TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 821
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....o be ascribed to the word "information" as occurring in Section 21 of the Chartered Accountants Act, 1949 (Act). 2. The writ petitions themselves emanate from disciplinary proceedings initiated by the Institute against the petitioners who are its members and were employed with firms which were appointed as Joint Statutory Auditors of the Punjab National Bank (PNB). The writ petitioners assail the validity of the show cause notices which were issued as well as the Prima Facie Opinion which has been drawn by the Disciplinary Directorate and forwarded for the consideration of the Disciplinary Committee. The writ petitions also seek quashing of the disciplinary proceedings itself as initiated against the individual petitioners. A. ESSENTIAL FACTS 3. All the writ petitioners are stated to be members/partners of different chartered accountancy firms which had collectively been engaged by the PNB for conducting a limited review of its financial statements. The challenge essentially arises from the suo moto initiation of proceedings by the Institute with it being principally contended that neither the Act nor the Chartered Accountants (Procedure of Investigations of Professional and Oth....
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....he suspected fraud which had occurred. In the course of this discussion, the Joint Statutory Auditors are stated to have been apprised of PNB having provided requisite information to the concerned regulators as well as the Central Bureau of Investigation (CBI). 8. The minutes of the discussion also records that the liability which would arise would have to be decided based on further examination of the legality and genuineness of the various transactions which constituted the fraud. These minutes further record that since the fraud was detected in the current quarter of March 2018 and the financial statements which formed subject matter of the limited review related to December 2017, no provision was required to be made. In view of the aforesaid, PNB as well as the other members are stated to have opined that no provision was required to be made in the limited review results. These minutes further record that the amount of Rs.280.70 crores was not material as per the policy of the bank. On the conclusion of this discussion, the Joint Statutory Auditors are stated to have submitted their Limited Review Report (LRR) on 06 February 2018. 9. On 13 February 2018, PNB is stated to have....
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....ment on fraud if in the course of performance of his duties as an auditor, the auditor has reason to believe that an offence involving fraud is being or has been committed against the company by its officers or employees. The provision of aforesaid section is re-produced herewith: 143(12) Notwithstanding anything contained in this section if an auditor of a company, in the course of the performance of his duties as auditor, has reason to believe that on offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter to the Central Government within such time and in such manner as may be prescribed. (b) SA 240- THE AUDITOR'S RESPONSIBILITIES RELATING TO FRAUD IN AN AUDIT OF FINANCIAL STATEMENTS casts a responsibility on an auditor that while conducting an audit in accordance with SAs he is responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. SA 240 inter alia states as under: the risk of the auditor not detecting a material misstatement resulting from management fraud is gr....
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....ous professional lapse on your part while undertaking above review done for the relevant period. In this regard, a show cause notice dated 21 February, 2018 was issued to you giving an opportunity to clarify your position in the matter. You vide your letters dated 27thFebruary, 2018 and 1st March, 2018 has submitted your response, but the same is found unsatisfactory. In view of the above, the matter has been treated as 'Information' within the meaning of Rule 7 of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007. A copy of the aforesaid Rules is also enclosed herewith for your ready reference. The aforesaid allegations, if proved, would fall within the purview of professional misconduct falling within the meaning of Clauses (5), (6), (7) and (8) of Part I of Second Schedule to the Chartered Accountants Act, 1949. Further, in accordance with the provisions of clause (a) of sub-rule (1) of Rule 8 read with Rule 11 of the aforesaid Rules, we are requesting you to submit your Written Statement duly signed, if any, in triplicate, within 21 days of the receipt of this letter." 12. The petitione....
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.... him to conclude whether there is anything that causes him to believe that the interim financial information is not prepared, in all material respects, in accordance with the applicable financial reporting framework. The matters for such inquiry has been laid out in Paragraph 21 of SRE 2410 which also include - Significant changes in contingent liabilities including litigation or claims and Knowledge of any fraud or suspected fraud affecting the entity involving employees. Paragraph 26 and 29 defines obligation of the reviewer/ auditor to determine if any event requires adjustment or disclosure in the interim financial information when it states as follows: "26. The auditor should inquire whether management has identified all events up to the date of the review report that may require adjustment to or disclosure in the interim financial information. It is not necessary for the auditor to perform other procedures to identify events occurring after the date of the review report." "29. When a matter comes to the auditor's attention that leads the auditor to question whether a material adjustment should be made for the interim financial information to be prepared, in all materi....
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.... Respondent) on 5th February 2018 before the submission of the Limited Review Report in which the Bank has confirmed as under (B30-830B)-. a That the quantum of fraud as per information available with the management on that date was Rs 280.70 crores and a further detailed investigation was in progress by the bank and CBI officials simultaneously. b. That as per Bank's Management, as on that date documentary evidence was not available to prove that these import transactions were bonafide trade transactions. c. That the liability arising out of these LOU'S on PNB would be decided based on the legality and genuineness of underlying transactions. d. That the fraud was detected during the current quarter i.e. March 2018 whereas financial statements under limited review relates to December 2017 and as per extant RBI guidelines provision would be required to be made in the quarter ending March 2018. As such, no provision was required to be made in December 2017 limited review results. e. That the above amount of Rs. 280.70 crores was not material as per the policy of the Bank. On the basis of said representation, the management was of the opinion that a disclosure rega....
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....whether uncorrected misstatements that have come to the auditor's attention are material to the interim financial information." "31. misstatements which come to the auditor's attention, including inadequate disclosures, are evaluated individually and in the aggregate to determine whether a material adjustment is required to be made to the interim financial information for it to be prepared, in all material respects, in accordance with the applicable financial reporting framework (emphasis supplied)." "33. The auditor may designate an amount below which misstatements need not be aggregated, because the auditor expects that the aggregation of such amounts clearly would not have a material effect on the interim financial information. In so doing, the auditor considers the fact that the determination of materiality involves quantitative as well as qualitative considerations, and that misstatements of a relatively small amount could nevertheless have a material effect on the interim financial information (emphasis supplied)," 8.4.9 It is therefore, viewed that in order to assess the facts being presented by the Management, the auditors/reviewers were required to assess the....
