# [1958] 1 S.C.R. 371

- **Citation:** [1958] 1 S.C.R. 371
- **Court:** Supreme Court of India
- **Decided:** 1955-01-12
- **Case number:** Civil Appeal No. 170 of 1956
- **Bench:** Bhagwati, S.K. Das, Gajendragadkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1958-1-s-c-r-371-1464
- **Pages:** 16

## Headnote

Chartered Accou11(ant-Misco11d11ct during appoimment as
liquidator by
Court-~/' amounts to prof'essional . misconductReference-Po\l'er ff' High Court-Chartered Acco1111ta11ts Act, 1949
(XXXV/JI of 1949) s.1·. 2(2), 21 and 22.
Respondent, a chartered accountant and a member of the
Institute of Chartered Accountants.
was appointed liquidator of
three insurance companies in pursuance of the orders of the High
1957
September 10
372
SUPREME COURT REPORTS
[1958J
1957
Court. He received records, ·cash and securities on behalf of these
h C
.1 if h companies. The Assistant Controller of Insurance found that his
1;~t~tut~u:J'ch0:1:,._ conduct as liquidator was wholly
unsatisfactory and. that ~e
ed Accountants of would not even reply to the letters addressed to him.
His
India & Another appointment was cancelled and another person was appointed.
v. kh .
In spite of repeated demands he failed to return all the records,
B. Mu erJea cash and securities. A complaint was lodged against him with
Gajendragadkar J. the Council of the Institute of Chartered Accountants. After
inquiry the respondent was found guilty of misconduct, and the
report was forwarded by the
Council to the High Court for
necessary action under s. 21 of the Chartered Accountants Act,
1949. · The High Court rejected the reference on the ground that
the conduct of which the respondent was found guilty could not
be said to be professional misconduct and did not attract the
provisions of ss. 21 and 22 of the Act.
Held, that the respondent, when working as a liquidator,
must be deemed to have been in practice as a chartered accountant
within the meaning of s. 2(2) of the Act. The definition of -
misconduct in s. 22 is inclusive and the Council may hold
an
inquiry and find a member guilty of conduct which, in its opinion,
renders him unlit to be a member of the Institute, even though
such conduct does not attract any of the provisions of the schedule
referred to in s. 22. The conduct of the respondent was
grossly improper and unworthy and amounted to professional
'misconduct within the meaning of the Act.
In a reference under s. 21 of the Act the High Court has
ample powers to adopt any course which would enab\e it to do
complete justice between the parties.
It can examine the
correctness of the findings recorded by the Council or refer the
matter back for further inquiry and call for a fresh finding.
The
High Court is not bound to deal with the merits of the finding as
ii has been recorded and either to accept or reject it.
C1v1L
APPELLATE
JURISDICTION:
Civil Appeal
No. 170 of 1956.
Appeal by special leave from the judgment and
order dated the 12th January, 1955, of the Calcutta
High Court in exercise of its Special Jurisdiction under
the Chartered Accountants Act,
1949, in Matter
No. 107 of 1954.
M.C. Setalvad, Attorney-General for India, S.N.
Andley, J.B. Dadachanji and Rameshwar Nath, for the
appellants.
Aswinl Kumar
Ghose, T. S. Venkataraman
and
K. R. Chaudhury, for the respondents.
SUPREME
COURT REPORTS
373
1957
1957, September 10. The following Judgment of the
Court was delivered by
,
The Council of the
Institute of Charter·
GAJENDRAGADKAR J.-The material facts leading ed A~countimts of
1
. d'
d
b
India & Another
to the present appea are not m 1spute an may e
v.
conveniently stated at the outset. On July 17, 1933,
B. Mukherjea
the respondent was enrolled as a registered account- Gajendragadkar J.
ant under the Auditors Certificate Rules, 1932. When
the Chartered Accountants Act, 1949, came into
operation, the respondent's name was entere(i as a
Member of the Institute of Chartered Accountants
of In.dia on July 1, 1949.
On September 13, 1950,
the respondent was appointed as Liquidator of three
companies. The respondent obtained refund of the
sums and securities deposited on behalf of the three
companies with the Reserve Bank
of India. He,
however, made no
report about the progress of
liquidation of the said · three companies. Repeated
requests made to him by the Assistant C

## Text

S.C.R. SUPREME
COURT
REPORTS
371
proceedings adopted by him in the present litigation
1957
he was probably not advised to make a proper appliKanai Lal Sur
cation under s .. 5. sub-s .. (2) of the Ordinance; but that
Para';;;nidhi
is the only protection that he and judgment-debtors of
sadhukhan
his class were entitled to after the amending Ordinance c . d-dk J
of 1952 came into force. It would, therefore, not be
a,en raga
ar .
