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2013 (3) TMI 367
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....e learned Single Judge quashing the decision of the Council dated 3rd February, 2010, consequent upon which the communication dated 19th February, 2010, was written to the first respondent. The said communication has also been quashed. As the appellants have accepted the decision to this extent, we need not go into the said factual aspects or merits of the decision of the learned Single Judge. 3. The issue raised in the present appeal involves interpretation of Section 21D of the Chartered Accountants Act, 1949 (CA Act, 1949, for short). In order to appreciate the controversy and in what circumstances interpretation of the aforesaid Section is required, some basic and essential facts may be noticed. 4. Between 3rd and 21st March, 2002, the Department of Company Affairs, Government of India had carried out inspection of books of accounts of Global Trust Bank Limited under Section 209A of the Companies Act, 1956. Affairs of Global Trust Bank Limited were also investigated extensively by a Joint Parliamentary Committee. Accounts of Global Trust Bank Limited were audited by Lovelock & Lewes (L&L, for short), Chartered Accountants, who were also asked to furnish certain details to....
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.... one letter dated 14th May, 2003, calling upon the Reserve Bank of India to file a complaint and enclosed therewith a relevant extract from the inspection report. The Reserve Bank of India, however, expressed their reluctance to file a formal complaint and by their letter dated 19th June, 2003, wrote to the appellant institute stating as under:- "In continuation of our letter DBS.ARS.No. 381/08.35.005 /2002-2003 dated December 6, 2002 on the captioned subject, we forward herewith a copy of the extracts of the report of the inspection under Sec 209A of the Companies Act, 1956 received from the Ministry of Finance & Company Affairs, Department of Company Affairs, Government of India, New Delhi. You are requested to examine the matter in the light of the above report and decide whether the audit firm M/s Lovelock & Lewes, Hyderabad, had discharged their duties properly or not. You may also let us know the action taken in this regard at an early date." 8. The appellant institute by their communication dated 10th July, 2003, to the Reserve Bank of India, recapitulated the background of the matter and stated as under:- "3. Our letter of even number dated 29th January, 2003, t....
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....ious news items have appeared, copies of some of them are enclosed herewith. You are requested to send your reply to the above stating factual position duly supported by relevant documents. Your reply may reach us at the earliest, in any case, not later than 11th August, 2004 to enable us to consider the matter in terms of the provisions of the Chartered Accountants Act, 1949 and the Regulations framed thereunder." 11. L&L were asked to submit their reply not later than 11th August, 2004 along with documents to consider the matter in terms of the provisions of CA Act, 1949 and the Regulations. L&L submitted their reply dated 9th August, 2004, along with supporting documents. Thereafter, correspondence was exchanged between the Reserve Bank of India and the Institute of Chartered Accountants asking for documents etc. 12. Provisions of CA Act, 1949, relating to misconduct and the procedure and penalties, underwent substantial modification and amendments by the Chartered Accountants (Amendment) Act, 2006 (hereinafter referred to as the Amendment Act, 2006). 13. Sections 21 and 22 of the unamended CA Act, 1949 read as under:- "21. Procedure in inquiries relating to misco....
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....vernment an opportunity of being heard, and may thereafter make any of the following orders, namely:- (a)direct that the proceedings be filed, or dismiss the complaint, as the case may be; (b)reprimand the member; (c)remove him from membership of 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 ....
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....s of the case; or (d)pass such other order as the High Court thinks fit: Provided that no order of the Council shall be modified or set aside unless the Council has been given an opportunity of being heard and no order imposing or enhancing a penalty shall be 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.] " 14. Regulations 12 and 13 of the Chartered Accountants Regulations, 1988 (Regulations, for short) read as follows: 12. Complaints and Enquiries Relating to Misconduct of Members.-(1) Subject to the provisions of this regulation, a complaint against a member under section 21 shall be investigated and all other enquiries relating to misconduct of such member shall be held by the Disciplinary Committee: Provided that if the subject matter of a complaint is, in the opinion of the President, substantially the same as or has been covered by any previous complaint or information received, the Secretary shall file the said complaint without any further action and inform the Complainant accordingly. (2) A complaint unde....