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....ragraph 16 of AS 25, even in the case of banks (Refer Illustrative Format of Condensed Financial Statements for a bank given in AS 25) which states as under: "16. An enterprise should include the following information, as a minimum, in the notes to its interim financial statements, if material and if not disclosed elsewhere in the interim financial report; (h) material events subsequent to the end of the interim period that have not been reflected in the financial statements for the interim period; ....." As regards materiality, it is noted that Paragraph 21 of AS 25 also define 'materiality' when it states as follows: "In deciding how to recognise, measure, classify, or disclose an item for interim financial reporting purposes, materiality should be assessed in relation to the interim period financial data. In making assessments of materiality, it should be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data (emphasis supplied)." 8.4.13 It is noted that SRE 2410 read with AS 25 prescribes to disclose material events subsequent to balance sheet date The fraud occurred had devolved liabilities on the e....
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....7) of Part 1 of Second Schedule to the Chartered Accountants Act. 1949. 8.6 It is also noted that the Respondent in his Written Statement (B21- B22) has submitted that the interim financial information was prepared by the management in accordance with the applicable financial reporting framework in keeping with the principles of materiality and that the report does not confirm the applicability of the various standards. It is further submitted that the said report was issued only to the Board of Directors of PNB and that too after the said Board had approved the interim financial statements in respect of which the report was issued. In this regard, it is observed that para 4 of the Limited Review Report (A3) for the said quarter states that "nothing has come to our attention that causes us to believe that the accompanying statement of unaudited interim financial results together with the notes thereon, prepared in accordance with applicable accounting standards and other recognised accounting practice and policies, has not disclosed information required to be disclosed in terms of Regulation 33 of the SEB! (Listing Obligations and Disclosure Requirements) Regulations 2015 includi....
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....a firm, received in person or by post or courier. However, the report of operation of MNAF in India and the judgment referred to in Paragraph No. 3 of the prima facie opinion, there is no reference to petitioner and therefore, question arises whether it would constitute the "Information" as per Rule 7 of the Rules-2007 or not. However, it appears from the material on the record that what is to be treated as "Information" within the meaning of Rule 7 of the Rules-2007 is missing because from the contents of the Paragraph No. 3 of the prima facie opinion, which is extracted herein above, it does not reveal any written allegation or allegations against the petitioner so as to treat the same as "Information" within the meaning of Rule 7 of the Rules-2007. The report of operation of MNAF in India and the judgment referred to in Paragraph No. 3 of the prima-facie opinion, it cannot consider as "information" withing the meaning of Rule 7 of the Rule-2007. Therefore, entire basis of formation of prima facie opinion is contrary to Rule 7 of the Rules-2007. The report of operation of MNAF in India and the judgment referred to in Paragraph No. 3 of the prima-facie opinion, it cannot consider ....
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....e answerable to the allegation/s and send a copy of the aforesaid Information letter along with its enclosures to the said member/members. Thereafter, the member/members answerable is/are required to forward his/her written statement, if any, in triplicate, within 21 days of the receipt of this letter." 27. On perusal of the above contents of the letter dated 05.04.2018, it emerges that the very basis to treat the material available on record and observations of the Supreme Court as the "Information" within the meaning of Rule 7 of the Rules-2007 for alleged violation of Section 25 and Section 29 of the Act-1949 cannot be considered as "Information" in absence of any written information containing allegation or allegations against the petitioner-firm as provided under Rule 7 of the Rules-2007. Therefore, merely on the basis of inference drawn by the respondent no. 2, and thereby, analyzing various terms of the representation agreement between the petitioner and the HLBI to form prima facie opinion is without any basis in absence of information as contemplated in Rule 7 of the Rules-2007. 28. On perusal of the prima-facie opinion recorded by the Director (Discipline), wherein re....
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....payable based upon the revenue of the respondent-firm. The respondent-firm has thus failed to bring in any corroborative evidences which may prove/substantiate that the firm has paid the amount on account of membership fee only and in no way this was a fee/profit sharing of professional fee based on referrals with HLB international. Thus, at this stage, the respondent-firm is prima facie guilty of professional misconduct falling within the meaning of item (2) of Part I of First Schedule to the Chartered Accountants Act-1949." 30. With regard to violation of item (2) of Part I of the First Schedule, following prima-facie opinion is arrived at:- "12.1 Thus, it has been observed that the firm is taking a plea that the none of the above provisions are applicable to his firm as they do not have a corporate as a partner in his LLP, they have not shared any fees or have paid for advertisement as stated in their explanation above. In this regard, it needs to be mentioned that HLBI is an English Company Limited by guarantee. The international entity is having a global presence with may firms being its member including non-CA firms. In this regard, the observations made by Hon'ble Su....
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....ed prima facie opinion only to do fishing inquiry and investigation. The intention of prima facie opinion is not for initiating disciplinary inquiry for the purpose of investigating further to establish whether the petitioner-firm in collaboration with the international entity, HLBI was involved in encouraging surrogate practice in India as highlighted in the judgment of the Supreme Court or not. For such purpose, the petitioner-Firm which is in existence for more than 70 years cannot be put to rigors of disciplinary proceedings in absence of any specific allegation and in absence of any written information containing allegation as per Rule 7 of the Rule-2007." 16. Upon arriving at the aforesaid conclusions, the learned Judge proceeded to allow the writ petition and quash the communication issued by the Institute impugned therein. It would be pertinent to note that the aforesaid judgment has been stayed by a Division Bench of the Gujarat High Court in Letter Patents Appeal No.383/2020. While placing the said decision in abeyance, the Division Bench in its interim order has provided as follows: - "List for final disposal/hearing on 9th September, 2020.As an interim measure, it is....
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....rd "information" would have to necessarily be gathered from the manner in which it has been treated and explained under the Rules since the Act fails to independently define the said expression. 20. Taking the Court through the provisions pertaining to the registration of a complaint and the treatment of information contained in Chapter II of the Rules, it was submitted that Rules 3 and 7 contemplate and envisage information being provided or a complaint being submitted in writing. The submission essentially was that since both a complaint under Rule 3 and information under Rule 7 is envisaged to be material that may be submitted to the Institute in writing against a member, this would establish that neither the Act nor the Rules contemplate a suo moto power being exercised by the disciplinary authority. 21. Elaborating on the aforesaid issue, Mr. Nandrajog submitted that in terms of Rule 3, a complaint against a member or a firm has to be filed in Form-I before the Directorate. That complaint has to be duly accompanied with the requisite fee as prescribed. The complaint once received in the Directorate is thereafter to be duly registered in accordance with the procedure prescrib....
