# OF INDIA v. MIS PRICE WATERHOUSE AND ANR

- **Citation:** [1997] Supp. 2 S.C.R. 267
- **Court:** Supreme Court of India
- **Decided:** 1997-07-11
- **Case number:** Civil Appeal No. 4600 of 1997
- **Bench:** K. Ramaswamy, S. Saghir Ahmad, G.B. Pattanaik
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/of-india-v-mis-price-waterhouse-and-anr-16124
- **Pages:** 38

## Headnote

Cha1tered Accountants Act, 1949-S-21(2) read with Regulation 16 (3)
B
& ( 4),-771e Council being empowered by Parliament and also by vi1tue of C
being the ultimate body colltrolling the conduct of its members can refer a
matter to the Disiplina1y Committee for fwther enquily even when an enquiry
has already been conducted and rep01t submitted-If on fwther enqui1y, the
report does not suppo1t action, then the Council has to give a verdict of not
guilty since it does not have any power to direct fwther enquiry-Cowicil to D
consider the explanation of the member, the evidence led and the report of
the Disciplinary Committee each independently, before coming to a conclusion.
Chartered Accountants Act 1949-Pmt I, First Schedule Clause (6) &
(7)-Solicitation of professional attainments.
E
I11tepretatio11 of Statute~~A/l provisions aie to be read hannoniously
so as not to render any provision suplus-Unlike inte1preti11g the Constitution
where the Cowt has wider powers, if the language of a Statute is unambiguous
and clear, the Cowt cannot innovate or alter the statut01y provisions.
F
The appellant Council, on learning that the respondent had professionally helped the Exim Bank prepare a book, issued notice to them for
violating the provisions of Part I of the First Schedule to the Chartered
Accountants Act, 1949. After receipt of the written statement from the
respondent, the Council referred the matter to the Disciplinary Commit- G
tee. On the Committee submitting a report, the Council asked the Com·
mittee to conduct a further enquiry. The Respondent challenged this action
of the Council before the High Court. The High Court upheld the conten·
tion of the respondent.
In appeal to this Court, it was submitted on behalf of the appellant H
267
268
SUPREME COURT REPORTS [1997] SUPP. 2 S.C.R.
A that the High Court erred in as much as the provisions of the Act read
with the Regulation gave power to the Council to refer the matter for
further enquiry. On the other hand the respondent argued inter alia, that
the High Court was right since the Council can refer the matter to the
Committee for further enquiry only on a finding by the Committee that the
B
c
member is not guilty and this finding is not acceptable to it; that the
Council did not apply its mind, and that the consequences are penal in
nature.
Allowing the appeal this Court, per majority (K. Ramaswamy J, for
himself and G.B. Pattanaik J)
HELD : 1. The Council has the power to call for further report from
the Disciplinary Committee on the non-guilt of the professional or other
misconduct of the respondent. In this backdrop, the proviso to sub-regulation (4) of Regulation 16 becomes relevant. In case on the second occasion,
D the report of the Disciplinary Committee still holds the delinquent member
not guilty, there is no option left to the Council except, by operation of
proviso to sub-regulation (4) of Regulation 16 read with Section 21 (2), as
the Council is enjoined to record finding of no guilt since the power of
calling for further report would stand exhausted. Any other view, in the
E
Courts considered opinion, would defeat the object of the Act. A combined
reading of the above statutory provisions would indicate that in case the
Council finds that the report of the Disciplinary Committee recording "no
guilt" is not correct or relevant material was not consid"ered by the
Disciplinary Committee, the Council has power to ca:ll further report from
the Disciplinary Committee. It is ditlicult to give acceptance to the contenF
tion that the report of "no guilt" by the Disciplinary Committee should be "
given primacy as it would deplete lhe content of the power to maintain
discipline among the members of the Institute. The ultimate control over
conduct of members is by the Council. The Disciplinary Committee is a
fact finding body which is a body subordinate to the Council as a fact
finding authority. If its finding of guilt or non-guilt receives finality, it
G denudes the Council

## Text

_Characters 0–39,852 of 84,570. This is a partial read: ask again with offset=39852 for what follows._