reasonable to complain that no protection whatever
has been given to this .class of thika tenants. It may
be that the extent of the protection now afforded to
this class may not be as wide as it originally was
under s. 28 of Act II .of 1949 but the deletion of s. 28
clearly indicates that the Legislature wanted to revise
its policy in this matter. The position, therefore, is
that the conclusion which follows from a reasonable
construction of s. 5, sub-s. (1) is corroborated by the
"deletion of s. 28 from the Act and by the provision of
s. 5, sub-s. (2) of the amending Ordinance of 1952 and
s. 9 of the amending Act VI of 1953. We must,
accordingly, hold that the Calcutta High Court was
right in rejecting the appellant's argument that civil
courts had no jurisdiction to entertain the execution
petition filed by the respondent against the appellant.
Jn the result, the appeal fails and must be dismissed
with costs.
·
Appeal dismissed.
THE COUNClL OF THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF
INDIA & ANOTHER·
1'.
B. MUKHERJEA
(BHAGWATI, S.K. DAS and GAJENDRAGADKAR, JJ.)
Chartered Accou11(ant-Misco11d11ct during appoimment as
liquidator by
Court-~/' amounts to prof'essional . misconductReference-Po\l'er ff' High Court-Chartered Acco1111ta11ts Act, 1949
(XXXV/JI of 1949) s.1·. 2(2), 21 and 22.
Respondent, a chartered accountant and a member of the
Institute of Chartered Accountants.
was appointed liquidator of
three insurance companies in pursuance of the orders of the High
1957
September 10
372
SUPREME COURT REPORTS
[1958J
1957
Court. He received records, ·cash and securities on behalf of these
h C
.1 if h companies. The Assistant Controller of Insurance found that his
1;~t~tut~u:J'ch0:1:,._ conduct as liquidator was wholly
unsatisfactory and. that ~e
ed Accountants of would not even reply to the letters addressed to him.
His
India & Another appointment was cancelled and another person was appointed.
v. kh .
In spite of repeated demands he failed to return all the records,
B. Mu erJea cash and securities. A complaint was lodged against him with
Gajendragadkar J. the Council of the Institute of Chartered Accountants. After
inquiry the respondent was found guilty of misconduct, and the
report was forwarded by the
Council to the High Court for
necessary action under s. 21 of the Chartered Accountants Act,
1949. · The High Court rejected the reference on the ground that
the conduct of which the respondent was found guilty could not
be said to be professional misconduct and did not attract the
provisions of ss. 21 and 22 of the Act.
Held, that the respondent, when working as a liquidator,
must be deemed to have been in practice as a chartered accountant
within the meaning of s. 2(2) of the Act. The definition of -
misconduct in s. 22 is inclusive and the Council may hold
an
inquiry and find a member guilty of conduct which, in its opinion,
renders him unlit to be a member of the Institute, even though
such conduct does not attract any of the provisions of the schedule
referred to in s. 22. The conduct of the respondent was
grossly improper and unworthy and amounted to professional
'misconduct within the meaning of the Act.
In a reference under s. 21 of the Act the High Court has
ample powers to adopt any course which would enab\e it to do
complete justice between the parties.
It can examine the
correctness of the findings recorded by the Council or refer the
matter back for further inquiry and call for a fresh finding.
The
High Court is not bound to deal with the merits of the finding as
ii has been recorded and either to accept or reject it.
C1v1L
APPELLATE
JURISDICTION:
Civil Appeal
No. 170 of 1956.
Appeal by special leave from the judgment and
order dated the 12th January, 1955, of the Calcutta
High Court in exercise of its Special Jurisdiction under
the Chartered Accountants Act,
1949, in Matter
No. 107 of 1954.
M.C. Setalvad, Attorney-General for India, S.N.
Andley, J.B. Dadachanji and Rameshwar Nath, for the
appellants.
Aswinl Kumar
Ghose, T. S. Venkataraman
and
K. R. Chaudhury, for the respondents.
SUPREME
COURT REPORTS
373
1957
1957, September 10. The following Judgment of the
Court was delivered by
,
The Council of the
Institute of Charter·
GAJENDRAGADKAR J.-The material facts leading ed A~countimts of
1
. d'
d
b
India & Another
to the present appea are not m 1spute an may e
v.
conveniently stated at the outset. On July 17, 1933,
B. Mukherjea
the respondent was enrolled as a registered account- Gajendragadkar J.
ant under the Auditors Certificate Rules, 1932. When
the Chartered Accountants Act, 1949, came into
operation, the respondent's name was entere(i as a
Member of the Institute of Chartered Accountants
of In.dia on July 1, 1949.