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....ings on its own motion since both a complaint as well as information is understood under the statute to be written material that may be received against a member laying specific allegations with respect to an act of professional misconduct. 23. Mr. Nandrajog laid stress on the fact that in order to commence an inquiry with respect to the alleged misconduct of a member or a firm, the complaint or the information must necessarily be specific and disclose an identified act of misconduct that may be leveled against a member or a firm. Learned Senior Counsel submitted that neither the Act nor the Rules can be interpreted as empowering the respondents to initiate proceedings based on an unsubstantiated statement that may appear in a newspaper. Mr. Nandrajog further underlined the fact that even the newspaper reports on the basis of which cognizance was taken by the Institute neither referred to nor named the petitioner specifically. 24. Learned Senior Counsel then drew the attention of the Court to the provisions contained in the Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Act, 2022 (2022 Amending Act) in terms of which Section 21 as ex....
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....nduct mentioned in the First Schedule, the Director (Discipline) shall submit the preliminary examination report to the Board of Discipline and where prima facie case is made out for any professional or other misconduct mentioned in the Second Schedule or in both the First Schedule and the Second Schedule, he shall submit a preliminary examination report to the Disciplinary Committee: Provided that a complaint or information filed by any authorised officer of the Central Government or a State Government or any statutory authority duly supported by an investigation report or relevant extract of the investigation report along with supporting evidence, shall be treated as preliminary examination report: Provided further that where no prima facie case is made out against the member or the firm, the Director (Discipline) shall submit such information or complaint with relevant documents to the Board of Discipline and the Board of Discipline may, if it agrees with the findings of the Director (Discipline), close the matter or in case of disagreement, itself proceed further or refer the matter to the Disciplinary Committee or advise the Director (Discipline) to further investigate the....
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....nd Works Accountants Act, 1959 and the Company Secretaries Act, 1980, inter alia, to- (i) strengthen the disciplinary mechanism by augmenting the capacity of the Disciplinary Directorate to deal with the complaints and information and providing time bound disposal of the cases by specifying the time limits for speedy disposal of the cases against members of the Institutes; (ii) address conflict of interest between the administrative and disciplinary arms of the Institute: (iii) provide for a separate chapter on registration of firms with the respective Institutes and include firms under the purview of the disciplinary mechanism; (iv) enhance accountability and transparency by providing for audit of accounts of the Institutes by a firm of chartered accountants to be appointed annually by the Council from the panel of auditors maintained by the Comptroller and Auditor-General of India: (v) provide for autonomy to the Council of the respective Institutes to fix various fees. 4. The Bill seeks to achieve the above objectives. NIRMALA SITHARAMAN. NEW DELHI: The 11th December, 2021." 26. Reverting then to the contentions which were addressed by Mr. Nandrajog and which re....
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....d expressions, namely "information" or "complaint". This is a clear lacuna, which the legislature would do well to plug. 36. "Complaints", under Section 21 of the Act, have, as per Rule 3(1) of the 2007 Rules, necessarily to be filed in Form I annexed to the 2007 Rules, in triplicate, before the Director, in person or by post or by courier, and are required to be acknowledged, under Rule 3(6), by the Directorate, by ordinary post along with an acknowledgement number. Rule 4 requires the complaint to be accompanied by a fee. Rule 5(1) contemplates registration, by the Director, or by officers/ officers authorised by him, of the date on which the complaint is presented to the Director, by way of endorsement on the complaint itself, accompanied by the signature of the Director or officer/officers. Sub- rule (2) of Rule 5 requires the complaint to be scrutinised by the Director, or by the authorised officer/officers and, if it is found in order, sub-rule (3) contemplates registration of the complaint and allocation, to it, of a unique reference number, to be quoted in all future correspondence. Where the complaint is, on the other hand, found to be defective, sub-rule (5) of Rule 5 r....
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....said proceedings." 29. Upon recordal of the aforesaid prima facie conclusions, the learned Judge framed the following operative directions: - "44. As has already been noted herein above, the petitioners had taken a preliminary objection, before the Disciplinary Committee, to the effect that the entire proceedings are vitiated ab initio, not having been initiated in accordance with Rule 7 of the 2007 Rules. In my opinion, it would be appropriate, before this Court arrives at a prima facie view regarding the said objection, to have, before it, the opinion of the Disciplinary Committee thereon. I am, therefore, of the opinion that, in the interests of justice, the Disciplinary Committee ought to be directed to address the preliminary submission, by the petitioners, that the enquiry proceedings being conducted by, and before, it, are unsustainable ab initio, not having been commenced on the basis of any "information", as would satisfy the test laid down in Rule 7 of the 2007 Rules, and to return a finding, thereon, before proceeding with the enquiry. I have made certain observations, hereinabove, in this regard, without returning any categorical finding, even tentative, on this issu....
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....conducted in accordance with International Standards on Auditing (ISAs). A review of interim financial information does not provide a basis for expressing an opinion whether the financial information gives a true and fair view, or is presented fairly, in all material respects, in accordance with an applicable financial reporting framework. 9. A review, in contrast to an audit, is not designed to obtain reasonable assurance that the interim financial information is free from material misstatement. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review may bring significant matters affecting the interim financial information to the auditor's attention, but it does not provide all of the evidence that would be required in an audit." 33. Mr. Nandrajog submitted that the disciplinary proceedings initiated in any case lose sight of the fact that the limited review was restricted to the period 01 October 2017 to 31 December 2017 only. The submission was that since the incidents which formed the foundation of the Nirav Modi Scam had not occurred in the quarter which was r....
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....overnment:- "An appropriate amendment to be made in Section 21 of the Chartered Accountants Act, to enable the Institute to initiate either suo motu or on a reference made to it by the Central Government or by any other Government agency in any matter of professional or other misconduct committed by any member or firm of Chartered Accountants except as provided in Section 132 of the Companies Act. 2013 and Rules framed thereunder" 38. It would be pertinent to note that the aforesaid recommendation essentially sought the Institute being conferred a power identical to that which stood vested in the NFRA in terms of Section 132(4) of the 2013 Act. 39. The petitioners in their written submissions have further asserted that a suo moto power must be specifically spelt out and conferred by the statute itself before the authority may be considered as vested with the power to do so. Reliance in this regard was placed on the following decisions:- (a) Shrikrishnavs. State of Maharashtra (2007 SCC Online Bom 988), (b) Indira Gandhi vs. J.C. Shah (1980) ILR 1 Delhi 552) and (c) Mohinder Singh and others vs. State and others (2013 Lab IC 13608) 40. Mr. Datt, learned counsel appearing ....
