TaxTMI 
TaxTMI 
1986 (10) TMI 37
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....her members of it ? " The appellant is the Institute of Chartered Accountants of India ( "the Institute "). The Institute was created as a body corporate under the Chartered Accountants Act, 1949 (" the Act "), and its members are chartered accountants. The affairs of the Institute are managed by body known as the Council of the Institute, which is headed by a President and a Vice-President below him. There are three Standing Committees of the Council and one of them is the Disciplinary Committee. The Disciplinary Committee consists of the President and the Vice-President ex-officio of the Council, two members elected by the Committee from its members and a third member nominated by the Central Government. Chapter V of the Act contains provisions dealing with cases of misconduct of members of the Institute. Section 21 provides for conducting enquiries relating to such misconduct and the penalties which may be imposed and section 22A provides for an appeal by a member against the imposition of a penalty. As the sections are material, they may be set forth. Section 21. Procedure in inquiries relating to misconduct of members of Institute.-(1) Where on receipt of information by,....
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.... any of the following orders, namely :-- (a) direct that the proceedings be filed, or dismiss the complaint, as the case may be; (b) reprimand the member; (c) remove him from membership of the Institute either permanently or for such period as the High Court thinks fit ; (d) refer the case to the Council for further inquiry and report ...... (8) For the purposes of any inquiry under this section, the Council and the Disciplinary Committee shall have the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908, in respect of the following matters, namely :-- (a) summoning and enforcing the attendance of any person and examining him on oath; (b) the discovery and production of any document ; and (c) receiving evidence on affidavit. 22A. Appeals.-(1) Any member of the Institute aggrieved by any order of the Council imposing on him any of the penalties referred to in sub-section (4) of section 21, may, within thirty days of the date on which the order is communicated to him, prefer an appeal to the High Court : Provided that the High Court may entertain any such appeal after the expiry of the said period of thirty days, if it is s....
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....r solicitors, and the solicitors advised that making available of printed informative material in the form of a brochure would not be in contravention of clauses 6 and 7 in Part I of the First Schedule to the Act or otherwise amount to professional misconduct. A few days later, the Council published an " exposure draft ", setting forth the proposals under consideration by the Council regarding the regulations and ethical rules in respect of management consultancy services by the chartered accountants and invited members to send their suggestions on the proposals. It was pointed out further that the recommendations to be made by the Council would require appropriate amendments in Part of the First Schedule to the Act which contained rules in respect of professional misconduct. Meanwhile, Ratna had prepared a brochure relating to the management consultancy service to be provided by Ferguson & Co. It was stated that the brochure was intended for the use of the clients of the firm who -requested information regarding such services and that it was for limited circulation only, the clients themselves being warned of that restriction. On February 19, 1973, the Council wrote to Fergu....
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....ted to the penalty proposed. Copies of the report of the Disciplinary Committee and the findings of the Council were forwarded to him. On March 5, 1974, Ratna applied for extension of time to enable him to make his representation and the Council granted him time up to April 13, 1974, for that purpose. It may be stated at this stage that parallel proceeding,; were taken in the case of Behl and Bhoopatkar. The brochure was treated as information against them also and on April 14, 1973, they sent their written statements to the Institute. Their submissions were considered by the Council, which being of opinion that they were prima facie guilty of misconduct, referred the matter to the Disciplinary Committee. On January 4, 1974, the Disciplinary Committee granted a full personal hearing to these two respondents, who were represented by counsel. As in the case of Ratna, the Disciplinary Committee made its report to the Council that these two respondents were guilty of professional misconduct under clauses 6 and 7 of Part I of the First Schedule to the Act, and in its meeting on February 16, 1974, the Council held them guilty accordingly and proposed the same penalty as in Ratna's cas....
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....ly. They cannot be regarded as " findings ". The Disciplinary Committee is not vested by the Act with power to render any findings. It is the Council which is empowered to find whether a member is guilty of misconduct. Both section 21(2) and section 21(3) are clear as to that. If, on receipt of the report, the Council finds that the member is not guilty of misconduct, section 21(2) requires it to record its finding accordingly, and to direct that the proceedings shall be filed or the complaint shall be dismissed. If, on the other hand, the Council finds that the member is guilty of misconduct, section 21(3) requires it to record finding accordingly, and thereafter to proceed in the manner laid down in the succeeding sub-sections. So the finding by the Council is the determinative decision as to the guilt of the member, and because it is determinative, the Act requires it to be recorded. A responsibility so grave as the determination that a member is guilty of misconduct, and the recording of that finding, has been specifically assigned by the Act to the governing body, the Council. It is also apparent that it is only upon finding being recorded by the Council that the Act moves for....