On September 13, 1950,
the respondent was appointed as Liquidator of three
companies. The respondent obtained refund of the
sums and securities deposited on behalf of the three
companies with the Reserve Bank
of India. He,
however, made no
report about the progress of
liquidation of the said · three companies. Repeated
requests made to him by the Assistant Controller of
Insurance found no response. As
Liquidator the
respondent gave a cheque to Shri S. K.
Mandal,
Solicitor to the Central
Government at Calcutta,
towards payment of the taxed costs in the windingup
proceedings of one of the companies. The said
cheque was, however, returned dishonoured on the
ground that the payment had not been arranged for.
When the Assistant Controller of Insurance found
that the conduct of the respondent as Liquidator was
wholly unsatisfactory and that he would not even
show the ordinary courtesy of replying to the letters
addressed to him, he proceeded to cancel the appointment of the respondent as Liquidator by his letter
dated October 29, 1952. The respondent was then
called upon to hand over all books of account, records,
documents, etc., to Shri N.N. Das, who was appointed
a Liquidator in his place. Shri Das as well as the
Assistant Controller of Insurance then made repeated
demands on the respondent to deliver to Shri Das the
assets and records of the three companies. It is
common ground that the respondent had with him
securities of the value of Rs. 11,950 and a cash sum
of Rs. 642 on account of the United Common
374
SUPREME COURT REPORTS
(1958 j
1957
Provident Insurance Co. Ltd. He had also with him
The Co1-;;;cilof1he securities to the value of Rs. 12,100 on account of the
Insli1111e of Charier- Asiatic Provident Co. Ltd., and securities anll cash
ed Accounlan/s of
f h
c· .
f
j d.
p
.d
India & Ano1her on account o t e
1t1zens o
. n 1a
rov1 ent
8 :i· kl
.
Insurance Co.
Ltd.
Out of these amounts
the
·
:'__!_"'ea respondent returned only securities of the face value
Gajemlragadkar J. of Rs. 10,000 and Rs. 350 of Asiatic Provident Co.
Ltd., and United Common Provident Insurance Co.
Ltd., respectively.
He failed to send any further
securities or cash held by him on account of the said
three companies. It was
at this
stage that
a
complaint was lodged against the respondent with
the Council of the Institute of Chartered Accountants
of India in Calcutta.
As required by the provisions
of the Act, the disciplinary committee of the Council
inquired into the matter.
Notice was served on the
respondent but he filed no written statements within
the time fixed.
On August
1, 1953, a letter was
received
from the respondent that he
was ill and
was unable to attend
personally. The respondent
had also requested for the adjournment of the case.
Proceedings were accordingly adjourned to August
29, 1953,
on which
date
the
respondent was
represented by a counsel who filed the respondent's
affidavit stating that he was prepared to hand over
the entire cash, books of.account, etc., to the newly
appointed Liquidator without rendering the necessary
accounts. ·It appears that Shri Das, the subsequently
appointed
Liquidator, gave
evidence before
the
disciplinary committee. Though several opportunities
were given to the respondent to appear before the
disciplinary committee he failed to appear or to take
part in the proceedings.
Ultimately the committee
made its report on September 13, 1953, and found
that the respondent was guilty of gross negligence in
the conduct of his professional duty in not handing
over charge of the assets and the books of account of
the said companies to the newly appointed
liquidator. This report was considered by the
Council
itself as required by the Act.
The
Council agreed
with
the
finding
recorded by the
disciplinary
committee in substance, but took the view that the
'
S.C.R.
SUPREME COURT REPORTS
375
acts and omissions of the respondent were
more
1951
serious
than what can be described as
gross The.Councilofthe
negligence. The finding of the Council
was then Institute of Charter-
•
.
ed Accountants of
forwarded to the High Court of Judicature at Calcutta
India & Another
as required by section 21 (I) of the Act and the
B. Ifukherjea
matter was heard by the learned Chief Justice and
Mr. Justice Lahiri. By their judgment delivereo on Gaje11dragadkar J.
January 12, 1955, the reference was rejected on the
ground that no action could be taken against the
respondent under the Act though the facts proved
against the respondent showed that "he had been
guilty of grossly improper conduct if not dishonesty".
On these facts the main point which arises for our
decision is what is the nature, scope and extent of the
disciplinary jurisdiction
which can be·
exercised
under the
provisions of this
Act
against
the
respondept.