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....d under Article 226 of the Constitution must necessarily be patent, stark and self-evident. According to learned Senior Counsel, the instant challenge clearly fails to meet the aforesaid parameters viewed in light of the information on the basis of which the Institute had initiated proceedings against the petitioners. 42. Mr. Srinivasan submitted that the tests that stand judicially formulated for a writ court to entertain a challenge to a show cause notice or proceedings relating to disciplinary action are fairly well settled. It was his submission that unless it is established that the proceedings drawn suffer from an apparent or an inherent lack of jurisdiction or authority, courts would be slow, hesitant and circumspect before interdicting proceedings at a nascent stage. This more so when the statute may provide for an adequate and efficacious remedy to appeal against any adverse order that may ultimately be passed and lays in place a fair and transparent process for examination of complaints. Mr. Srinivasan contended that the instant writ petitions fail to meet the aforesaid tests and clearly are an ill-advised foray against proceedings which had been validly initiated and dr....
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....ual may have against a member or a firm, information on the other hand would include any material or fact that may be placed for the consideration of the Institute or may otherwise come to its knowledge. Mr. Srinivasan submitted that an informant may not necessarily have an individual grievance or seek redressal against a member or a firm. However, any material or fact that such an informant may choose to place before the Directorate would also clearly fall within the ambit of Section 21 and if found sufficient to initiate an enquiry, be taken into consideration. 46. Learned Senior Counsel submitted that the suo moto power that is available with the Institute is one which was recognised even by the Division Bench of the Court in Institute of Chartered Accountants of India VS. P. Rama Krishna (2011 SCC OnLine Del 4253) as would be evident from the following observations as appearing in that decision: - "31. No doubt Section 21, both unamended and post amendment, refers to information and complaint but it would be incorrect to hold that the legislature wanted to make a distinction between complaint or information cases in Section 21D of the CA Act, 1949. Such distinction may be re....
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....ive 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." 47. Learned Senior Counsel in support of his submissions also placed reliance on a decision rendered by a learned Judge of the Court in Walmart India Pvt. Ltd. vs. Central Vigilance Commission (2018 SCC OnLine Del 11005). In Walmart, the Court was called upon to consider the scope of Section 8(1)(d) of the Central Vigilance Commission Act 2003 and the word "complaint" as occurring therein. The question which arose for consideration was whether a newspaper report could be considered as falling within Section 8(1)(d). While dealing with the aforesaid question, the learned Judge in Walmart observed as follows: - "39. Plainly, an authority, which is constituted under an Act cannot by an administrative order expand its jurisdiction as conferred under the Statute. The CVC Act has expressly charged the CVC to make inquiries in a complaint in terms of Section 8(1)(d) of the CVC Act and the CVC cannot expand its jurisdiction to also conduct inquiries....
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....nly upon the receipt of a written complaint or information, it would not only denude it of the regulatory and supervisory role which are assigned to it, but also whittle down the powers that otherwise stands vested on that authority. Mr. Srinivasan submitted that the Institute is statutorily vested with powers to permanently remove the name of errant members and that the maintenance of discipline is a salutary function invested in the Institute and a necessary concomitant to the objective of maintaining public confidence in members of the Institute. According to Mr. Srinivasan, reading down the scope and width of the authority conferred on the Institute in any other fashion would clearly be deleterious to the primary objective of maintaining discipline and holding members to the standards of professional conduct as embodied under the Act and the Rules. 49. Turning then to the provisions of Rule 7, Mr. Srinivasan submitted that it would, on first principles, be wholly incorrect to read Rule 7 as constricting or cabining the power conferred on the Disciplinary Directorate under Section 21. Learned Senior Counsel submitted that the acceptance of the contentions addressed at the behes....
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.... for the Directorate to examine the allegations relating to the scam and to evaluate the role discharged by the auditors of PNB. It was pointed out that the letter of 13 March 2018 would clearly establish that after the news reports had come to be published and a response obtained from the petitioners, the Directorate scrutinized the LRR dealing with the quarterly results of PNB and undertook due examination of whether the petitioners had adhered to the SAs' which applied. It was submitted that the LRR was duly obtained, examined and evaluated on the anvil of the SAs' which apply and it was on the culmination of the aforesaid exercise that a decision to initiate disciplinary proceedings was ultimately taken by the Institute. 52. Learned Senior Counsel laid stress on the fact that despite the auditors having been duly apprised by the PNB of the nature of the scam which had occurred prior to the submission of the LRR, no details in respect thereof were either recorded or noted by the auditors in the report which was ultimately submitted. It was contended that as details of the scam came to light, it transpired that PNB faced the spectre of a gigantic loss of almost Rs. 11,000/- cror....
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....our attention that causes us to believe that the accompanying statement of unaudited interim financial results together with the notes thereon, prepared in accordance with applicable accounting standards and other recognized accounting practices and policies, has not disclosed the information required to be disclosed in terms of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including the manner in which it is to be disclosed, or that it contains any material misstatement or that it has not been prepared in accordance with the relevant prudential norms issued by the Reserve Bank of India in respect of income recognition, asset classification, provisioning and other related matters." 54. The LRR and the Review of Interim Financial Information owes its genesis to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 (Regulation 2015) and the SREs. The subject of Financial Results and Limited Review is governed by Regulation 33. Clause (d) of Regulation 33 specifically deals with the submission of Limited Review or Audit Reports on a quarterly and annual basis. It stipulates that th....
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....by management of the entity. Objective of an Engagement to Review Interim Financial Information 7. The objective of an engagement to review interim financial information is to enable the auditor to express a conclusion whether, on the basis of the review, anything has come to the auditor's attention that causes the auditor to believe that the interim financial information is not prepared, in all material respects, in accordance with an applicable financial reporting framework. The auditor makes inquiries, and performs analytical and other review procedures in order to reduce to a moderate level the risk of expressing an inappropriate conclusion when the interim financial information is materially misstated. 8. The objective of a review of interim financial information differs significantly from that of an audit conducted in accordance with Standards on Auditing (SAs). A review of interim financial information does not provide a basis for expressing an opinion whether the financial information gives a true and fair view, or is presented fairly, in all material respects, in accordance with an applicable financial reporting framework. 9. A review, in contrast to an audit, is n....
