills under Supply Bills
Purchased account for Rs.90,12,750/- which is still
outstanding without sanction and beyond delegated
power which are overdue and not reported to
Controlling Office.
vii) Branch has allowed TOD's in 18 current accounts
amounting to Rs.41.86 lakhs beyond the delegated
powers and also not reported to the Controlling
Office. 8 accounts amounting to Rs.13.57 lakhs are
still pending for recovery.
4. Accordingly, the Complainant filed complaint against the
Respondent on 16.03.2004. A copy of the complaint was
sent to M/s.Jignesh V. Shah & Co. Chartered
Accountants vide petitioner's letter dated 02.07.2004
with a request to disclose the name of the member(s)
who is / are answerable to the charge of misconduct and
to send copies of this letter with its enclosures to the
said member/s with a request to send directly to the
Petitioner his / their written statement, if any, as
required under Regulation 12(7) of the Chartered
Accountants Regulations, 1988.
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5. The respondent submitted his written statement, duly
verified on 09.08 2004. The complainant submitted the
rejoinder, duly verified on 11.09.2004. The respondent
submitted his comments, duly verified on 19.10.2004.
Thereafter, in accordance with the provisions of
Regulation 12(11) of the Chartered Accountants
Regulations, 1988, the above papers containing the
complaint, the written statement, the Rejoinder and the
Comments were considered by the Council at its meeting
held in May, 2005 at New Delhi. The Council being
prima facie of the opinion that the respondent was guilty
of professional and / or other misconduct, decided to
cause an enquiry to be made in the matter by the
Disciplinary Committee.
6. Thereafter, the complainant and the respondent were
examined by the Committee. The Committee submitted
its report dated 07.07.2006, by holding that the
Respondent was guilty of gross negligence falling within
the meaning of Clause (7) of Part-I of the Second
Schedule read with Sections 21 and 22 of the Act.
7. The Disciplinary Committee report was forwarded to
respective parties vide letter dated 28.07.2006 and they
were informed that the said report would be considered
by the Council in the forthcoming meetings. The
respondent did not file any written representation on the
report of the Disciplinary Committee, however,
representative of the complainant Department appeared
before the Council and the respondent submitted his
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written representation dated 05.10.2006 on the report of
the Disciplinary Committee.
8. On consideration of the Report of the Disciplinary
Committee along with the written representation dated
05.10.2006 received from the Respondent and also the
oral submissions made by the representative of the
Complainant Department before it, the Council decided
to accept the Report of the Disciplinary Committee and
accordingly held that the Respondent was guilty of
professional misconduct falling within the meaning of
Clause (7) of Part I of the Second Schedule to the Act.
9. Accordingly, under Section 21(5) of the Act, the Council
decided to recommend to the High Court that the name
of the respondent be removed from the Register of
Members for a period of six months.
SUBMISSIONS ON BEHALF OF THE COUNCIL :
10. Learned advocate Mr.B.S.Soparkar appearing for the
Council, while pointing out the report of the Disciplinary
Committee and also the opinion of the Council has
submitted that in fact the respondent has admitted that
there was serious negligence amounting to misconduct
on his behalf in failing to file timely reports pointing out
the serious deficiency. It is submitted that the only
excuse given by the respondent was about his family
circumstances and there is no contest on merits.
11. While referring to the questionnaires of the Disciplinary
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Committee to the respective parties, it is contended that
before the Disciplinary Committee, the respondent has
categorically admitted that he did not submit the flash
report of the irregularities, and the same were only
submitted on 30.12.2003 after the inspection was
carried out by the Bank through its internal Inspectors.
It is submitted that the family circumstances such as the
death of his father and surgery of his wife, is an after-
thought, as his father had passed away in September,
2003 and the inspection was undertaken by the
Inspectors in October, 2003 and thereafter also till
30.12.2003, the respondent did not file the flash report,
indicating serious irregularities in the aforementioned
cases.
12. While placing reliance on the judgment of the Supreme
Court in the case of State Bank of India and others vs.