It would now be necessary to examine the scheme
of the
material
provisions of the Act. This Act
came into force in 1949 and it was passed, because
the Legislature thought it expedient to make provision
for the regulation of professional accountants and for
that purpose it has provided for the establishment of
the Institute of Chartered Accountants. Section 2,
sub-s. (1) (b) defines a Chartered Accountant as
meaning "a person who is a member of the Institute
and who is in practice". Section 2, sub-s. (2) provides
that a member of the Institute shall be deemed to be
in practice when, individually or in partnership with
chartered
accountants, he, in consideration of the
remuneration received or to be received, does any of
the acts mentioned in the following 4 sub-clauses:
...... Sub-clause (iv) is relevant for our purpose :
"S. 2 (2) iv) : " (Where a member) renders such
other services as in the opinion of the Council are or
may be rendered by a chartered accountant, (he is
deemed. to be in practice)."
Section 4 provides for the entry of names in the
register of chartered accountants. Section 5 divides
the members of the Institute into two classes designated respectively as Associates and Fellows.
Section
6 lays down that no member of the Institute shall be
376
SUPREME COURT REPORTS
[1958]
1957
entitled to practise unless he has obtained from the
TheCouncitofrhe Council a certificate of practice. Under s. 7, every
Institute o/Charrer-member of the Institute in practice shall be designated
ed Accountants of
India & Another as a chartered accountant and no person practising
8
~ukherjea the profession of accountancy in India shall use any
. · -
other designation whether in addition thereto or in
Ga1enaragadkar J. substitution therefor. Section 8 deals with disabilities.
Any person who incurs any
one of the disabilities
enumerated in sub-els. (i) to (vi) of s. 8 shall not be
entitled to have his name entered in or borne on the
Register. Sub-clause (v) deals with the disability arising
by reason of conviction by a competent court whether
within or without India of an offence involving moral
turpitude and
punishable with
transportation or
imprisonment or of an offence not of a"technical
nature committed by him in his professional capacity
unless in respect of the offence committed he has
either been granted a pardon or, on an application
made by him in this behalf, the Central Government
has, by an order in· writing, removed the disability.
Sub-clause (vi) deals with the disability in cases where
the chartered accountant is found on an inquiry to be
guilty of conduct which renders him unfit to be a
member of the Institute. Chapter III deals with the
constitution of the Council, the committees of the
Council and the finances of the Council. Chapter IV
deals with the register of members and the removal
from the Register of the
name of a chartered
accountant, as provided bys. 20, sub-els. (a),(b) and (c).
Under s. 20, sub-s. (2), it is provided that the Council
shall remove from the Register the name of any
member who has been found by the High Court to
have been guilty of conduct which renders him unfit to
be a member of the Institute. Chapter V deals with
the question of misconduct. It consists of ss. 21 and
22. Chapter VI deals with the constitution and functions of the Regional Councils; Chapter VII deals with
penalties and Chapter VIII deals with miscellaneous
matters. Section 21 deals with the procedure of
enquiries relating to misconduct of members of the
Institute. It reads thus :
S.C.R.
SUPREME COURT REPORTS
377
"S. 21. (1)-Where on receipt of information or on
. 1957
receipt of a complaint made to it, the C<;mncil is of The council of the
opinion that any member of the Institute has been Institute of Charter·
'l
f
d
h' h 'f
d
']J
d
h'
ed Accountants of
gm ty o con uct w 1c , 1 prove , WI
ren er 1m India & Another
unfit to be a member of the Institute, or where a
B Mv. k' .
1 .
.
b
f h
I
.
h
b
.
u r1er1ea
comp amt agamst a mem er o t e nstttute as een
-
made by or on behalf of the Central Government, the Gajendragadkar J.
Council shall cause an inquiry to be held in such
manner as may be prescribed, and the finding of the
Council shall be forwarded to the High Court.
(2) ................. .
(3) ................. .
( 4) ••...............• "
Sub-sections (2), (3) and ( 4) of s. 21 deal with the powers
of the High Court in dealing with the reference made
to it, under s. 21. sub-s. (1). Section 22 defi,nes 'misconduct. It reads thus :
"S. 22. For the purposes of this Act, the expression
"conduct which, if proved, will render a person unfit
to be a member of the Institute " shall be deemed to
include any act or omission specified in the Schedule,
but nothing in this section shall be construed to limit
or abridge in any way the power conferred on the
Council under sub-s. (1) of section 21 to inquire into
the conduct of any member of the Institute under any
other circumstanc~s."
The learned Judges of the Calcutta High Court have
held
that the conduct of which the respondent is
proved to have been guilty cannot be said to be
professional misconduct properly so-called and cannot,
therefore, attract the provisions of ss. 21 and 22 of
the Act. "There, thus, seems
to be no room for
contending", observes the learned Chief Justice in his
Judgment, "that misconduct not connected with the
exercise of the profession is also within the ambit of
the Act,
provided it involves moral turpitude or
appears to render a person unworthy to remain a
member of a responsible profession". It has also been
found by the learned Judges that even if they were to
hold that the misconduct
proved against the
respondent attracted the provisions of ss. 21 and 22 of
378
SUPREME
COURT
REPORTS
[1958)
!957
the. Act it. would not be open to them to take any
Th• Councit of1hc action agamst the respondent on that ground because
111stifllte of Charter- the Institute cannot expect the Court to take action
ed Accou111ants of .