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....that the power to find and record whether member is guilty of misconduct has been specifically entrusted by the Act to the entire Council itself and not to a few of its members who constitute the Disciplinary Committee. It is the character and complexion of the proceeding considered in conjunction with the structure of power constituted by the Act which leads us to the conclusion that the member is entitled to a hearing by the Council before it can find him guilty. Upon the approach which has found favour with us, we find no relevance in James Edward Jeffs v. New Zealand Dairy Production and Marketing Board [1967] 1 AC 551 (PC) cited on behalf of the appellant. The court made observations there of a general nature and indicated the circumstances when evidence could be recorded and submissions of the parties heard by a person other than the decision-making authority. Those observations can have no play in a power structure such as the one before us. Our attention has been invited to the difference between the terms in which section 21(3) and section 21(4) have been enacted and, it is pointed out, that while in section 21(4), Parliament has indicated that an opportunity of being h....
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....ng. The principles of natural justice must be read into the unoccupied interstices of the statute unless there is a clear mandate to the contrary. It is then urged by learned counsel for the appellant that the provision of an appeal under section 22A of the Act is a complete safeguard against any insufficiency in the original proceedings before the Council, and it is not mandatory that the member should be heard by the Council before it proceeds to record its finding. Section 22A of the Act entitles a member to prefer an appeal to the High Court against an order of the Council imposing a penalty under section 21(4) of the Act. It is pointed out that no limitation has been imposed on the scope of the appeal and that an appellant is entitled to urge before the High Court every ground which was available to him before the Council. Any insufficiency, it is said, can be cured by resort to such appeal. Learned counsel apparently has in mind the view taken in some cases that an appeal provides an adequate remedy for a defect in procedure during the original proceeding. Some of those cases are mentioned in Sir William Wade's erudite and classic work on " Administrative Law ". But, as th....
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....ury LS soon as it is made, an injury not capable of being entirely erased when the error is corrected on subsequent appeal. For instance, as in the present case, where a member of a highly respected and publicly trusted profession is found guilty of misconduct and suffers penalty, the damage to his professional reputation can be immediate and far-reaching. " Not all the King's horses and all the King's men " can ever salvage the situation completely, notwithstanding the widest scope provided to an appeal. To many a man, his professional reputation is his most valuable possession. It affects his standing and dignity among his fellow members in the profession, and guarantees the esteem of his clientele. It is often the carefully garnered fruit of a long period of scrupulous, conscientious and diligent industry. It is the portrait of his professional honour. In a world said to be notorious for its blase attitude towards the noble values of an earlier generation, man's professional reputation is still his most sensitive pride. In such case, after the blow suffered by the initial decision, it is difficult to contemplate complete restitution through an appellate decision. Such a case is ....
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....is guilty of misconduct. There is nothing in section 21 of the Act, however, to indicate whether the members of the Disciplinary Committee should be excluded when the Council enters upon its task. The answer must be found from the general scheme of the Act and the fundamental principles of law. There can be no dispute that the function of the Disciplinary Committee of holding an enquiry under section 21(1) of the Act into the conduct of the member calls for a recording of evidence by the Committee. Its duty does not end there. It must consider the evidence and come to its conclusions. As section 21(2) of the Act plainly says, it must report " the result of its enquiry to the Council. In the absence of express or implied statutory intendment to the contrary, it appears to us that the members of such a Committee would be disqualified from participating in the deliberations of the Council when it proceeds to consider the report in order to find whether the member is guilty of misconduct. For, that alone would be consistent with the fundamental principle that justice must not only be done but must also appear to be done. The nature of the function discharged by the Council in render....
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....und of bias would have been excluded if the statute had expressed itself to the contrary. But nowhere do we find in the Act any evidence to establish such exclusion. It is true that by virtue of section 17(3), it is obligatory that the Disciplinary Committee should be composed of the President and the Vice-President of the Council and three other members of the Council. While that is so, there is nothing in the Act to suggest that the meetings of the Council must always be presided over by the President or the Vice-President, and that no meeting can be held in their absence. We find that regulation 140 framed under the Act contemplates that the Council may meet in the absence of the President and the Vice-President, and provides that in their absence, a member elected from among the members who are present should preside. There is an element of flexibility which makes it possible for the Council to consider the report of the Disciplinary Committee without the participation of the members of the Committee. Because of the " flexibility " potential in the scheme, the doctrine of necessity to which reference has been made on behalf of the Institute cannot come into play. We must admit ....
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....eview under a two-stage scheme of inquiry into allegations of professional misconduct. No doubt, characterization of the proceedings as an appeal may lend weight to the contention of the appellant solicitor, but the principle underlying his position rises above any such formalistic approach. The principle is immanent in the ancient maxim nemo judex in causa sua, expressed by Coke in Dr. Benham's case [1610] 8 Co. Rep. 11 3b, 77 E.R. 646." The conclusion reached by us has not been an easy one. The authorities on the subject have oscillated from one extreme to the other, and an analysis of the cases points at times to some rather slender element in the mosaic of facts which has influenced the outcome. There is good reason ultimately for adopting a liberal view, for as has been observed by the late Professor S.A. de Smith in his Judicial Review of Administrative Action, Fourth Edition, p. 261 : "...... a report will normally include a statement of findings and recommendations, which may be controverted before the parent body ; and in such a case the participation of members of the sub-committee in the final decision may be of dubious validity. The problem is not merely one of st....