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2024 (2) TMI 493
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....mitted within a particular time frame, i.e., by the 7th of the succeeding month. The service provider was also required to report any suspicious activity or foul play pertaining to the transactions under review, to the Chief Executive Officer of the Complainant bank. On 27.09.2009, a series of circuitous transactions (hereinafter referred to as 'subject transaction') involving large sums of money are said to have taken place in certain accounts of the branch, which were neither regular nor normal in nature. However, in the audit report submitted to the Complainant bank, these transactions were not flagged. 2. According to the Complainant, the main purpose of engaging the firm for audit related work was to assist it in timely detection of irregularities/ lapses, besides observing as to whether the transactions were within the policy parameters as laid down by the Reserve Bank of India. In having failed to point out the suspicious transactions that took place on 27.09.2009, the Complainant alleges that the firm had utterly failed to discharge its professional obligation under the terms, as agreed. 3. It is in this background that the Complainant wrote to the firm, vide lette....
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.... us. 9. According to the Ld. Counsel for the Appellant, when the Director (Discipline) was of the prima facie opinion that the Appellant was not guilty of the alleged misconduct, the Board had two options available to it according to Section 21 A (4) of the Act. It could either close the matter at that very stage or direct the Director (Discipline) to further investigate and it could not have assumed the role of the Director and acted as the investigating agency by referring the matter to the Disciplinary Committee. It is submitted that there is no substantive basis in the parent Act for the action impugned in this appeal. The Ld. Counsel argued that the impugned Rule, being a delegated legislation, cannot provide for any action which is not contemplated under the parent Act. 10. Per contra, Ld. Counsel for the Respondent has sought to justify the correctness of the view taken in the impugned order. According to him, if the argument of the Appellant is accepted, the result would be that the Director (Discipline), who is merely a Secretary to the Board of Discipline, would have greater powers than the Board itself. This is because the Board would not be able to overrule the pr....
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....rd 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 member is guilty of a professional or other misconduct mentioned in the First Schedule, it shall afford to the member a pportunity of being heard before making any order against him and may thereafter take any one or more of the following actions, namely: -- (a) reprimand the member. (b) remove the name of the member from the Register up to a period of three months. (c) impose such fi....
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....residing Officer and Members of the Tribunal, place of meetings and allowances to be paid to them under sub-section (3) of Section 10B4; (c) the procedure of investigation under sub-section (4) of Section 21 ; (d) the procedure while considering the cases by the Disciplinary Committee under sub-section (2), and the fixation of allowances of the nominated members under subsection (4) of Section 21B; (e) the allowances and terms and conditions of service of the Chairperson and members of the Authority and the manner of meeting expenditure by the Council under Section 22C; (f) the procedure to be followed by the Board in its meetings under Section 28C ; and (g) the terms and conditions of service of the Chairperson and members of the Board under sub-section (1) of Section 28D.] (emphasis supplied) Rule 9 of the Rules, 2007 is extracted hereinbelow: Rule 9. Examination of the Complaint (1) The Director shall examine the complaint, written statement, if any, rejoinder, if any, and other additional particulars or documents, if any, and form his prima facie opinion as to whether the member or the firm is guilty or not of an....
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....of any information or complaint, shall arrive at a prima facie opinion on the occurrence of the alleged misconduct. Section 21(3) states that should the Director (Discipline) arrive at a prima facie opinion that the member is guilty of professional misconduct, he shall refer the matter to the Board of Discipline or the Disciplinary Committee, depending on whether the alleged misconduct falls within the First Schedule or the Second Schedule or both. If the alleged misconduct falls within the First Schedule, the matter is placed before the Board of Discipline and if it falls within the Second Schedule or in both the Schedules, the matter is placed before the Disciplinary Committee. Section 21(4) provides that the procedure for investigation would be as prescribed under the relevant rules. Chartered Accountants' (Procedure of Investigation of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 In the event where the Complainant wishes to withdraw his/her complaint, Section 21(5) provides that the Director (Discipline) shall place the request for withdrawal before the Board of Discipline or the Disciplinary Committee, as the case may be, and the Board or Committee would....
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....een examined in the instant case. This can be found in sub-clause (3) of Rule 9. It provides that the Board can accept the opinion of the Director (Discipline) and pass an order for closure (Rule 9(3)(a)). Where the Board disagrees with the opinion of the Director (Discipline), it may proceed under Chapter IV of the Rules, 2007 if the matter pertains to the First Schedule or it may advise the Director to further investigate the matter. Similarly, the Board could refer the matter to the Disciplinary Committee for action under Chapter V if the matter pertains to the Second Schedule or it could advise the Director (Discipline) to conduct further investigation. Analysis and Findings: 20. Now, let us contrast Section 21A (4) with Rule 9(3) to examine if there is any substance in the argument that Rule 9(3) is ultra vires Section 21A (4). In the event the Board disagrees with the opinion of the Director (Discipline), Section 21A(4) provides that the Board may advise the Director to further investigate the matter. However, Rule 9(3) does not limit itself to just this option. It also enables the Board to straightaway proceed to act by itself or refer the matter to the Disciplinary Co....