.
India & A1101hcr m the present case on the footmg that the respondent
B. Mn~iierjca had be~n guilty o~ misc?nduct otherwise than in his
-
professional capacity
smce that 1s not the finding
GujeudragadkarJ. which the Council arrived at and which is reported to
the Court. It is the correctness of these findings that
is challenged before us by the
learned
AttorneyGeneral. He contends that the learned Judges of the
Calcutta High Court have put an
unduly restricted
and narrow construction on the provisions of ss. 21
and
22 in holding that the respondent's conduct
does not amount to professional misconduct; and he
has also urged that the technical reason given by the
learned Judges in not taking any action against the
respondent even
if they had accepted the broader
interpretation of the two said sections proceeds on a
misconception about the nature and extent of the
powers
of the High Court while hearing references
made to it under the provisions of s. 21, sub-ss. (2), (3)
and (4) . In our opinion, the contentions raised by
the learned Attorney-General are well-founded
and
must be upheld.
Let us first consider whether the conduct of the
respondent amounts to professional misconduct or not.
In dealing with this question it is necessary to bear in
mind the provisions of s. 2, sub-s. (2) (iv) of the Act.
A member _of the Institute under this provisions shall
be deemed to be in practice when he renders
such
other services as in the opinion of the Council are or
may be rendered by a chartered accountant.
In other
words, just as a member of the Institute who engages
himself in the practice of accountancy
is by such
conduct deemed to be_ in practice as a chartered
accountant, so is he d~emed to be in practice as a
chartered accounta11t when he renders other services
mentioned in s. 2, sub-s. (2) iv). What other services
attract the provisions of this sub-section has to be determined in the light of the regulations framed under provisions of this Act. Section 30 of the Act confers power
on the Council to make regulations by notification
S.C.R.
SUPREME COURT REPORTS
379
in the Gazette of India for the purpose of carrying
1957
out the object of the Act and it provides that a copy The Council of the
of such regulation should be sent to each member ofl11stit111eofCharter--
h
.
S
.
30
b
2
h
l ed Accountants oj
t e Institute.
ect10n
, su -s.
sets out t e severa
India & Another
topics in respect of which regulations can be framed
B u vkh .
though, as usual, it provides that the enumeration of
· ~er,ea
the different topics is without prejudice to the genera- Gajendragadkar J.
lity of the powers conferred bys. 30, sub-s.(1). Sub-s. (4)
lays down that, notwithstanding anything contained
in sub-ss. (1) and (2), the Central Government may
frame the first regulations for the purposes mentioned
in the section and such regulations shall be deemed to
have been made by the Council and shall remain in
force from tfie date of coming into force of this Act until
they are amended, altered or revoked by the Council.
Regulation 78 is one of the regulations originally
framed by the Central Government under s. 30, subs. (4~. It reads thus :
' Regulation
78. Without
prejudice
to the
discretion vested in the Council
in this behalf,
a
Chartered Accountant may act as liquidator, trustee,
executor, administrator, arbitrator, receiver, adviser,
or as representative for costing financial and taxation
matter or may take up an appointment that may be
made by Central or State Governments and Courts of
law or any Legal Authority, or may act as Secretary
in his professional capacity not being an employment
on a salary-cum-full-time basis."
The last clause has been added by the Council by a
notification dated August 22, 1953. Now it is clear
that when the respondent accepted his appointment
as liquidator of the three companies in question he
agreed to work as a liquidator in pursuance of an
order passed by the High Court of Judicature at
Calcutta and there can be na doubt that in working
as such liquidator he was rendering services which in
the opinion of the Council
may be rendered by a
chartered accountant. The provisions of Regulation 78.
must inevitably be considered
in the light of s. 2,
sub-s. (2), cl. (iv) and the result of considering the two
provisions together
obviously
is that when
the
respondent was working as a liquidator in pursuance
of an order passed by the Calcutta High Court he-
380
SUPREME COURT REPORTS
[1958]
1957
must be deemed to be in practice within the meaning
The Council of the of s. 2, sub-s. (2). We feel no difficulty in holding that
Institute of Charter- chartered accountants who render services falling
ed Accountants of
. h"
2
b
(2)
1 c· )
h
. I d
b
India & Another wit m s. , su -s.
