TaxTMI 
TaxTMI 
2007 (5) TMI 673
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....n in terms of Sections 11 and 36 of the Monopolies and Restrictive Trade Practices Act, 1969 on 11.02.1988, whereto a reply was sent by the appellants on 24.02.1988. A notice, however, was published in the journal of Respondent No. 1 herein, wherein a purported caution to members about the appellant-Institute was published in the following terms: It has come to the notice of the Institute that the Institute of Chartered Financial Analysts of India, Hyderabad is conferring the designation of "Chartered Financial Analyst" and permitting its members to use the letters 'C.F.A.' after their names. The Additional Solicitor General of India has opined that the designation "Chartered Financial Analyst", would seem to be similar to the designation Chartered Accountant especially when the letters 'C.F.A.' are added to the name, which is very close to the letters 'F.C.A.' conferred by the Institute of Chartered Accountants of India. He has further opined that the activities of the Institute of Chartered Financial Analysts of India are violative of Section 24A of the Chartered Accountants Act, 1949. The Institute has already filed an application under Section 3....
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....ecognized and in respect of Institutes other than Accountancy Institutes the word 'London' in brackets may be allowed to be added provided that in each case the respective Institutes had permitted such addition. The Council also decided that the Institute of Costs and Works Accountants is not an Accountancy Institute within the meaning of Section 7 and therefore there was no bar to the use of these letters by the members of that Institute, if they happen to be their members. A combined reading of Section 7 and the Appendix (8) makes it clear that Chartered Accountants who have been registered as members of the 1st respondent-Institute alone are permitted to use the letters or description which are recognized by it. Therefore it is clear that the designation of 'Chartered Financial Analyst' is not recognized by the 1st respondent-Institute or for that matter by the Central Government or by any Statute. Therefore, under Section 24A of the Act the 1st respondent-Institute can impose restrictions on all the members of the 1st petitioner-Institute not to use the unrecognized diploma or designation that has been awarded by the 1st petitioner-Institute. Section 24....
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....ve passed such examination and complete such training as may be prescribed for members of the Institute shall be entitled to have their names entered in the Register of the Institute and no member of the Institute shall be entitled to practice whether in India or elsewhere unless he has obtained from the Council a Certificate of practice. According to Section 7, every member of the Institute in practice shall, any other member may, use the designation of a chartered accountant and no member using such designation shall use any other description, whether in addition thereto or in substitution therefore. The members of the Institute are divided into two classes viz., associates and fellows. Any person whose name is entered in the Register is deemed to have become an associate member of the Institute and is entitled to use the letters "A.C.A." after his name to indicate that he is an associate member of the Institute of Chartered Accountants. A member, being an associate, who has been in continuous practice in India for at least five years as a Chartered Accountant is entitled to use the letters F.C.A. after his name to indicate that he is a fellow of the Institute of Chartered Accoun....
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....Having regard to the reasons stated in the impugned notification as also the reasoning given by the learned single Judge, it cannot be said that there is no nexus for the object to be achieved and that the impugned notification is irrational. Fundamental right to practice a profession guaranteed under Article 19(1)(g) of the Indian Constitution can always be hedged with restrictions; but the said restrictions should be reasonable restrictions and in the instant case, having regard to the facts and circumstances discussed and legal it cannot be said that the restrictions imposed are unreasonable so as to negate the fundamental rights of the Chartered Accountants to practice their profession. 5. Mr. K.K. Venugopal, the learned Senior Counsel appearing on behalf of the appellants, would submit: i.) The High Court committed a manifest error in passing the impugned judgment insofar as it failed to take into consideration that in terms of Section 7 of the Act any Chartered Accountant whether in profession or not is entitled to use any degree and in that view of the matter, the prohibition purported to have been imposed by reason of the impugned notification dated 03.08.1989 m....
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....does indicate 'the position or attainment of any qualification or competence similar to that of a member of the Institute' which attracts the prohibition in Section 24A(1)(ii) of the Act. vi) Further, the letters 'CFA' closely resemble 'FCA' and are capable of misleading the lay public and also conveying the entirely erroneous impression that a FCA with a CFA is superior to a mere 'FCA'. This will directly result in the dilution and debasement of the value of the membership of the Institute. vii) Item No. (i) of Part II of the Second Schedule makes it clear that contravention of any provision of the Act or of the regulations made thereunder would amount to a misconduct. Section 22 defines 'professional misconduct' in the widest possible terms. This Hon'ble Court has also read and construed Section 22 and Clause (ii) of Part II of the Second Schedule in the broadest manner. viii) The impugned notification seeks to make effective the prohibition contained in Sections 7 and 24A of the Act, the constitutional validity of which has not been challenged by the appellant before the High Court. The notification is, therefore, ....
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....ny other description, whether in addition thereto in substitution therefor: Provided that nothing contained in this Section shall be deemed to prohibit any such person from adding any other description or letters to his name, if entitled thereto, to indicate membership of such other Institute of accountancy, whether in India or elsewhere, as may be recognized in this behalf by the Council, or any other qualification that he may possess, or to prohibit a firm, all the partners of which are members of the Institute and in practice, from being known by its firm name as Chartered Accountants. Sub-section (1) of Section 21, inter alia, lays down the manner in which an inquiry relating to misconduct of members of the Institute shall be instituted. Section 22 of the Act defines professional misconduct to mean: 22. Professional misconduct defined For the purpose of this Act, the expression "professional misconduct" shall be deemed to include any act or omission specified in any of the Schedules, but nothing in this section shall be construed to limit or abridge in any way the power conferred or duty cast on the Council under Sub-section (1) of Section 21 to....
