2011 (8) TMI 972 - HC - Indian Laws

Chartered Accountant's Misconduct Appeal Upheld, Removal Period Reduced

Gulshan Rai Versus Institute of Chartered Accountants of India

The appellant, a Chartered Accountant, was found guilty of professional misconduct under Clause 11 of the Chartered Accountants Act. The Disciplinary ... Professional misconduct or other misconduct - appellant had entered into a partnership with respondent No. 2 in promoting a company 'S' in violation of provision of Clause (4) of Part-I, First Schedule - appellant violated the provisions of Clause (1) of Part-II of Second Schedule by having more than 20 per cent shares in the aforesaid company in his name and in the name of his wife and son - Held that:- the appellant never made any application for obtaining permission of the Disciplinary Committee to act as a full-time director of the company. The Disciplinary Committee recorded that as per rule before engaging himself in any commercial activities he should have verified that in fact the permission had been granted. appellant was guilty of professional misconduct for violating the provisions of Clause 11 of Part-II of First Schedule read with section 190(A) of the Regulations Issues:Allegations of professional misconduct against a Chartered Accountant based on various violations including partnership in a company, breach of regulations, perjury, illegal activities, and misconduct as a CA.Analysis:1. The appellant, a Chartered Accountant, faced allegations of professional misconduct, including violating provisions of the Chartered Accountants Act, 1949, and the Chartered Accountants Regulations, 1988. The allegations ranged from entering into a partnership in a company against the Act's provisions to perjury and illegal activities such as unauthorized share allotment and removal of a director.2. The Disciplinary Committee conducted an inquiry into the complaint and found the appellant guilty of professional misconduct under Clause 11 of Part-I of the Act. The Council accepted the Committee's report and decided to remove the appellant's name from the List of Members for six months. The appellant challenged this decision, claiming innocence and errors in the Committee's findings based on conjectures and surmises.3. The appellant argued that his role in the company was limited to overseeing statutory compliances and attending meetings, not as a full-time director. He claimed that the complaint was an attempt at blackmail and pressure. However, evidence showed the appellant's involvement in significant company activities, including banking operations and loan arrangements, contrary to his assertions.4. The Disciplinary Committee concluded that the appellant failed to obtain permission to engage in commercial activities as required by the Act and Regulations. The Committee found the appellant substantially involved in managing the company's affairs, leading to a violation of professional conduct. The Council upheld this decision, leading to the appellant's removal from the membership list for six months.5. The High Court reviewed the case and acknowledged the validity of the Council's decision but reduced the removal period to three months considering the lapse of time since the alleged misconduct occurred in 1987. The Court found no infirmity or illegality in the Council's decision, ultimately disposing of the appeal.This detailed analysis covers the issues of professional misconduct, violation of regulations, and the subsequent legal proceedings leading to the appellant's removal from the membership list.