, c . IV are as muc en tit e to e
B M ih .
deemed to be in practice as those whose duties attract
· !:._"1'
0
the provisions of els. (i), (ii) and (iii) of sub-s. (2). If
Gajendragadkar J. that be the true
position it is difficult to accept the
view that the conduct of the respondent while he
discharged his duties as a liquidator is not
the
professional conduct of a chartered accountant even
within the narrow and restricted sense of the term.
If, while acting as liquidator, the respondent must be
deemed to be in practice as a chartered accountant
all acts and omissions proved against him in respect of
such conduct as liquidator must be characterised as his
professional acts and omissions. "Practice" according
to Webster's New International
Dictionary means
"exercise of any profession or occupation" and if the
performance of the duties as liquidator attracts the
provisions of s. 2, sub-s. (2), whatever the chartered
accountant does as a liquidator must be held to be
conduct attributable to
him in the course of his
practice. The object with which cl. (iv) in sub-s. (2)
of s. 2 has been deliberately
introduced
by the
Legislature, in our opinion, appears to be to bring
within the disciplinary
jurisdiction of the statutory
bodies recognized under the Act, conduct of chartered
accountants even while they are rendering services
otherwise than as chartered accountants properly
so-called. It is because the Legislature wanted to
provide for a self-contained code of conduct is respect
of chartered accountants that the denotation of the
expression "to be in practice" has been in a sense
deliberately and artificially extended by virtue of s. 2,
sub-s. (2), cl. (iv). We must, therefore, hold that, on
the facts proved, the respondent is clearly guilty of
professional misconduct.
.
This would really dispose of the appeal before us,
because once it is held that the respondent is guilty of
professional misconduct it would be obviously necessary
to deal with him on that basis and make an appropriate order under s. 21, sub-s. (3) of the Act. However,
S.C.R. SUPREME
COURT
REPORTS
381
since the learned Attorney-General has alternatively
1957
urged before us that in confining the exercise of disci- The council of the
plinary jurisdiction only to cases of professional mis-InstituteofChartei:-
.
ll d
d
f ed Accountants oj
conduct, techmcally so-ca e , the learned Ju ges o
India&: Another
the Calcutta
High
Court have misconstrued the
Bu ~h .
relevant provisions of the Act, we propose to deal very
· .::..__:riea
briefly with that question also.
Gajendragadkar J •.
Section 21, sub-s.(1), deals with two categories of
cases in which the alleged misconduct of members of
the Institute can be inquired into. If information is
received or complaint is made to the Institute against
the conduct of any chartered accountant the Council
is· not bound to hold an inquiry straightaway. The
Council is required to examine the nature of the
information or complaint made and decide whether, if
the facts alleged against the member are proved, they
would render the member unfit to be a member of the
Institute. In other words, in the case of a private
complaint made against members, it is only where the
Council is satisfiedprimafacie that facts alleged against
the member, if proved, would justify the exercise of
disciplinary jurisdiction against the member that the
Council is required to hold an inquiry. The conduct
alleged must be such as, if proved, would render the
member unfit to be a member of the Institute. The
other class of cas)!s has reference to the complaint
received by the Council from the Central Governmt nt.
In regard to this class of cases, the Council is not
required,-and indeed has no jurisdiction to apply the
prima facie test-before holding an inquiry. The
Council is required to cause an inquiry to be held
on such complaint straightaway. In both the cases
when the inquiry is concluded, the findings of the
Council are to be forwarded to the High Court.
Section 22 purports to define the expression "conduct
which, if proved, will render a person unfit to be a
member of the Institute". It is an inclusive definition;
it includes any act or omission specified in the schedule
but the latter portion of s. 22 clearly lays down that
nothing contained in this section shall be construed to
limit·or abridge in any way the power conferred on the
Council tm,der sub-s. (1) of s. 21. The position thus
.382
SUPREME COURT REPORTS
[1958]
1957
appears to be that though the definition of the
!ne c-;;mcil of the material expression used ins. 21, sub-s. (I), refers to the
b1S1i1111e of Charier· acts and omissions specified in the schedule the list of
ed Acco11ntants of h
"d
d
· ·
·
h
?
d ·
Jtulia & Another t e sar acts an
om1ss1ons 1s not ex aust1ve; an , m
v.
any event, the said list does not purport to limit the
B. Mukherjea
'l
powers of the Counc1
under s. 21, sub-s. (I), which
.Gt1Jendragadkar J. may otherwise flow from the words used in the said
sub-s. itself. The schedule to which s. 22 refers has
enumerated in els. (a) to (v) several acts and omissions
and it provides that, if any of these acts or omissions
is proved against a chartered accountant, he shall be
deemed to be guilty of professional misconduct which
renders him unfit to be member of the
Institute.