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....either in his personal capacity nor in his capacity as an employee, acts as a liquidator, trustee, executor, administrator, arbitrator, receiver, adviser or representative for costing, financial or taxation matters or takes up an appointment made by the Central Government or a State Government or a Court or law or any other legal authority or acts as a Secretary unless his employment is on a salary-cum-full-time basis; Clauses (2) and (3) of Appendix No. (8) read as under: The Council decided that letters or description in respect of membership of bodies other than Accountancy Institutes can be used provided such use does not amount to the use of designation and in the case of Accountancy Institutes prior recognition of the Council in this behalf is necessary. It was also decided that in respect of Accountancy Institutes which are recognized and in respect of Institutes other than Accountancy Institutes the word London in brackets may be allowed to be added provided that in each case the respective Institutes had permitted such addition. x x x (3) The Council also decided that the Institute of Cost and Works Accountants is not an Accountancy Institute ....
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....ncy, the degrees granted in respect thereof are six in number, as would appear from Appendix No. (8) of the said Act. The expression 'any other qualification that he may possess', therefore, must be read as qualification other than conferred upon the member by other Institutes of Accountancy. Such qualification of accountancy may be conferred even by other Institutes. But as noticed hereinbefore, an exemption had been granted by reason of a resolution of the Institute in relation to the Institute of Cost and Works Accountants. Furthermore, a degree conferred by any university also is subject to an exemption from the rigour of the provisions of Section 7 of the Act. 17. There cannot, therefore, be any doubt whatsoever that 'the other qualification' would mean a qualification other than granted by an Institute of Accountancy, subject of course to recognition thereof by the Institute. 18. The questions, however, which is required to be posed and answered inter alia is whether by reason of a notification, acquisition of a qualification itself can be prohibited. The Institute is constituted under a parliamentary act. It is governed by the provisions thereof as also....
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.... to include wrongful omission or commission whether done or omitted to be done intentionally or unintentionally. It means, 'improper behavior; intentional wrong doing on deliberate violation of a rule of standard or behavior': Misconduct is a transgression of some established and definite rule of action, where no discretion is left except what necessity may demand; it is a violation of definite law a forbidden act. It differs from carelessness. Misconduct even if it is an offence under the Indian Penal Code is equally a misconduct. [See also State of Punjab and Ors. v. Ram Singh Ex. Constable [1992]3SCR634 and B.C. Chaturvedi v. Union of India (1996)ILLJ1231SC ]. 24. In 'M' an Advocate Re 1957CriLJ300 , this Court dealt with professional misconduct in the following terms: As has been laid down by this Court in the matter of 'G', a Senior Advocate of the Supreme Court (A) (supra) the Court, in dealing with cases of professional misconduct is "not concerned with ordinary legal rights, but with the special and rigid rules of professional conduct expected of and applied to a specially privileged class of persons who, because of their priv....
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....are free to choose any trade, business, calling or profession etc. It obviously, also includes the manner and terms in which they will carry on their profession, but again subject to reasonable restrictions which may be thought necessary by the State in the interest of the general public. On the other hand, once a citizen voluntarily chooses to join government service or any other service, he would obviously be free to do so but he would be bound by the terms and conditions of the service as may be provided under the law or by contract of service. 28. Submission of Mr. Ganesh that Section 7 should be read with Section 24A of the Act, in our opinion, cannot be accepted. An institute may commit an offence for awarding a degree in respect of attainment of any qualification or competence similar to that of a member of institute. But answer to such a question must be rendered as and when the same is raised. It is not for us to proceed on the presumption that the appellant has committed an offence. It is also not possible to hold that the appellant has committed an offence. It is also not possible to hold that in the event such an offence has been committed, awarding of any degree in ....
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....hereby quashed. 33. For the reasons aforementioned, the impugned judgment cannot be sustained which is set aside accordingly. The appeal is allowed. No costs. Markandey Katju, J. 34. I have perused the judgment of my learned brother Hon'ble S.B. Sinha, J. and am in respectful agreement with the same. However, I wish to add some of my own reasons. 35. In recent years, the country has witnessed phenomenal growth in the field of financial markets. The funds raised by the corporate sector from the capital market have increased exponentially, the number of stock exchanges have increased, the investor community has multiplied. The structural developments in the markets are the inclusion of institutional and corporate members, of stock exchanges, and formation of the regulatory authority 'SEBI' to oversee the functioning of the capital market. 36. In recent decades the financial services industry has matured in our country. A large number of mutual funds have been set up by the banks, insurance companies and the corporate sectors, leasing and hire purchasing companies have grown in size, content and operations. Credit rating services have been launched. Venture ....
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.... in the exclusive domain of Chartered Accountants (hereinafter referred to as "C.A.") Cost Accountants, and lawyers (though it is true that the C.F.A. course includes some study of accountancy). 41. The submission of learned Counsel for respondent No. 1, Mr. Ganesh, is that the object of the impugned notification dated 3.8.1989 is to avoid conflict of interest. In our opinion this submission suffers from a total misunderstanding of the functions of a C.F.A. vis-a-vis a C.A. The main function of the former is to study and analyze the financial markets and advise his clients accordingly, whereas the main function of a C.A. is to do auditing of a firm's (or company's) balance sheet and profit and loss account. These are two altogether different functions. Of course, if a person audits a firm's balance sheet and P&L Accounts, there may be a conflict of interest if he also advises the same firm about its investments. An auditor is a watchdog on behalf of the shareholders, whereas a financial adviser advises the management. Such a possible conflict of interest can no doubt be prohibited by law, and such prohibition would be reasonable and in the public interest. 42. How....