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....etary, in triplicate, his rejoinder on the written statement, duly verified in the same manner as the complaint. (9) On receipt of the Complainant's rejoinder, if any, the Secretary shall send a copy thereof to the respondent and the respondent may within 14 days of the service of a copy of the rejoinder, or within such time as may be extended by the Secretary, forward to the Secretary, in triplicate, his comments on the rejoinder, duly verified in the same manner as the complaint. (10) On a perusal of the complaint, the written statement, if any, the Complainant's rejoinder on the written statement, if any, and the respondent's comments on the Complainant's rejoinder, if any, the President may call for such additional particulars or documents connected therewith either from the Complainant or the respondent as he may consider expedient. (11) (i) If on a perusal of the complaint, the written statement, if any, the Complainant's rejoinder to the written statement, if any, and the respondent's comments on the Complainant's rejoinder, if any, and other relevant documents, the Council is prima facie of opinion that the respondent is guilty of professional and or other miscondu....
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....make investigations under the provisions of this Act, the Disciplinary Directorate shall follow such procedure as may be specified. (5)Where a complainant withdraws the complaint, the Director (Discipline) shall place such withdrawal before the Board of Discipline or, as the case may be, the Disciplinary Committee, and the said Board or Committee may, if it is of the view that the circumstances so warrant, permit the withdrawal at any stage. 21A. Board of Discipline.-(1) The Council shall constitute a Board of Discipline consisting of- (a)a person with experience in law and having knowledge of disciplinary matters and the profession, to be its presiding officer; (b)two members one of whom shall be a member of the Council elected by the Council and the other member shall be nominated by the Central Government from amongst the persons of eminence having experience in the field of law, economics, business, finance or accountancy; (c)the Director (Discipline) shall function as the Secretary of the Board. (2) The Board of Discipline shall follow summary disposal procedure in dealing with all cases before it. (3) Where the Board of Discipline is of the opinion that a....
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....uthority, the Disciplinary Committee, Board of Discipline and the Director (Discipline) shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, in respect of the following matters, namely:- (a)summoning and enforcing the attendance of any person and examining him on oath; (b)the discovery and production of any document; and (c)receiving evidence on affidavit. Explanation.-For the purposes of sections 21, 21A, 21B, 21C and 22, "member of the Institute" includes a person who was a member of the Institute on the date of the alleged misconduct although he has ceased to be a member of the Institute at the time of the inquiry." 16. Thereafter, in exercise of powers under Section 29A read with Section 21(4) and sub-sections (2) and (4) of Section 21B of the CA Act, 1949, the Chartered Accountants (Procedure for Investigation of Professional and other Misconduct and Conduct of cases) Rules, 2007, have been enacted. These deal with the procedure of investigation relating to complaints and information etc. We are not reproducing the said Rules but what is relevant is that new Rules were enacted after the amendments were made in the CA....
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.... the Legislature, they have to be construed as carrying different meanings. 19. It was further pleaded that in case 'information' is read as synonymous to 'complaint' an anomalous situation will arise. 'Information' received before 17th November, 2006, which is not noticed and not acted upon will be considered to be covered by the amended Act but when noticed, the unamended Act will apply. Information converts into a disciplinary case only when such information is considered substantial enough to take cognizance of and an enquiry gets initiated before the Disciplinary Committee. The Legislature has, therefore, deliberately referred to term 'complaint' and not 'information' in Section 21D, which is carefully worded. Reliance was placed on Thyssen Stahlunion GMBH v. Steel Authority of India Ltd. [2000] 25 SCL 102 (SC) and Qudrat Ullah v. Municipal Board Bareilly [1974] 1 SCC 202. 20. Lastly, it was submitted that even if there is a lacuna, the same cannot be filled up or rectified by the Court. Reliance was placed on Raghunath Rai Bareja v. Punjab National Bank [2007] 2 SCC 230; J.P. Bansal v. State of Rajasthan [2003] 5 SCC 134; Shiv Shakti Co-op. Housing Society v. Swaraj Dev....
