In CREF-1-2017 (O&M)-PUNJ HC- P&H HC addresses reference of ICAI recommending removal of CA from its register for professional misconduct, directs Institute to “severally reprimand” him instead of removal, after considering his 30 yrs of clean practice & pendency of proceedings for 16 yrs Justice Pankaj Jain [02-08-2022]

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Read Order: The Institute of Chartered Accountants of India v. Union of India and another

Monika Rahar

Chandigarh, August 4, 2022: While dealing with a reference from Institute of Chartered Accountants recommending removal of a Chartered Accountant from its register of members for six months as a punishment on account of professional misconduct, the Punjab and Haryana High Court, considering the otherwise blot-less-30-year long practice of the CA and the pendency of proceedings against him for the past 16-years, has held that ends of justice will be served if he is severely reprimanded for his misconduct.

The Bench of Justice Pankaj Jain held, “Coming on to the recommendation concerning punishment imposed under Section 21 of the 1949 Act in form of removal of the name of respondent No.2 from the roles for a period of six months, it needs to be noticed that respondent No.2 has remained member of the institute for more than 30 years. There is no evidence with regard to any allegation of misconduct against him in the past. The present complaint was filed against respondent No.2 in the year 2006. Meaning thereby, that the present proceedings have remained pending against him for over 16 years.”

The Court was dealing with a reference at the behest of the Institute of Chartered Accountants (Institute) under Section 21(5) of the Chartered Accountants Act, 1949 (Act of 1949) recommending that the name of the second respondent be removed from the register of members of the institute for a period of six months as a punishment on account of professional misconduct.

After receipt of complaints against the said respondent, the disciplinary committee started proceedings against him and via its 2011, the committee found the respondent guilty of professional misconduct falling within the meaning of Clauses (6) and (7) of Part I of the Second Schedule to the 1949 Act.

The second respondent prepared two auditor’s reports which were used by the firm i.e. M/s. Sitla Rice & General Mills, Jagraon for sanction of working capital limit from Indian Bank.

After considering the report of the Disciplinary Committee and the response filed by the complainant (bank), the second respondent and the oral submissions made by the parties, Council of the Institute resolved to accept the report of the Disciplinary Committee. Resolution was passed in accordance with Section 21(5) of the 1949 Act recommending the removal of the said respondent from the membership of the institute for a period of six months by way of punishment and to make the reference.

The second respondent admitted having prepared these two audit reports but he claimed absence of malafide intention. Inadvertently both the reports were filed with the bank and the mischief was discovered. Sanction of limit was declined. Before the Court, the respondent’s counsel submitted that since no financial loss was caused to the bank and considering the fact that the second respondent was practicing as a Chartered Accountant for more than 30 years, the present act be considered to be a bonafide mistake. Thus, he claimed that the punishment imposed was excessive and disproportionate to the gravity of the charges and thus the same be reduced. 

After considering the above-stated, the Court observed that the Disciplinary committee found the second respondent guilty of having failed to disclose material facts that appeared in the financial statement with which he was concerned in the professional capacity. Thus, the Court found that the respondent was rightly held to be guilty of professional misconduct within the meaning of Section 22 read with Clauses (6) and (7) of the Second Schedule appended to the 1949 Act.

Next, regarding the recommendation concerning punishment imposed under Section 21 of the 1949 Act in form of removal of the name of the second respondent from the roles for a period of six months, the Court observed that the second respondent remained member of the institute for more than 30 years and there was no evidence with regard to any allegation of misconduct against him in the past.

Thus, keeping in view the fact that present proceedings against the second respondent continued for more than 16 years without any past record of a professional misconduct against him, the Court held that the ends of justice would be served if the second respondent was severely reprimanded for his misconduct as provided under Section 21(6)(b) of 1949 Act.

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