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....ing personnel, or reading the sales contract." 58. The Policy framed by PNB in respect of Materiality and referable to the 2015 Regulation and more particularly Part B of Schedule III in Para 5A makes the following provisions: - "5A. Para C of Part A of Schedule III of the LODR deals with any other information/event viz. major development that is likely to affect business, e.g. emergence of new technologies, expiry of patents, any change of accounting policy that may have a significant impact on the accounts, etc brief details thereof and any other information which is exclusively known to the Bank which may be necessary to enable the holders of securities of the Bank to appraise its position and to avoid the establishment of a false market in such securities. Criteria: Any development which may have an impact on the Financials of the Bank to the extent of more than 5% of the operating profit of the previous year shall be treated as material." 59. It is perhaps with reference to Para 5A that PNB appears to have advised the Joint Statutory Auditors of there being no requirement of mentioning or recording the loss suffered by it as a result of the incidents which occurred at it....
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....s that Government may take to curb malpractices in trade and business, really effective. You have referred to the moral standard of the accountancy profession. I welcome your assurance that the deterioration of standards in this profession is certainly not of that aggravated character which may be found elsewhere as a result of the war conditions. I trust you will not misunderstand me if I utter a word of warning against complacency in this respect. It is essential to be ceaselessly vigilant about this, all the more so because of the greatly enlarged sphere of your activities. The Institute of Chartered Accountants should continue to exercise unceasing vigilance in seeing that its members conform to the traditions and conventions of the profession and that the rules framed by them are observed both in the letter and in the spirit. Yours is the privileged task of making membership of the Institute a hall-mark of distinction in professional circles all over the world. Such a position implies unwearied and unceasing effort on your part. Government are aware of the importance of your profession and have acknowledge it in practical terms whenever possible. As you know, Government pr....
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....may be called upon to discharge in the sense of not being restricted to the performance of a limited role in aid of the requirements of corporate entities but also making contributions to the Government itself and various other financial regulators. 64. It would be pertinent to observe that the various reports and documents which come to be published under the seal of a member or a firm of the Institute are trusted and accepted starting from a small common investor to Governments, corporate bodies and regulators situate not just within the country but even outside. It is to subserve the aforesaid purposes and to maintain a high quality of service that various standards have been prescribed by the Institute which members are mandatorily required to scrupulously adhere to. The Court also bears in mind the significant recommendations which were made by the Naresh Chandra Committee to shore up the disciplinary mechanism and which preceded the 2006 amendments which were introduced in the Act. It would be pertinent a note the Statement of Objects and Reasons which accompanied the Chartered Accountants (Amendment) Bill 2005, which reads as follows:- "1. The necessity to bring out amend....
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....EMANTIC CONNOTATION UNDER SECTION 21 66. The fundamental challenge which stands raised in the instant writ petition turns upon the provisions of Section 21 in the principal Act and the Rules relating to the submission and treatment of complaints and information. Section 21(1) stipulates and provides for the establishment of a Directorate for making investigation in respect of any information or complaint that may be received by it. For the purposes of investigation sub section (4) stipulates that the Director (Discipline) shall follow such procedure as may be prescribed. In terms of Section 21(2), the Director (Discipline) on receipt of any information or complaint is to firstly record it's prima facie opinion on the question of whether the alleged misconduct stands established. Once the Director Discipline comes to the prima facie conclusion that the allegation of professional or other misconduct stands evidenced, it is obliged to place the matter before the Board of Discipline or the Disciplinary Committee. 67. It becomes pertinent to note that both sub sections (1) and (2) of Section 21 speak of information or complaint. The word "information" as occurring therein is clearly a....
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....te Government or any other statutory authority. 70. The procedure of investigation of a complaint is governed by Rules 8 and 9. Rule 11 makes the following salient provisions:- "11. Certain provisions relating to complaint also to be applicable for information relating to misconduct of members.- The procedure laid down for dealing with complaints in sub-rule (6) of rule 3, sub-rules (1), (2), (3) and (4) of rule 5, sub-rules (1), (2), (3) and (5) of rule 8, rule 9 and rule 10 shall also apply to information received by the Director relating to misconduct of members." 71. Rule 12 reads as under:- "12. Time limit on entertaining complaint or information.- Where the Director is satisfied that there would be difficulty in securing proper evidence of the alleged misconduct, or that the member or firm against whom the information has been received or the complaint has been filed, would find it difficult to lead evidence to defend himself or itself, as the case may be, on account of the time lag, or that changes have taken place rendering the inquiry procedurally inconvenient or difficult, he may refuse to entertain a complaint or information in respect of any misconduct made more t....
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....s and information while Rules 8, 9 and 10 deal with the procedure of investigation and examination of complaints and information that may be received. 75. As would be evident from the aforesaid discussion, the word "complaint" is not defined under the Act. Going by the plain meaning of the two words as well as how lexicons have chosen to define them, the Court finds that the expression "information" has been accorded a far wider meaning than the word "complaint". This position would clearly emerge from the meaning and scope of the two words as explained in the two seminal works which are noticed hereinbelow. 76. P. Ramanatha Aiyar's Advanced Law Lexicon, The Encyclopaedic Law Dictionary, 3rd Edition, Volume 1 2005 (P. Ramanatha Aiyar's Advanced Law Lexicon) defines the term "information" in the following terms: - "The word 'information' has a wide natural meaning for the purposes of R. 14. A new report which may include a different interpretation of contemporaneous medical records from that previously put forward would be considered as new 'information'. [Current Law June Digest (2005) Page 232, para 109] [(English) General Medical Council Preliminary Proceeding....
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....of its relevance. [Sterling Machine Tools v. CIT, (1980) 122 ITR 926 (All)] The term 'information' as used in Section 147(b) of the Act means instruction or knowledge. The term 'information' as used in Section 147(b) of the Act means information as to the law created by a formal source. Any statement by a person or body not competent to create or define the law cannot be regarded as law. [CIT v. Union Carbide Corporation, (1994) 206 TTR 402 (Cal). See also Munna Lal & Sons v. CIT. (1991) 187 ITR 378 (All) [Income-tax Act (43 of 1961), S. 147(b)] The expression 'information' means the communication or acquisition of knowledge or intelligence. It includes knowledge acquired from investigation, study or instruction. It must be something more than a rumour or gossip or hunch. [Bawa Abhai Singh v. Deputy CIT, (2002) 253 ITR 83 (Del)] [Income-tax Act (43 of 1961), S. 147(b)] The term 'information' as used in Section 147(b) of the Act must mean 'instruction or knowledge derived from an external source concerning facts or particulars or as to law relating to a matter bearing on the assessment. Mere change of opinion on the part of the Income-tax Officer cannot c....