Ramadhar Sao, 2025 SCC OnLine SC 1752, it is urged
that this Court may not disturb the concurrent findings
of the Disciplinary Committee as well as the Council,
since the respondent has not alleged any irregularities in
holding the proceedings by the Disciplinary Committee
as well as by the Council. Reliance is also placed on the
decision of this Court in the case of Council of Institute
of Chartered Accountants of India vs. Arun Purushottam
Kapadia, [2014] 41 taxmann.com 308 (Gujarat). By
placing reliance on the decision of this Court in the case
of C A Rajesh v. Disciplinary Committee, [2012] 28
taxmann.com 100 (Gujarat), he has submitted that the
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learned Single Judge of this Court, after appreciating the
provisions of Clause-7 of Part-1 of Second Schedule of
the Act, r/w provisions under Sections 21(3), 21(B)(3)
and 22 of the Act has held that failure to exercise due
diligence is a very vital aspect which also is to be taken
into account in examining the Chartered Accountant's
conduct and the finding or the conclusion recorded by
the Disciplinary Committee and confirmation by the
Council cannot be disturbed if only the quantum of
penalty is shown to be or found to be so disproportionate
as it would amount to victimisation. It is submitted that
in the present case, looking to the proved misconduct,
the Council has recommended the name of the
respondent to be removed from the Register of Members
for the period of six months only and hence unless the
Court finds that such penalty is disproportionate to be
deficiency, the same may not be interfered with.
SUBMISSIONS ON BEHALF OF THE RESPONDENT :
13. Responding to the aforesaid submissions, and opposing
the recommendation, learned advocate Mr.Mrugesh Jani,
at the outset, has submitted that the Disciplinary
Committee as well as the Council fell in error in
recommending six months removal from Register of
Members, since it would be a very harsh and
disproportionate punishment, looking at the alleged
negligence or failure to perform the duty, more
particularly in wake of the fact that, the complainant-
Bank has neither alleged any mala fide intention nor it is
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asserted that the respondent has gained anything illegal
in belatedly filing the flash reports. It is submitted that
in absence of accusations of mala fide, the impugned
action of removal from Register of Members for a period
of six months, is illegal and hence, the provision of
Clause-7 of IInd Schedule cannot be invoked. In support
of his submission, he has placed reliance on the decision
of Calcutta High Court in the case of Council of Institute
of Chartered Accountants vs. Somnath Basu, AIR 2007
Calcutta 29. It is submitted that as held by the Calcutta
High Court, in case of proved carelessness and
negligence but in absence of ill-motive, the
recommendation of the Council for removal of the name
from the Register of Members is uncalled for.
14. It is also contended that the report of the Inspectors out
of which the proceedings emanated has not been
supplied to the respondent and is neither placed before
the Disciplinary Committee nor before the Council. It is
submitted that the non-production of internal Inspectors
Report, which reported negligence, will vitiate the entire
proceedings.
15. It is also contended that the irregularity in case of two
entities being M/s.Varsha Textiles and M/s.Shree Umiya
Enterprises, the irregularities were already committed
before the respondent was appointed and hence it was
the earlier Auditor who was responsible for not
reporting the irregularity committed by such entities and
hence the respondent cannot be fastened with the
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liability or inaction committed by the earlier Auditors.
16. Finally, it is submitted that the respondent has not
deliberately belated the reporting of the statutory audit.
It happened due to several family circumstances, more
particularly, the death of his father as well as his wife
had undergone surgery of cyst. Thus, it is urged that the
recommendation made by the Council may not be
accepted by this Court.
ANALYSIS AND OPINION :
17. We have heard the learned advocates appearing for the
respective parties at length.
18. The relevant extract of the un-amended Section 21 of the
Act, as applicable to the instant case, under which the
reference has been made to this Court is incorporated as
under :
"21. Procedure in inquiries relating to misconduct of
members of Institute -
(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
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(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.
(6) On receipt of any case under sub-section (4) or subsection
(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 :−
(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."
19. It is not in dispute that the respondent was appointed as
concurrent Auditor for the period from 01.07.2003 to
20.06.2004 and as per the Appointment Letter/
Guidelines, he was required to point out the irregularity,
defects or shortfalls and report the same to the Bank. It
appears that the Bank took an internal inspection of the
Branch on October, 2003 when the various
irregularities, which are briefly reiterated as under:
(a) CCH limited of M/s.Varsha Textiles in which it is
alleged that Branch has allotted excess limit
against the sanctioned limit of Rs.260.00 lakhs and
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the excess overdraft report was not submitted to
Controlling Office for approval.
(b) CCM limit of M/s.Shree Umiya Enterprises, the
Branch allowed excess continuously without
submitting Overdraft report to Controlling Office
against the sanctioned limit of Rs.10 lakh. The
Branch Manager purchased 7 cheques beyond his
delegated powers which were reported unpaid and
were kept pending for 6 months without reporting
to Controlling Office.
(c) CCM Account of M/s. Rajni Combustion P. Ltd,
without execution of renewal documents, the
Branch has simply modified that DP in computer
from Rs.30 to 70 lakhs without fulfilling 13
sanction terms and conditions.