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.... from penalties referred to in sub-section 4 to Section 21. These obviously will not apply when reference is made to the High Court under the proviso to sub-section 4 or sub-section 5 of Section 21 of the CA Act, 1949. 25. Regulations 12 and 13 of the Chartered Accountants Regulations, 1988 quoted above prescribe the procedure to be followed under Section 21. Regulation 12 deals with complaints and enquiries relating to misconduct of members. Regulation 13, however, stipulates that the procedure laid down and prescribed in Regulation 12(1) and sub-regulation 6 to 13 to Regulation 12 so far as may be will equally apply to the information cases. Thus, the Regulations prescribe that virtually same procedure to the extent possible shall apply to the complaints cases and information cases. A perusal of sub-regulations 2 to 5 would indicate that they pertain to particulars or the format in which the complaint should be made, deposit of fee by the complainant, withdrawal of the complaint and if the complaint is not in proper format, the complaint may be represented after removing objections etc. It is obvious that these formalities/aspects are not required in information cases. Thus, a....
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....ed in the unamended Section 21 stipulates that complaints/informations shall be examined by the Council, who shall form a prima facie opinion on whether or not the member is guilty of professional or other misconduct and when the Council forms the prima facie opinion that a member is guilty of professional or other misconduct, reference is made to the Disciplinary Committee for report. Consequent upon the report and the opinion formed, the Council awards or recommends punishment and thereupon reference or an appeal is maintainable before the High Court. The intention of the legislature, therefore, is clear that all pending matters before the Council or any enquiry pending or initiated by the Disciplinary Committee or any reference or appeal before the High Court shall continue to be governed by the unamended provisions. The amendment made by the Amendment Act, 2006 will not apply to the pending matters before the Council, enquiry initiated by the Disciplinary Committee or appeal or reference before the High Court. The intention is not to disturb pending cases or the existing proceedings. 31. No doubt Section 21, both unamended and post amendment, refers to information and compla....
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....s to the knowledge and has been considered by the Institute/Council. The word "complaint" in Section 21D has to be given a broader and a wider meaning to give full effect to the legislative intent behind Section 21D. In common parlance also the word "complaint" means and refers to a pending matter before the prescribed authority authorized to make enquiry into the allegations. The source of information may not be relevant. 32. The decisions relied upon by the first respondent are distinguishable for the reason that it is a duty of the Courts to act upon the true intention of the legislature. The words used by the legislature have to be interpreted with guidance furnished by the accepted principles of interpretation. When two interpretations are possible, the court is to choose that interpretation which represents the true intention of the legislature and give a true meaning to the statutory provision. In G.P. Singh's "Principle of Statutory Interpretation" at page 3, 11th Edition, 2008, it has been observed as under:- ".....The task is often not an easy one and the difficulties arise because of various reasons. To mention a few of them: Words in any language are not scientifi....
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....injustice and consequences revolting to the mind of any reasonable man, the court will always endeavour to place on such words a reasonable limitation, on the ground that the legislature could not have intended such consequence to ensue, unless the express language in the Act or binding authority prevents such limitation being interpolated into the Act. In construing an Act, a construction ought not be put that would work injustice, or even hardship or inconvenience, unless it is clear that such was the intention of the legislature. It is also settled that where the language of the legislature admits of two constructions and if construction in one way would lead to obvious injustice, the courts act upon the view that such a result could not have been intended, unless the intention had been manifested in express words. Out of the two interpretations, that language of the statute should be preferred to that interpretation which would frustrate it. It is a cardinal rule governing the interpretation of the statutes that when the language of the legislature admits of two constructions, the court should not adopt the construction which would lead to an absurdity or obvious injustice. It ....
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....ld lead to an absurdity or obvious injustice. It is equally well settled that within two constructions that alternative is to be chosen which would be consistent with the smooth working of the system which the statute purported to be regulating and that alternative is to be rejected which will introduce uncertainty, friction or confusion into the working of the system. (See Collector of Customs v. Digvijaysinhji Spg. & Wvg. Mills Ltd., SCR at p. 899 and Kesavananda Bharati v. State of Kerala.)" ** ** ** 53. In series of judgments of this Court, these exceptional situations have been provided for. In Narashimaha Murthy v. Susheelabai (SCC at p. 658, para 20), it was held that: "20. ... the purpose of law is to prevent brooding sense of injustice. It is not the words of the law but the spirit and internal sense of it that makes the law meaningful." 54. In American Home Products Corpn. v. Mac Laboratories (P.) Ltd. (AIR at p. 166, para 66), it was held that: (SCC p. 508, para 66) "66. ... It is a well-known principle of interpretation of statutes that a construction should not be put upon a statutory provision which would lead to manifest absurdity or futility, palpable....