Chartered Accountants Act, 1949 – ss.9, 17, 21, 22-A – Complaints against appellant-Chartered Accountant received by respondent-Institute – Council of the Institute prima facie opined that the appellant was guilty of professional and/or other misconduct – Case referred to Disciplinary Committee – Disciplinary Committee submitted its report to the Council also opining the appellant to be guilty of other misconduct – Report accepted by Council – Recommendations made to High Court for removal of the appellant’s name from the Register of the Members – Accepted by High Court – On appeal, held: Observations of the Disciplinary Committee cannot by any stretch of imagination be treated as findings – It is only the Council which is empowered to find out whether the member is guilty of misconduct – Power exercised by the Council u/s.21 is quasi-judicial in nature – Recording of reasons is a principle of natural justice and every judicial/quasi--judicial order must be supported by reasons to be recorded in writing – In the present case, recommendations of the Council show that it did not discuss the report of the Disciplinary Committee, written statement and oral submissions of the appellant while coming to the conclusion that he is guilty of misconduct – Recommendations were made mechanically – High Court equally erred in accepting the said recommendations – Recommendations passed by the Council set aside – Orders of the High Court also set aside – Matters remitted back to the Council for fresh consideration – Chartered Accountants Regulations, 1964 – Regulations 13-15 – Principles of Natural Justice.
Principles of Natural Justice – Recording of reasons – Necessity of – Discussed.
Allowing the appeals, the Court
HELD:1.1 The Institute of Chartered Accountants of India is a statutory body created by an Act of Parliament, the Chartered Accountants Act, 1949. In accordance with Section 9, the management of the affairs of the Insitute are vested in the Central Council. The Council performs its functions through three different standing committees. The function of the Institute is to regulate the provisions of the Act and it is also empowered to take action against its members for any misconduct as contemplated in the Act and relevant regulations framed thereunder. Section 21 of the Act prescribes the procedure to be followed with regard to an inquiry relating to the misconduct of the members of the Institute. Section 22-A provides for filing of an appeal by a member against imposition of penalty. Regulation
13 of the Chartered Accountants Regulations, 1964 provides for the procedure of an inquiry before the Disciplinary Committee. The report of the Disciplinary Committee will contain a statement of the allegations, the defence entered by the members, the recorded evidence and the conclusions expressed by the Disciplinary Committee. The conclusions of the Disciplinary Committee are tentative and the same are not recorded as findings. It is only the Council which is empowered to find out whether the member is guilty of misconduct. If on receipt of the report, the Council finds that the member is not guilty of misconduct, Section 21(2) requires that it shall record its finding accordingly and direct that the proceedings shall be filed or the complaint shall be dismissed. On the other hand, if the Council finds that the member is guilty of misconduct, Section 21(3) requires it to record a finding accordingly and to proceed in the manner laid down in the succeeding sub--sections. The findings by the Council constitute the determinative decision as to the guilt of the member and because it is determinative in character, the Act requires it to be recorded. Thus, the Council has to determine that a member is guilty of misconduct and the task of recording of the findings has been specifically assigned to the Council. Sub--section (4) of Section 21 mandates that where a member of the Institute has been guilty of professional misconduct specified in the First Schedule of the Act, the Council shall afford to such member an opportunity of being heard before any orders are passed against him. After recording a finding that a member is guilty of misconduct, the Act moves forward to the final stage of penalisation. [Paras 15-17][1052-D-G; 1055-D-E; 1056-E-H; 1057-A]
Institute of Chartered Accountants of India v. L.K. Ratna and Ors. (1986) 4 SCC 537 : [1986] 3 SCR 1049; Institute of Chartered Accountants of India v. Price Waterhouse and Ors. (1997) 6 SCC 312 : [1997] 2 Suppl. SCR 267 – relied on.
1.2 As per sub- section (5) of Section 21, where the Council has found any member of the Institute to be guilty of misconduct other than any such misconduct as is referred to in sub-section (4), it is required to forward the case to the High Court with its recommendations and, under sub-section (6) of Section 21, the High Court has to pass the orders in accordance with sub-section (6)(a) to (d) of Section 21 of the Act. Section 22-A provides for appeal by a member against imposition of penalty. The power exercised by the Council under Section 21 is quasi--judicial in nature. Perusal of the recommendations of the Council shows that it did not discuss the report of the Disciplinary Committee, the written statement and the oral submissions of the appellant while coming to the conclusion that he is guilty of misconduct. However, the concluding portion of the recommendations of the Council made an incorrect statement that the Council had considered all the materials on record and the written and oral submissions of the appellant. The observations of the Disciplinary Committee cannot by any stretch of imagination be treated as findings. At best, they may be termed as the material which falls within the domain of consideration by the Council. The Council has failed to give its own independent findings. The recommendations made by the Council are not supported by independent reasons. The recommendations have been made mechanically by the Council. [Paras 20, 21][1059-C-G]
1.3 Recording of reasons is a principle of natural justice and every judicial/quasi-judicial order must be supported by reasons to be recorded in writing. It ensures transparency and fairness in the decision-making process. The person who is adversely affected wants to know as to why his submissions have not been accepted. Giving of reasons ensures that a hearing is not rendered as a meaningless charade. Unless an adjudicatory body is required to give reasons and make findings of fact indicating the evidence upon which it relied, there is no way of knowing whether the concerned body genuinely applied itself to and evaluated the arguments and the evidence advanced at the hearing. Giving reasons is all the more necessary because it gives satisfaction to the party against whom a decision is taken. Justice should not only be done but should also be seen to be done. An unreasoned decision may be just, but it may not appear to be so to the person affected. A reasoned decision, on the other hand, will have the appearance of fairness and justice. [Para 22][1059G-H; 1060-A-C] M/s. Woolcombers of India Ltd. v. Woolcombers Workers Union and Ors. (1974) 3 SCC 318 : [1974] 1 SCR 504; State of West Bengal v. Atul Krishna Shaw and Anr. (1991) 1 Suppl. SCC 414 – relied on.
1.4 Where the Council has found any member of the Institute to be guilty of misconduct, it is required under the Act to forward the matter to the High Court with its recommendations and the High Court has to pass final order either dismissing the complaint or penalizing the member of the Institute. The order of the Council, imposing penalty upon the member, is also appealable by the members aggrieved before the High Court. In the circumstances, it is all the more necessary that the recommendation/order of the Council should contain reasons for the conclusion. The High Court has equally erred in accepting the recommendations of the Council without applying its own logic to this aspect of the matter. The Council has to reconsider the matter afresh after granting the appellant an opportunity of being heard. The recommendations/order(s) passed by the Council of the Institute of Chartered Accountants of India which were the subject matter of the aforesaid two reference cases, are set aside. Consequently, the orders of the High Court impugned are also set aside. These matters are remitted back to the Council for fresh consideration and disposal in accordance with law and in the light of the observations made above. [Paras 25-27][1061-FH; 1062-A-C]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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