(d) Supply Bills Purchased account of M/s.Ashima Ltd.,
the Branch Manager purchased 13 local Supply
Bills of the party to the extent of Rs.2,08,16,481/-
without sanctioned limit and delegated powers.
Among 13 bills, 5 bills amounting to Rs.74.47 lakh
were remained outstanding.
(e) SBP account of M/s.Paramount Industries, the
Branch Manager has purchased 2 bills under
Supply Bills Purchased account for Rs.90,12,750/-
which remained outstanding without sanction and
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beyond delegated power.
(f) Branch has also allowed TODs in 18 current
accounts amounting to Rs.41.86 lakhs beyond the
delegated powers and not reported to the
Controlling Office.
20. After the complaint made by the Bank on 16.03.2004,
the Council, upon perusal of the responses of the
respective parties, decided to cause an inquiry by the
the Disciplinary Committee vide its opinion dated
25.05.2005. Upon the inquiry having been conducted by
the Disciplinary Committee, it was found that the
respondent has failed to discharge its duties and onus in
reporting the aforementioned irregularities, committed
by various entities and the respondent was held guilty of
professional misconduct within the meaning of Clause-7
of Part-1 of Second Schedule read with Sections 21 and
22 of the Act.
21. The Disciplinary Committee held a detailed inquiry in
which the respondent participated. He was also given
ample opportunity of hearing, and there are no
allegations levelled by the respondent regarding any
violation of rules or regulations or principles of natural
justice. Keeping this in mind, we are now making an
endeavour to examine the case of the respondent on
merits.
22. The proceedings of the Disciplinary Committee are
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minutely examined by us. When questions were placed
by the Members of the Committee to the respondent
about his failure in duty to report the irregularities of
serious nature, promptly by generating flash reports, the
respondent in his defence has only mentioned about his
family circumstances. His sole defence is that he was
unable to highlight the deficiency/ irregularities through
his flash report since his father had passed away
somewhere in September, 2003 and his wife had
undergone surgery for cyst in August, 2003.
23. At this stage, we may mention that, subsequently, the
respondent has reported the irregularities vide his flash
reports on 31.12.2003. The respondent was very well
aware about the Bank's internal audits by the Inspectors
in the month of October, 2003. The defence of the
respondent taking shelter under family circumstances is
not palatable since it is accepted that his father has
passed away in September, 2003 and his wife had
undergone surgery in August, 2003, much prior to the
internal inspection of the Branch conducted in October,
2003. Even after the irregularities surfaced in October,
2003, the respondent reported the irregularities vide
flash report No.14/03-04 on 30.12.2003 and the
quarterly report of quarter ending on December, 2003,
i.e after a period of almost two months. Thus, the
defence taken by the respondent before the Disciplinary
Committee citing his family circumstances, is not
palatable and appears to be an after-thought. The
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respondent had enough time to report the irregularity in
flash report from October, 2003 and onwards also after
the internal inspection of the Branch was conducted.
However, he did not do so till 30.12.2003. It is not
denied by the respondent that the flash report is to be
generated immediately upon noticing the irregularity. As
per the appointment letter / guidelines, the respondent
was supposed to verify all these deficiency on daily
basis, however he remained indolent, and woke up only
after the internal inspection was undertaken by the
Bank. Thus, the facts which are proved and not denied
by the respondent, suggest that the respondent was
negligent in undertaking his duties. The respondent has
also raised grievance about non-supply of Inspectors
Report, however, he has not shown the prejudice caused
to him in this context. Before the Disciplinary
Committee, he has not demanded the Inspectors Report.
Moreover, the non-supply of the Report cannot alter the
fact that the Respondent has not acted diligently in
pointing out the deficiencies. On the contrary, he has
admitted that the deficiencies were not pointed out due
to his family circumstances.
24. It is also the case of the respondent that he had in his
quarterly report pointed out the irregularity of
M/s.Varsha Textiles and M/s.Shree Umiya Enterprise.
We have perused Annexure No.CAQ14 dated 30.09.2003
prepared by the respondent and on a perusal of the
same, it is noticed by us that none of the 5 entities, as
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mentioned hereinabove, for which the respondent was
charged, figure in annexure CAQ14, nor there is any
explanation tendered relating to other entities. As
admitted before the Committee, the irregularity of
M/s.Varsha Textiles and M/s.Shreeji Umiya Enterprises
were reported vide the flash report on 30.12.2003 only.