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....ication of knowledge, news of some fact or occurrence and the action of telling or the fact of being told something. The following extracts from the aforesaid authoritative work would be of relevance insofar as the issues which arise in the present case are concerned:- "2. The action of informing (in sense 5 of the verb); communication of the knowledge or 'news' of some fact or occurrence; the action of telling or fact of being told of something. 3. a. Knowledge communicated concerning some particular fact, subject, or event; that of which one is apprised or told; intelligence, news. Spec. contrasted with data. † b. with an and pl. An item of information or intelligence; a fact or circumstance of which one is told. In earlier use, An account, relation, narrative (of something). Obs." As would be manifest from the aforesaid extracts, the word "information" has been understood to include knowledge communicated concerning some particular fact, subject or event, that of which one is apprised. It has also been defined to mean an item of information or of relevance, the fact or circumstances which one is told. 79. A complaint, on other hand, is defined by the P. Ramanatha ....
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.... is made for the sake of ascertaining a fact or bringing to punishment. A complaint may be frivolous; an accusation false. People in subordinate stations should be careful to give no cause for complaint, the most guarded conduct will not protect any person from the unjust accusations of the malevolent." 80. The Oxford English Dictionary, Second Edition defines the word "complaint" as follows: - "3. Outcry against or because of injury; representation of wrong suffered; utterance of grievance. 1374 CHAUCER Anel. &Arc. (title), The compleynte of Anelida.. upon Arcyte.. for his Doublenesse. 1393 GOWER Conf. 1. 111 Tho was murmur, tho was disdeine, Tho was compleinte on every side. 1597 HOOKER Eccl. Pol. v. lxxix. $14 You.. make great complaint of the wonderful cruelty we shew towards you. 1667 MILTON P.L. x. 131 Whose failing ..I should not expose to blame By my complaint. 1738-9 in Swift's Lett. (1768) IV. 223 For some little time past, I have not had the same cause of complaint. 1789 BENTHAM Princ. Legisl. xix. $15 It is a standing topic of complaint, that a man knows too little of himself. 1856 FROUDE Hist. Eng. (1858) I. i. 35 Complaint was loud enough when complaint was j....
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....hich the Institute may itself derive from an external source. G. "ANY" AS THE OPERATIONAL PREFIX TO INFORMATION 84. The Court further takes into consideration the significance of the prefix "any" to the word information as occurring in Section 21 of the 1949 Act. The use of the word "any" before information in Section 21 clearly appears to be a conscious attempt by the authors of the statute to confer an expansive meaning upon the word and not confine or whittle it down to the rigours and formality that may be attached to a written complaint that may be received by the Institute. The expression "any information" as used in Section 21 thus appears to have been consciously employed so as to enable the Institute to make an investigation with respect to professional conduct of its members untrammelled by rigours of form. 85. On an overall consideration of the aforesaid, this Court is of the considered view that the word "information" as appearing in Section 21 cannot be narrowly construed to mean only those facts which may be specifically provided to the Institute. The Act and the Rules have consciously attempted to treat the two separately and distinctively. The phrase "any informa....
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.... That then takes the Court to consider the question whether the Institute could be recognised to proceed suo moto under the provisions of the Act. The principal contention addressed on behalf of the petitioners was that the power to proceed suo moto must necessarily stand conferred by the Act. According to the petitioners in the absence of a specific conferral of power, the Institute cannot be recognised to have the jurisdiction to move on its own initiative. 89. Though not specifically placed for the consideration of this Court, the written submissions which were tendered on behalf of the petitioners referred to the decisions in Shrikrishna, Indira Gandhi and Mohinder Singh. In Shrikrishna, the Bombay High Court was dealing with the issue whether Section 28A of the erstwhile Land Acquisition Act, 1894 could be interpreted to include a power to proceed suo moto. While dealing with the aforesaid question, the High Court observed thus: - "20. The expression "suo motu" means of its own initiative. The power to initiate must emerge from the language of the provisions. Where the language of the provision is simple, unambiguous and is incapable of various meanings, then the principle ....
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....ion this Court observed as follows:- "17. In order to appreciate, the challenge which stands raised in the present petition, it would at the outset be relevant to contrast the power and jurisdiction which the Appellate Tribunal and the Authority are conferred with under the provisions of the Act. As is evident from a reading of Sections 43 and 44, it is manifest that the Appellate Tribunal has been constituted as a forum whose jurisdiction may be invoked by any person aggrieved by a direction, decision or order made by the Authority or an Adjudicating Officer. Sections 43 and 44 of the Act do not confer, recognize or envisage any original or plenary power or authority being exercised by the Appellate Tribunal. The authority of the Appellate Tribunal stands confined to consideration of challenges that may be laid to orders passed by either the Authority or the Adjudicating Authority. The Act does not vest or confer any authority or jurisdiction upon the Appellate Tribunal to initiate proceedings on its own motion. 18. Turning then to the provisions which deal with the constitution and powers of the Authority, it is manifest that it is obliged to regulate real estate projects, to....
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....hy of traditional judicial institutions which constitute the judicial system of our country. It is an appellate forum whose origin and formation stems from the provisions of the Act. It is in that sense an adjudicatory authority which owes its existence and authority to a special statute. Viewed in that light it is manifest that it can neither assume nor arrogate to itself a power or authority which may otherwise not stand conferred on it by the Act. There is thus an evident and blatant assumption of jurisdiction which otherwise does not stand vested upon the Appellate Tribunal. The Court thus comes to the firm conclusion that the impugned proceedings are clearly ultra vires the Act. 20. The Court further notes that the patent lack of jurisdiction stands further highlighted when one compares the jurisdiction conferred upon the Authority and the Appellate Tribunal. As is clear from a reading of Section 35, the power to draw proceedings suo moto power stands specifically bestowed on the Authority. There is however a conspicuous and evident absence of extension or conferral of similar powers on the Appellate Tribunal. This, in the considered opinion of the Court, is not liable to be....