Clause (v) is rather general in terms since it provides
for cases where the accountant is guilty of such other
act or omission in his professional capacity as may be
specified by the Council in this behalf by notification
in the Gazette of India. 1 t must be conceded that the
conduct of the respondent in the present case cannot
attract any of the provisions in the schedule and may
not therefore be regarded as falling within the first
part of s. 22; but if the definition given by s. 22 itself
purports to be an inclusive definition and if the section
itself in its latter portion specifically
preserves the
larger powers and jurisdiction conferred upon the
Council to hold inquiries by s. 21, sub-s. (I), it would
not be right to hold that such disciplinary jurisdiction
can be invoked only
in respect of conduct falling
specifically and expressly within the inclusive definition given by s. 22.' In this connection it would be
relevant to mention s. 8 which deals with disabilities.
Section 8, sub-ss. (v) and (vi), support the argument
that disciplinary jurisdiction can be exercised against
chartered accountants even in respect of conduct
which
may not fall expressly within the inclusive
definition contained in s. 22
We, therefore, take the
view that, if a member of the Institute is found, prima
facie, guilty of conduct which, in the opinion of the
Council, renders him unfit to be a member of the
Institute, even though such conduct may not attract
any of the provisions of the schedule, it would still be
open to the Council to hold an inquiry, against the
S.C.R. SUPREME
COURT
REPORTS
383
member in respect of such conduct and a finding against
. 1957
him in such an
inquiry
would justify appropriate The council of the
acbtion (
3
b)ein1g ~aken byh thehHiHg1:1 hCoCurt under1
ds. 2kl, In;J;'A:~:t,,f:,~'!j"
su -s.
.
t lS true t at t e
ig
ourt wou
ta e India & Another
action against the offending member only . if the High
v.
Court accepts the finding made by the Council and not
B. Mukherjea
otherwise. This conclusion is strengthened if we bear Gajendragadkar J.
in mind the extended meaning of the expression "to be
in practice" given in s. 2, sub-s. (2), which we have
already dealt with. In this view of the matter we
must reverse the conclusion of the learned Judges of
the Calcutta High Court that the conduct proved
against the respondent does not fall within ss. 21 and
22 because it is not conduct connected with the
exercise of his profession as a chartered accountant in
the narrow sense of that term.
The next question to consider is in regard to the
extent of the jurisdiction and powers of the High Court
when the High Court deals with references under s. 21,
sub-ss. (2), (3) and (4).
The learned Judges of the
Calcutta High Court took the view that even if they
had agreed to put a wider construction on the material
words used in ss. 21 and 22, they would not be.justified
in passing any orders against the respondent in the
present proceedings because the finding which had been
referred to the High Court was only one and that was
that the respondent was guilty of prof~ssional misconduct in the narrow sense of the term. In other words, the
High Court thought that in accepting, and acting on,
the larger construction of the material words the High
Court would be making out a new case on the reference
and the High Court would not be justified in adopting
such a course. In our opinion, this view is not wellfounded. Section 21, sub-s. (2), lays down the procedure
to be followed by the High Court when a finding made
by the Council is referred to it under s. 21, sub-s. (l).
Notice of the day fixed for the hearing of the reference
has to be given to the parties specified in s. 21, subs. (1) and an opportunity of being heard has to be
given to them. Section 21, sub-s. (3), then lays down
that the High Court may either pass such final orders
on the case as it thinks fit or refer it back for further
384
SUPREME COURT REPORTS
[1958]
1951
inquiry by the Council and, upon receipt of the finding
The council oft/re after such inquiry, deal with the case in the manner
lnstirnte of c1rar1er-provided in sub-s. (!) and pass final orders thereon.
ed Accoulltants of I ·
1
h t ·
h
·
fi
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d
India & Anot/rcr
t IS C ear t a
Ill
earmg re erences ma e Un er
v.
.
s. 21, sub-s. (I), the High Court can examine the
B. Muklrerica
correctness of the findings recorded by the statutory
Gaiendragadkar J. bodies in that behalf. The High Court can even refer
the matter back for further inquiry by the Council and
call for a fresh finding. It is not as if the High Court
is bound in every case to deal with the merits of the
finding as it has been recorded and either to accept or
reject the said finding. If, in a given case, it a,ppears
to the High Court that, on facts alleged and proved,
an alternative finding may be recorded, the High
Court
can well send the case
back to
the
Council with
appropriate
directions
in that
behalf. The powers of the High Court under
s. 21, sub-s. (3), are undoubtedly
wide enough to
enable the High Court to adopt any course which
in its opinion will enable the High Court to do
complete justice between the parties. Besides, in
the present case, no such technical considerations
can really come
into
operation
because
the
material facts have not been in dispute between the
parties at any stage of the proceedings. The only
point in dispute between the parties has been whether
on the facts proved disciplinary jurisdiction can be
invoked against the respondent under the provisions
of the Act. We, therefore, take the view that the
learned Judges of the. High Court were in error in
holding that, even if they had accepted the broader
interpretation of s. 21 and s. 22, they could not make
an appropriate order in the present case against the
respondent having regard to the specific
finding
recorded by the Council in the inquiry in question.