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....cific heads for exercising the rule-making power. In that sense, the power to make rules generally for carrying out the provisions of the Act is found in Section 29A(1). Section 29A (2) is only an illustrative list of subjects with respect to which the Central Government may make rules. The illustrative list of subjects cannot limit the scope of general power available under the wider rule-making power found in Section 29A(1). 24. Experience of legislative drafting in India has shown that, generally, the delegation of power to formulate rules follows a standardized pattern within statutes. Typically, a section of the statute grants this authority in broad terms, using phrases like 'to carry out the provisions of this Act' or 'to carry out the purposes of this Act.' Subsequently, another sub-section details specific matters or areas for which the delegated power can be exercised, often employing language such as 'in particular and without prejudice to the generality of the foregoing power.' Judicial interpretation of such provisions underscores that the specific enumeration is illustrative and should not be construed as limiting the scope of the general po....
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....e of State of Kerala v. Shri M. Appukutty (1963) 14 STC 242, the provisions of Section 19 (1) and (2) (f) of the Madras General Sales Tax Act of 1939 came up for consideration of this Court. It was unsuccessfully argued therein that Rule 17(1) was ultra vires the rule making power specifically enumerated in Section 19(2)(f). 29. The relevant provisions involved there were similar in form to the applicable provisions in the instant case. Section 19 (1),(2),2(f) read as follows: (1) The State Government may make rules to carry out the purposes of this Act. (2) In particular and without prejudice to the generality of foregoing power such rules may provide for-- ***** (f) the assessment to tax under this Act of any turnover which has escaped assessment and the period within which such assessment may be made, not exceeding three years; Dealing with the objection raised, this Court observed:-- "..... Rule 17 (1) and (3A) ex facie properly fall under Section 19(2)(f). In any event as was said by the Privy Council in King Emperor v. Sibnath Banerji MANU/PR/0024/1945, the rulemaking power is conferred by Sub-section (1) of that section and the fu....
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....ed that the bye-laws were invalid for the additional reason that they were inconsistent with Section 241 of the Act. Rejecting the said contentions, this Court observed as follows: "Even if the said clauses did not justify the impugned byelaw, there can be little doubt that the said bye-laws would be justified by the general power conferred on the Boards by s. 298(1). It is well-settled that the specific provisions such as are contained in the several clauses of s. 298(2) are merely illustrative and they cannot be read as restrictive of the generality of powers prescribed by s. 298(1) vide Emperor v. Sibnath Banerji & Ors MANU/PR/0024/1945. If the powers specified by s. 298(1) are very wide and they take in within their scope bye-laws like the ones with which we are concerned in the present appeal, it cannot be said that the powers enumerated under s. 298(2) control the general words used by s. 298(1). These latter clauses merely illustrate and do not exhaust all the powers conferred on the Board, so that any cases not falling within the powers specified by section 298(2) may well be protected by s. 298(1), provided, of course, the impugned bye-laws can be justified by ref....
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....mining if the impugned rule is intra vires/ultra vires the scope of delegated power, Courts have applied the 'generality vs enumeration' principle. (e) The "generality vs enumeration" principle lays down that, where a statute confers particular powers without prejudice to the generality of a general power already conferred, the particular powers are only illustrative of the general power, and do not in any way restrict the general power. In that sense, even if the impugned rule does not fall within the enumerated heads, that by itself will not determine if the rule is ultra vires/intra vires. It must be further examined if the impugned rule can be upheld by reference to the scope of the general power. (f) The delegated power to legislate by making rules 'for carrying out the purposes of the Act' is a general delegation, without laying down any guidelines as such. When such a power is given, it may be permissible to find out the object of the enactment and then see if the rules framed satisfy the Act of having been so framed as to fall within the scope of such general power confirmed. (g) However, it must be remembered that such power delegated by an enact....
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....horises the Central Government to make rules for carrying out the purposes of the Act. 35. Since the general delegation of power is without any specific guideline, it may be necessary to understand the object of the Act vis-à-vis the chapter on Misconduct. It is only then can we examine whether the impugned rule falls within the scope of such general power conferred. Object of the CA Act vis a vis Chapter on Misconduct: 36. The Chartered Accountants Act, 1949, is a legislation that governs the regulation of the chartered accountancy profession in India. The chapter on "Misconduct" in the Chartered Accountants Act, 1949, plays a crucial role in maintaining the ethical standards of the profession in India. Its main objectives are to set ethical guidelines, prevent actions that may compromise public interests, ensure accountability among chartered accountants, and preserve the profession's reputation. This Chapter defines and prohibits professional misconduct, while aiming to uphold honesty, integrity, and professionalism in the practice of chartered accountancy. By addressing instances of misconduct, it establishes a framework for accountability, reinforcing the c....