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....absence of a written complaint or allegation that may be submitted. A written complaint or allegation in writing cannot, in any manner, be understood to be a pre-requisite or a sine qua non for the initiation of action under Section 21. This since the authority conferred on the Institute relates to both a complaint as well as information. Information, as has been found by this Court, would extend to any material or fact that may come to the notice of the Institute and from which it may derive knowledge. That material need not necessarily be in the written or be interpreted as being confined to something which an individual may choose to bring to the notice of the Institute. Acceptance of a submission to the contrary would amount to restricting the width and amplitude of the power conferred by Section 21 which enables the Institute to proceed on the basis of "any information". 95. The Court also bears in mind the significant observations which were made by the Division Bench of this Court in P. Ramakrishna where while recognizing the intrinsic distinction between a complaint and information, the Court had aptly observed that information would include material that may be made avail....
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....ely. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended.... An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 468-69). 15. Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, according to Craies (Statute Law, 7th Edn.), it is open for the legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the courts may be called upon to construe the provisions and answer the question whether the legislature had suffici....
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.... where there has been an obvious mistake in drafting, a court will be prepared to substitute another word or phrase for that which actually appears in the text of the Act (p. 231). 18. In a recent decision of this Court in National Agricultural Coop. Mktg. Federation of India Ltd. v. Union of India [National Agricultural Coop. Mktg. Federation of India Ltd. v. Union of India, (2003) 5 SCC 23] it has been held that there is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. Every legislation whether prospective or retrospective has to be subjected to the question of legislative competence. The retrospectivity is liable to be decided on a few touchstones such as: (i) the words used must expressly provide or clearly imply retrospective operation; (ii) the retrospectivity must be reasonable and not excessive or harsh, otherwise it runs the risk of being struck down as unconstitutional; (iii) where the legislation is introduced to overcome a judicial decision, the power cannot be used to subvert the decision without removing the statutory basis of the decision. There is no fixed formula for the expression of legislative intent t....
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....e remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro private commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico." ' 21. In Allied Motors (P) Ltd. v. CIT [Allied Motors (P) Ltd. v. CIT, (1997) 3 SCC 472] certain unintended consequences flowed from a provision enacted by Parliament. There was an obvious omission. In order to cure the defect, a proviso was sought to be introduced through an amendment. The Court held that literal construction was liable to be avoided if it defeated the manifest object and purpose of the Act. The rule of reasonable interpretation should apply. 'A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole.' [Allied Motors (P) Ltd. case [Allied Motors (P) Ltd. v. CIT, (1997) 3 SCC 472] , SCC pp. 479-80, para 13] 22....
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....ning of that provision. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act." (emphasis supplied) 54. From the circumstances narrated above and from the memorandum explaining the Finance Bill, 1987 (supra), it is crystal clear that the amendment was intended to supply an obvious omission or to clear up doubts as to the meaning of the word "owner" in Section 22 of the Act. We do not think that in the light of the clear exposition of the position of a declaratory/clarificatory Act it is necessary to multiply the authorities on this point. We have, therefore, no hesitation to hold that the amendment introduced by the Finance Bill, 1988 was declaratory/clarificatory in nature so far as it relates to Section 27(iii), (iii-a) and (iii-b). Consequently, these provisions are retrospective in operation. If so, the view taken by the High Courts of Patna, Rajasthan and Calcutta, as noticed above, gets added support and consequently the contrary view taken by the Delhi, Bombay and Andhra Pradesh High Courts is not good law." 99. It must, at the outset, be noted that the provisions of the 2022 Amending Act are yet ....
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.... power stands conferred or exists. The answer to the question whether a particular power stands conferred under statute must necessarily be answered on a reading of the statute and on discernment of its scope. The meaning to be conferred upon a statute cannot rest merely on the fact that the power though being found to exist was never invoked earlier. In any case, the respondents disclose and provide details in paragraph 49 of their counter affidavit of a suo moto power having been exercised even in the past. The averments made in the counter affidavit establishes that the Institute had exercised its suo moto powers similarly in relation to the Satyam Computers scam. In fact as the facts taken note of in Manubhai would indicate, the Institute had in that particular instance initiated an enquiry based on the report submitted with respect to MNAF's. That report too is liable to be viewed as an external source of information as distinct from a written complaint or information that may be received by the Institute. While in the aforesaid case, the Institute was also bound by the directions issued by the Supreme Court, in principle, the steps taken by the Institute would be liable to be....
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....ould either scuttle the parent provision or extract or delete something therefrom. If the Court were to accord a judicial imprimatur to such a submission, it would amount to virtually recognizing a right existing in the delegate to control or even amend the parent provision. The acceptance of such a submission would lead to preposterous results and virtually permit the delegatee to rewrite or even override the legislative wisdom. 105. More fundamentally, this Court is of the considered opinion that Rule 7 merely engrafts a statutory or a legal fiction in respect of written allegations that may be received by the Institute against a member or a firm. It becomes pertinent to note that ordinarily the Institute may receive information in the shape of a written complaint against a member or a firm. That written complaint would have to necessarily be compliant with the requirements of Rule 3 and thus the in the format prescribed by Form-I. However, Rule 7 takes care of contingencies where even though information may be received by the Institute in writing, it may not be in accord with Form-I as prescribed. It is only to take care of such an eventuality that Rule 7 prescribes that even s....
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....itial show cause notice which had been issued, the anomalies which were noticed by the Directorate were duly conveyed to the petitioners and their comments invited. It was pointed out that ultimately it was the reasons and facts recorded in the letter of 13 March 2018 which was treated as information for the purposes of initiation of action under Section 21 of the 1949 Act. 109. Undoubtedly, the show cause notice refers to an alleged non-compliance "with the various SAs" and in particular provisions of SA. 110. The respondents accordingly called upon the petitioners to explain why action be not initiated in terms of Section 21 of the 1949 Act. After taking into consideration the aforesaid reply, the Institute appears to have examined the matter further and perused the LRR of PNB which was submitted by the Joint Statutory Auditors for the quarter ending on 31 December 2017. The aforesaid communication then proceeded to record that surprisingly even though PNB had lodged a complaint to CBI on 29 January 2018 and the LRR issued on 06 February 2018, the latter had failed to report or record the aforesaid incident. It was this which was viewed by the Institute as constituting a seriou....
