Prima facie disciplinary referral and auditor compliance duty: threshold challenge rejected, but real ascertainment remains essential.

A disciplinary referral under the Chartered Accountants Act, 1949 based on a prima facie opinion of professional misconduct should not be quashed at the threshold, because that opinion is only an initial assessment and the disciplinary process must be allowed to proceed. On auditor appointment, the statutory duty under item 9 of the First Schedule is to ascertain compliance with section 225 of the Companies Act, 1956 before acceptance; registered post is not the only permissible mode of notice under that provision, and the code of conduct cannot widen the statutory test. The required standard is a real and reasonable ascertainment on the facts, to be examined by the disciplinary authorities.

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Issues: (i) Whether the reference of the complaint to the Disciplinary Committee on the Council's prima facie opinion of professional misconduct was liable to be quashed at the threshold; (ii) Whether acceptance of an auditor's appointment without insisting that the notice under section 225 of the Companies Act, 1956 be sent by registered post amounted to misconduct under item 9 of Part I of the First Schedule to the Chartered Accountants Act, 1949.

Issue (i): Whether the reference of the complaint to the Disciplinary Committee on the Council's prima facie opinion of professional misconduct was liable to be quashed at the threshold.

Analysis: The statutory scheme under section 21 of the Chartered Accountants Act, 1949 permits the Council to refer a matter to the Disciplinary Committee when it forms a prima facie opinion that a member is guilty of misconduct. Such opinion is only an initial assessment based on available material and does not amount to a final finding. The Court held that the disciplinary forum must be allowed to examine the matter objectively and fairly, particularly because the proceedings are governed by the Act and any adverse finding carries further statutory safeguards, including appeal. The Court declined to interfere at the stage of initiation, as doing so would improperly pre-empt the disciplinary process.

Conclusion: The challenge to the reference failed and the disciplinary proceedings were allowed to continue.

Issue (ii): Whether acceptance of an auditor's appointment without insisting that the notice under section 225 of the Companies Act, 1956 be sent by registered post amounted to misconduct under item 9 of Part I of the First Schedule to the Chartered Accountants Act, 1949.

Analysis: Item 9 of Part I of the First Schedule requires an incoming auditor to ascertain whether the requirements of section 225 of the Companies Act, 1956 have been duly complied with before accepting appointment. The Court held that section 225 does not prescribe registered post as the only mode of service and that the Institute's code of conduct could not enlarge the statutory concept of misconduct. However, the Court further held that 'ascertainment' is more than a casual inquiry and requires a proper probe into the available material so as to be reasonably satisfied that compliance has occurred. Whether that standard was met was a matter for the disciplinary authorities to investigate on the facts.

Conclusion: The insistence on registered post alone was not the statutory test, but the complaint could still be examined on whether proper ascertainment was made.

Final Conclusion: The writ petition was not maintainable for stopping the disciplinary inquiry at the threshold, and the petitioner was left to face the proceedings before the Institute.

Ratio Decidendi: A disciplinary referral based on a prima facie opinion under the Chartered Accountants Act, 1949 cannot be quashed merely because the alleged misconduct is disputable on facts, and an incoming auditor's statutory duty is to make a real ascertainment of compliance with section 225 of the Companies Act, 1956, not merely to rely on a bare assertion by the company.

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