TaxTMI 
TaxTMI 
2011 (6) TMI 654
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....icer [which includes a Director under section 2(30) of said Act] was not qualified for appointment as auditor of the said Company. The Respondent has made a statement in his audit report about the true and fair view of the state of affairs of the Company without disclosing his own and his Partner Shri K.C. Lunawat's interest in the said Company. As per the annual return made up to 24-9-1990 of the said Company duly signed by Shri K.C. Lunawat as a Director and filed with the Registrar of Companies, West Bengal, the Respondent and his said partner held 28,400 and 41,800 equity shares respectively out of a total of 95,940 subscribed equity shares of the aforesaid Company. Therefore, the Respondent has committed professional misconduct in terms of clause (4) of part I of the Second Schedule to the Chartered Accountants Act, 1949, by expressing his opinion on the financial statements of the business of the Company for the period ended 31-3-1989 in which he and his partner had a substantial interest." (b)The Council at its meeting held on 5th and 6th December, 1996 was prima facie of the opinion that the respondent was guilty of professional and other misconduct and thus, decided to ....
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....of notice of the reference. 6. In view of the importance of the point involved as to whether in spite of the finding that the respondent is guilty of an offence specified in the Second Schedule to the Act, the law permits filing of the proceedings or dismissal of the complaint, we appointed Mr. Poddar, a Senior Advocate of this Court, as Amicus Curie for assisting us in arriving at our conclusion in answering this reference. 7. Therefore, the first question that arises for determination in this reference is whether there is scope of filing the proceedings against the respondent as recommended by the Council after holding that the respondent is guilty of an offence which comes within the purview of the Second Schedule to the Act. 8. To appreciate the aforesaid question the provision contained in sections 21, 22 and 22A of the Act as it stood at the relevant time are quoted below: "21. Procedure in inquiries relating to misconduct of members of Institute.-(1) where on receipt of information by, or of a complaint made to it, the Council is prima facie of opinion that any member of the Institute has been guilty of any professional or other misconduct, the Council shall refe....
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....f 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. (7) Where it appears to the High Court that the transfer of any case pending before it to another High Court will promote the ends of justice or tend to the general convenience of the parties, it may so transfer the case, subject to such conditions, if any, as it thinks fit to impose, and the High Court to which such case is transferred shall deal with it as if the case had been forwarded to it by the Council. Explanation I.-In this section "High Court" means the highest civil court of appeal, not including the Supreme Court, exercising jurisdiction in the area in which the person whose conduct is being inquired into carries on business, or has his principal place of business at the commencement of the inquiry: Provided that where the cases relating to two or more members of the Institute have to be forwarded by the Council to different High Courts, the Central Government shall, having regard to the ends of justice and the general convenience of the parties, determine which of the High Courts to the exclusion of others shal....
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....e passed unless the person concerned has also been given an opportunity of being heard. Explanation.-In this section "High Court" and "member of the Institute" have the same meanings as in section 21." [Emphasis supplied] 9. After hearing the learned Counsel for the Institute and Mr. Poddar, the learned Amicus Curie, we find that under the provisions of the Act, various types of professional misconducts mentioned in the Act have been classified under the two Schedules annexed to the Act. The First Schedule deals with misconducts of lesser degree than those mentioned in the Second Schedule which indicates those of graver nature. 10. Under the provisions of the Act, there are several stages of the enquiry relating to the misconduct of the members of the Institute. At the first stage, whenever on receipt of information by, or of a complaint made to it, the Council is, prima facie of the view that any member of the Institute has been guilty of any professional or other misconduct, a duty has been cast upon the Council to refer the case to the Disciplinary Committee, and the Disciplinary Committee shall thereupon hold such inquiry and in such manner as may be prescribed, and sh....
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....ll forward the case to the High Court with its recommendations thereon. (B) Where the misconduct in respect of which the Council has found any member of the Institute is guilty of misconduct referred to in Second Schedule, which are graver in nature, the Council is not competent to pass any penal order but will simply forward the case to the High Court with its recommendations thereon. 13. On receipt of any case of recommendation of higher penalty than reprimand or removal not exceeding five years, as provided under sub-section (4) of section 21 or in respect of the cases of proved misconducts specified in the Second Schedule as provided in sub-section (5) of section 21, 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:- (e)direct the proceedings be filed, or dismiss the complaint, as the case may be; (f)reprimand the member; (g)remove him from membership of th....