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....rtake the review independently and objectively and the requirement to make "a critical assessment, with a questioning mind, of the validity of evidence obtained". According to the respondent, the LRR could not have been drawn or structured based on the mere ipse dixit of the management of PNB. According to Mr. Srinivasan, if that were to be accepted as being the procedure to be adopted, the very purpose of a limited review would stand defeated. 114. The aforesaid recordal of facts would clearly establish that the action which was initiated and the material which was treated as "information" for the purposes of Section 21 was not based on mere newspaper reports. In fact, those reports could not have possibly and on their own constituted material at all since they did not carry any allegation against the petitioners here. What appears to have transpired is of the news reports merely acting as a catalyst for the Institute to delve deeper into the massive fraud which had occurred and to examine whether any member had failed to abide by the SAs' which applied. It was the material recorded and encompassed in the letter of 13 March 2018 which would constitute the foundation for testing t....
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....at Rule 7 mandates information to be in the written form containing allegation or allegations against a member or a firm which may be received in person or by post or courier. It was based on the aforesaid conclusion that the learned Judge had proceeded to record that the prima facie opinion which formed subject matter of consideration in the said proceedings was clearly not based on any written allegation or allegations against the petitioner. It would be pertinent to recall that in Manubhai the prima facie opinion rested on a report pertaining to the operation of MNAFs' in India and the order of the Supreme Court which had been passed in connection therewith. It was in that backdrop that the learned Judge came to hold that the said report would not constitute "information" within the meaning of Rule 7. 118. However and with due respect, this Court finds itself unable to agree with the aforesaid line of reasoning as adopted for reasons which have been recorded in the previous parts of this decision. This Court is of the considered opinion that the conclusions which stand recorded in Manubhai are clearly based on an extremely restrictive interpretation of Section 21 of the Act and....
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.... the Directorate is empowered to return the complaint for rectification and resubmission. Rule 5(6) then prescribes that if a complainant fails to rectify all defects within the time allowed under sub-rule 5, the Director shall form the opinion that there is no prima facie case and present the complaint before the Board for its closure. B. "Information", as per Rule 7, on the other hand, is any material that may be received by the Institute against a member or a firm in a written form. Rule 7, in fact, proceeds on the premise that the information which has been received in the shape of written content is not in Form-I. Rule 7(2) further obliges the Directorate to apprise the sender whether it would like to file a complaint in Form-I. C. As would be evident from the above, the expression "information" has been defined and understood to mean any instruction or knowledge derived from an external source concerning facts or particulars. It has been further explained to include knowledge acquired from investigation, study or instruction. The word "inform" has been understood to mean to impart knowledge, knowledge concerning a matter and the power of an authority to act on any informa....
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....ection 21 of the 1949 Act. The use of the word "any" before information in Section 21 clearly appears to be a conscious attempt by the authors of the statute to confer an expansive meaning upon the word and not confine or whittle it down to the rigours and formality that may be attached to a written complaint that may be received by the Institute. I. The expression "any information" as used in Section 21 thus appears to have been consciously employed so as to enable the Institute to make an investigation with respect to professional conduct of its members untrammelled by rigours of form. J. On an overall consideration of the aforesaid, this Court is of the considered view that the word "information" as appearing in Section 21 cannot be narrowly construed to mean only those facts which may be specifically provided to the Institute. The Act and the Rules have consciously attempted to treat the two separately and distinctively. The phrase "any information" would thus cover within its ambit not only written complaints that may be received, albeit not compliant with Form-I, but also any material or fact that may come to the notice of the Institute pertaining to the professional cond....
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....ation. Information, as has been found by this Court, would extend to any material or fact that may come to the notice of the Institute and from which it may derive knowledge. That material need not necessarily be in the written form or be interpreted as being confined to something which an individual may choose to bring to the notice of the Institute. Q. The Court while arriving at the aforesaid conclusion also bears in mind the significant and pivotal role which the Institute is obliged to discharge while acting as the self-regulating body with respect to the conduct of members and firms. Bearing in mind its primordial obligation to ensure that its members adhere to the strict code of discipline and the high standards of professional conduct which they are liable to maintain, the Court would be doing grave injustice to the plain language of the statute and the evident intent underlying the use of the phrase "any information" in Section 21. R. In fact, if Section 21 were narrowly construed as suggested by the petitioners, it would clearly undermine the duty and obligation of the Institute to examine cases of professional misconduct and restrict it to being able to initiate acti....
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....n, action may be initiated either suo moto or even on the basis of material that may be provided by a third party who may for a variety of reasons be not desirous of filing a formal complaint. V. Rule 7 cannot control or constrict the ambit of Section 21 of the Act. Firstly, and on a fundamental plane, it will be wholly incorrect to either interpret or construe a provision placed in the principal enactment on the basis of what may be contained in a subordinate piece of legislation, as in this case the Rules. A rule cannot possibly be understood or held to be determinative of the scope or content of a provision placed in the parent enactment. Rules, as is well settled, cannot be interpreted in a manner which may curtail the powers that may be vested or be available to be exercised by virtue of the parent enactment. They essentially supplement and are ancillary to the principal provisions contained in the Act. W. Rules cannot possibly be interpreted in a manner which would either scuttle the parent provision or extract or delete something therefrom. If the Court were to accord a judicial imprimatur to such a submission, it would amount to virtually recognizing a right existing in....
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....ry against the petitioners in the facts of the present case. BB. While the Court is not called upon at this stage to return any definitive or final conclusions with respect to the alleged violation of the various SAs' as well as SRE 2410, the material placed on the record would clearly belie the contention of the petitioners that the entire initiation of proceedings was based merely on news reports. CC. The record in fact and to the contrary would appear to indicate that the news reports only triggered a deeper examination by the Institute with respect to the role that had been discharged by the Joint Statutory Auditors and evaluating whether the standards of performance and enquiry as embodied in the various SAs' had been complied with. DD. A mere news report cannot constitute material which may justify the initiation of an enquiry. A newspaper report, as is well settled, cannot and does not constitute evidence per se. A report that may appear in the print media or on a visual news platform, can at best be understood as being an external source from which the Institute may gather or derive knowledge of a particular fact or incident. However, since the initiation of disciplin....