The respondent, who was supposed to submit daily
report, monthly report and quarterly report and explain
the same in verification/ revenue audit, issue relating to
frauds and other irregularities, legal compliance
certificate, etc., did not undertake such exercise and has
only done on 30.12.2003. We find that vide Annexure
No.CAQ19 dated 30.09.2003, the respondent had
prepared a report on account where warning signals
were observed, which required special attention of
Regional Office, Zonal Office and Head Office and the
name of M/s.Varsha Textiles, Rajni Combustion P. Ltd.,
along with 26 entities appeared in such reports.
However, the fact remains that the respondent never
reported vide flash report. The respondent failed to
carry out the concurrent audit effectively on daily basis
and it was only done after the Bank's internal experts'
report. The Committee and the Council have examined
the facts in detail along with the defence taken by the
respondent and ultimately has recommended the
removal of the respondent from the Register of Members
for a period of 6 months.
READING OF CLAUSE-7 OF PART-I OF SECOND
SCHEDULE :
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25. The entire case of the respondent hinges on the
provisions of Clause-7 of Part-1 of Second Schedule of
the Act, which reads as under:
"THE SECOND SCHEDULE
[See Sections 21(3), 21-B(3) and 22]
Part I
Professional misconduct in relation to chartered accountants
in practice
A chartered accountant in practice shall be deemed to be
guilty of professional misconduct, if he
(1) discloses information acquired in the course of his
professional engagement to any person other than his client
so engaging him, without the consent of his client or
otherwise than as required by any law for the time being in
force;
(2) certifies or submits in his name, or in the name of his firm,
a report of an examination of financial statements unless the
examination of such statements and the related records has
been made by him or by a partner or an employee in his firm
or by another chartered accountant in practice;
(3) permits his name or the name of his firm to be used in
connection with an estimate of earnings contingent upon
future transactions in a manner which may lead to the belief
that he vouches for the accuracy of the forecast;
(4) expresses his opinion on financial statements of any
business or enterprise in which he, his firm, or a partner in
his firm has a substantial interest;
(5) fails to disclose a material fact known to him which is not
disclosed in a financial statement, but disclosure of which is
necessary in making such financial statement where he is
concerned with that financial statement in a professional
capacity;
(6) fails to report a material misstatement known to him to
appear in a financial statement with which he is concerned in
a professional capacity;
(7) does not exercise due diligence, or is grossly
negligent in the conduct of his professional duties;
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(8) fails to obtain sufficient information which is necessary
for expression of an opinion or its exceptions are sufficiently
material to negate the expression of an opinion;
(9) fails to invite attention to any material departure from the
generally accepted procedure of audit applicable to the
circumstances;
(10) fails to keep moneys of his client other than fees or
remuneration or money meant to be expended in a separate
banking account or to use such moneys for purposes for
which they are intended within a reasonable time.
26. It is the case of the respondent that the provision of
Clause(7) will not get attracted in his case since there
was no mala fide intention alleged in not filing the report
immediately, and negligence in not filing the same
immediately will not amount to misconduct.
27. The complete reading of Clause (7) will be "A chartered
accountant in practice shall be deemed to have been
guilty of professional misconduct, if he does not exercise
due diligence, or is grossly negligent in the conduct of
his professional duties." A close reading of the provision
of Clause-7 will depict that the same is divided in two
parts by ","(coma) and word "or" , i.e, "does not
exercise due diligence," or "is grossly negligent in the
conduct of his professional duties".
28. Thus, the use of 'coma' before word "or" used in Clause
7 is a disjunctive particle to express an alternative. The
intention of Clause 7 in the first part of failure to
exercise due diligence forms a separate class of
misconduct, and cannot be read as "and" to connect with
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gross negligence. Both the words "diligence" and
"negligence" are forms of conduct/behaviour and hence
are used in a single sentence instead of making a
separate clause. Therefore, the respondent, who has not
shown due diligence in highlighting the
deficiencies/irregularities promptly, can be said to have
committed professional misconduct.
29. Thus, a Chartered Accountant in practice shall be
deemed to be guilty of professional misconduct if he
does not exercise due diligence or he is grossly negligent
in the conduct. The Disciplinary Committee and the
Council is not required to examine the professional
misconduct by including both the contingencies as
prescribed in Clause-7, i.e, failure to exercise due
diligence and grossly negligence. The Chartered
Accountant's misconduct is, thus, required to be
examined either he fails to exercise due diligence or he
is grossly negligent in his professional duties.
30. In the facts of the present case, as we have previously
held that the respondent remained indolent for almost a
period of 2 months even after internal report of the
Inspectors of the Bank. The family circumstances as
highlighted by the respondent before the Committee and
before us, cannot come to his rescue as such incidents
had happened prior to the internal auditors report. On
an overall appreciation of the facts, we are of the opinion
that the respondent has not undertaken his professional
duties by exercising "due diligence". In this regard, we
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do not find any error in the findings and the opinion
record by the Disciplinary Committee as confirmed by
the Council that the respondent has in fact is guilty of
professional misconduct, as envisaged in Clause-7 of
Part-1 of Second Schedule.