It would now be necessary to refer to some judicial
decisions to which our attention has been invited.
In
G. M. Oka, Jn re ('), it has been held by a Division
Bench of the Bombay High Court that, when a
chartered accountant gives evidence before a court of
law and he is in the witness box not as a chartered
(1) (1952] 02 Gomp. Gas. 168.
S.C.R. SUPREME
COURT
REPORTS
385
accountant
but as
a witness, the falsity of his.
1957
statement does not give rise to any disciplinary The c~loftl1e
proceedings against him as a chartered accountant. If Institute of Charter·
h
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h
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·1 . f
•
d edAccormtantsoJ
e gives a se ev1 ence e may e gu1 ty o perjury an
India & Another
if he is convicted the conviction itself ma)' call for
B ~{kh .
disciplinary action. These observations undoubtedly
· ~riea
lend support to the view taken by the Calcutta High Gajendragadkar J.
Court. It is of course true that the conviction of a
chartered accountant would attract the provisions of
s. 8, sub-s. (vi) and in that sense the conclusion of
the Bombay ·High Court that the conviction itself may
be the basis of disciplinary action is, with respect,
wholly correct; but the other observations on which
reliance is placed by the respondent before us are
obiter and it also appears from the judgment that the
attention of the learned Judges was not drawn to the
provision of s. 2 (2) (iv) and other relevant considerations do not appear to have been urged before them in
that case. As the judgment itself points out, apart
from the technical points which were urged before the
court on behalf of the chartered accountant, there
was a large volume of other evidence produced against
him which conclusively proved that he was guilty of
misconduct. Mr. Ashwini Kumar Ghosh, for the
respondent, has also sought to rely on Hase/dine v.
Hosken ('). In this case the solicitor had taken out
an indemnity policy which insured him against loss
arising by reason of any neglect, omission or error
while acting in his professional capacity. During the
subsistence of this policy, the solicitor sustained loss
through having, without
realising the fact, entered
into a champertous agreement. When the solicitor
made a claim to be indemnified, it was held that the
loss in respect of which indemnity was claimed did
not arise by reason of any neglect, omission or error
committed by the solicitor in his professional capacity
but arose from his entering into a personal speculation.
We do not see how this case can assist the respondent
in any way. In considering the question as to whether
the respondent has
been guilty
of professional
misconduct in the present case, we are concerned with
(t) [1933] I K. B. 822.
M2SC/61--6
386
SUPREME COURT REPORTS
[1958]
l9S1
the material provisions of the Chartered Accountants
Th• Council of the Act itself. Observations made by the learned
Jud~e
lnstit•teafCharter·in Haseldine's case can afford no assistance to us m
•d Accountants of •
.
h
"d
. .
s· 'l 1
h
India & Another mterpretmg t e
sru
prov1S1ons.
1m1 ar y
t e
B. MJkherfea
decision in Krishnaswamy v. The Council of the Institute
--
of Chartered Accountants (') where the court was
Gafe11dragadkar J. primarily concerned with the question as to whether
orders passed under s. 21 (2) of the Act are orders
passed in civil proceedings or not is wholly inapplicable
and gives us no help in deciding the points before us.
The only question which now remains to be
considered is the final order to be passed against the
respondent. The conduct of the respondent is, in our
opinion, wholly unworthy of a chartered accountant
in practice. His refusal to give prompt replies to the
letters received from the Assistant Controller of
Insurance followed
by his failure to return
the
documents and all securities and cash received by him
as liquidator leave no room for doubt that he was
unable to return the said
amount and the
said
securities and cash and that he was merely employing
delaying tactics with the object of postponing the evil
day. It is not conduct which
is only technically
improper or unworthy; it is conduct which is grossly
improper and unworthy and as such it calls for a
deterrent order. The respondent was appointed a
liquidator by the Calcutta High Court presumably
because he was a chartered accountant in practice.
He thus received the benefit of this appointment as a
result of his status as chartered accountant in practice
and in acting as a liquidator he has been guilty of
conduct which is absolutely unworthy of his status
and it renders him unfit to be a
member of the
institute. We, therefore, think that the ends of
justice require that the respondent's name should be
removed from the Register for four years. In regard
to costs we direct that the respondent should pay the
costs of the appellants in this Court and that the
parties should bear their own costs in the court below.
Appeal allowed.
(1) A.I.R. 1953 Madras 79·