SCOPE OF JUDICAL REVIEW :
31. We may, at this stage, reiterate the settled legal
precedent about the Court's power to interfere with the
findings of the Disciplinary Authority as well as
Appellate Authority (Council in the present case) or
where the disciplinary proceedings are examined in two
stages, one by the Disciplinary Authority and another by
any higher authority to the Disciplinary Authority.
32. The respondent has not alleged any irregularity,
illegality or violation of principle of natural justice in
holding the inquiry and hence in absence of such
assertion, this Court cannot interfere with the findings
recorded by the Disciplinary Authority and confirmed by
the Council. It is no more res integra that the Court
cannot interfere with the findings of the disciplinary
authority by reassessing and questioning the adequacy
of the evidence established in the disciplinary
proceedings, if the enquiry has been fairly and properly
held, and there are no allegations of any violation of
principles of natural justice or statutory regulations or
the findings are based on extraneous consideration.
(Vide State Bank of Bikaner and Jaipur vs. Nemi Chand
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Nalwaya, (2011) 4 SCC 584, State of Karnataka vs. N.
Gangaraj, (2020) 3 SCC 423).
33. The respondent has placed reliance on the judgment of
the Calcutta High Court in the case of Council of
Institute of Chartered Accountants vs. Somnath
Basu, (supra). However, we do not agree with the view
expressed by the Calcutta High Court to the extent it
holds that the auditors cannot be held to be guilty of any
misconduct bereft of any charge of dishonesty
committed by him in discharge of his duties. We also do
not agree with the view expressed by the Calcutta High
Court to the extent that the negligence in performance
of duties or error of judgment in discharging of such
duties, cannot constitute misconduct unless ill-motive in
the aforesaid acts are established. Such observation if
applied in the present case or in the cases of auditor
who has failed to exercise his due diligence or is gross
negligent in performing his professional duties; the
provision of Clause-7 of Part-1 of Second Schedule will
become redundant. The Part-1 of 2nd Schedule
enumerates professional misconduct in relation to
Chartered Accountant in practice and there are 10
eventualities which are prescribed therein. The elements
of ill-motive and dishonesty, as expressed by the
Calcutta High Court, cannot be introduced in the
comportments as prescribed in Part-1 of the Second
Schedule. The Chartered Accountant who is engaged by
the Bank is supposed to be very vigilant and his act of
not reporting the irregularities or illegalities of the Bank
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Account holders or the staff of the Bank, including the
Manager, directly impacting the reputation,functioning
and efficiency of the Bank, cannot be made reliant on ill-
motive or dishonest intention. The Chartered Accountant
is a professional engaged by the Bank only to point out
the irregularities and it is immaterial as to such
irregularities are not reported due to his ill-motive or
lack of honesty. The negligence in the performance of
duty or errors of judgment in discharging of such duties,
as highlighted by the Calcutta High Court will definitely
form the expression 'does not exercise due diligence'
and the failure of due diligence cannot be subject to any
involvement of element of ill-motive.
: FINAL ORDER :
34. Upon an overall analysis of the proceedings, we find that
the recommendation of the Council for removal of the
respondent's name from the Register of Members for a
period of six months is, in principle, appropriate.
However, while accepting the said recommendation, we
cannot overlook the inordinate lapse of time consumed
in the present proceedings. The Council, by its decision
dated 14.10.2006, recommended to the High Court that
the name of the respondent be removed from the
Register of Members for a period of six months under
Section 21(6) of the Chartered Accountants Act, 1949.
The said provisions of Section 21(6) empower the High
Court to pass orders in terms of clauses (a) to (d), which
read as under :
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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."
35. Having regard to the passage of nearly two decades, we
are of the considered view that the respondent ought not
to be subjected, at this belated stage, to the rigours of
removal from membership, even for a limited duration of
six months. In the facts and circumstances of the case,
an order under clause (b) of Section 21(6) of the
Chartered Accountants Act, 1949, viz. "reprimand",
would adequately meet the ends of justice.
36. Accordingly, while upholding the findings of the
Disciplinary Committee and the recommendation of the
Council, we modify the proposed penalty of removal of
the respondent from Register of Members for a period of
six months to that of "reprimand."
37. The Reference stands disposed in aforesaid terms.
(A. S. SUPEHIA, J)
(PRANAV TRIVEDI,J)
SAJ GEORGE