THE INSTITUTE OF CHARTERED ACCOUNTANTS
A
OF INDIA
v.
MIS PRICE WATERHOUSE AND ANR.
JULY 11, 1997
[K. RAMASWAMY, S. SAGHIR AHMAD
AND G.B. PATTANAIK, JJ.]
Cha1tered Accountants Act, 1949-S-21(2) read with Regulation 16 (3)
B
& ( 4),-771e Council being empowered by Parliament and also by vi1tue of C
being the ultimate body colltrolling the conduct of its members can refer a
matter to the Disiplina1y Committee for fwther enquily even when an enquiry
has already been conducted and rep01t submitted-If on fwther enqui1y, the
report does not suppo1t action, then the Council has to give a verdict of not
guilty since it does not have any power to direct fwther enquiry-Cowicil to D
consider the explanation of the member, the evidence led and the report of
the Disciplinary Committee each independently, before coming to a conclusion.
Chartered Accountants Act 1949-Pmt I, First Schedule Clause (6) &
(7)-Solicitation of professional attainments.
E
I11tepretatio11 of Statute~~A/l provisions aie to be read hannoniously
so as not to render any provision suplus-Unlike inte1preti11g the Constitution
where the Cowt has wider powers, if the language of a Statute is unambiguous
and clear, the Cowt cannot innovate or alter the statut01y provisions.
F
The appellant Council, on learning that the respondent had professionally helped the Exim Bank prepare a book, issued notice to them for
violating the provisions of Part I of the First Schedule to the Chartered
Accountants Act, 1949. After receipt of the written statement from the
respondent, the Council referred the matter to the Disciplinary Commit- G
tee. On the Committee submitting a report, the Council asked the Com·
mittee to conduct a further enquiry. The Respondent challenged this action
of the Council before the High Court. The High Court upheld the conten·
tion of the respondent.
In appeal to this Court, it was submitted on behalf of the appellant H
267
268
SUPREME COURT REPORTS [1997] SUPP. 2 S.C.R.
A that the High Court erred in as much as the provisions of the Act read
with the Regulation gave power to the Council to refer the matter for
further enquiry. On the other hand the respondent argued inter alia, that
the High Court was right since the Council can refer the matter to the
Committee for further enquiry only on a finding by the Committee that the
B
c
member is not guilty and this finding is not acceptable to it; that the
Council did not apply its mind, and that the consequences are penal in
nature.
Allowing the appeal this Court, per majority (K. Ramaswamy J, for
himself and G.B. Pattanaik J)
HELD : 1. The Council has the power to call for further report from
the Disciplinary Committee on the non-guilt of the professional or other
misconduct of the respondent. In this backdrop, the proviso to sub-regulation (4) of Regulation 16 becomes relevant. In case on the second occasion,
D the report of the Disciplinary Committee still holds the delinquent member
not guilty, there is no option left to the Council except, by operation of
proviso to sub-regulation (4) of Regulation 16 read with Section 21 (2), as
the Council is enjoined to record finding of no guilt since the power of
calling for further report would stand exhausted. Any other view, in the
E
Courts considered opinion, would defeat the object of the Act. A combined
reading of the above statutory provisions would indicate that in case the
Council finds that the report of the Disciplinary Committee recording "no
guilt" is not correct or relevant material was not consid"ered by the
Disciplinary Committee, the Council has power to ca:ll further report from
the Disciplinary Committee. It is ditlicult to give acceptance to the contenF
tion that the report of "no guilt" by the Disciplinary Committee should be "
given primacy as it would deplete lhe content of the power to maintain
discipline among the members of the Institute. The ultimate control over
conduct of members is by the Council. The Disciplinary Committee is a
fact finding body which is a body subordinate to the Council as a fact
finding authority. If its finding of guilt or non-guilt receives finality, it
G denudes the Council of the power to direct further appropriate enquiry
into the professional or other misconduct not adequately dealt with by the
Disciplinary Committee. Similarly, the Council would be disabled to exercise effective vigil and supervision over the professional or other misconduct of the members of the Institute. The Parliament has invested that
H power with the Council and the construction suggested allows the tail to
INSIITUTEOFCHARTEREDACCOUNrANfS v. PRICEWATERHOUSE '26')
wag while the controlling body, the Conncil lamentably look at it. Such a A
construction would be deleterious to the maintenance of discipline or the
professional conduct on the part of the members of the Institute, as the
case may be. It is true that the discipline sought to be maintained is penal
in nature; nonetheless, maintenance of discipline or professional or other
conduct of the members or associate members is salutary and paramount B
to maintain public confidence in the members of the Institute and to
inculcate sense of discipline and excellence in the performance of the
functions as member of the Institute or associate member of the Institute,
as the case may be. The contrary view would easily defeat the purpose of
the Act and object behind the regulatory measures envisaged in Section 21
of the Act. [287-E-G; 284-B-G]
C
2. Regulation 16 is only an enabling provision to conduct by the
Disciplinary Committee which is a fact finding subordinate delegated body
whose finding is not conclusive on the non-guilt of the professional or other
misconduct of the member of the Institute. A combined reading of relevant
provisions of Section 21 and Regulation 16 does indicate that the recording D
of a finding of guilt or non-guilt by the Council is mandatory to take further
action or to dismiss the complaint or for further process. The Council is
required to consider independently the explanation submitted by the member and the evidence adduced in the enquiry before the Disciplinary Committee and the report of the Disciplinary Committee. It provides an in-built E
mechanism under which the Council itself is required to examine the case
of professional or other misconduct of a member of the Institute or associate member, taking the aid of the report submitted by the Disciplinary
Committee, the evidence adduced before the Committee and the explanation offered by the delinquent member. Entire material constitutes the
record of the proceedings before the Council to reach a finding whether or
not the delinquent member committed professional or other misconduct.
Otherwise, the primacy accorded to the report of the Disciplinary CommitF
tee attains finality denuding the Council of the power of discipline over the
members of the Institute that would render deletarious effect on the maintenance of discipline among the members or associate members of the G
Institute. [284-G-H; 285-D-E]
Institute of Chartered Accountants of India v.L.K Ratna & Ors., [1986]
4 sec 537, referred to.
3. Here, it may be illustrated that the effect of giving primacy to the H
270
SUPREME COURT REPORTS [1997) SUPP. 2 S.C.R.
A finding recorded by the Disciplinary Committee is to make it conclusive.
B
Take for instance, where the Committee records a finding of guilt of
professional misconduct. When the matter comes before the Council and
the Council finds that the evidence adduced before the Disciplinary Committee in proof of professional or other misconduct is not established, then
the Committee will not have any power to record a finding exct!pt to call
for a further finding from the Disciplinary Committee in that behalf which
does not appear to be warranted. If the Council reaches the conclusion
that professional or other misconduct was not proved, without calling for
any further finding, it can straightaway exonerate the delinqm:nt member
of the charge of professional or other misconduct and would drop the
C action or dismiss the complaint. On the other hand, if the finding of non
guilt recorded by the Disciplinary Committee is not consistenlt with the
evidence on record, then the Disciplinary Committee will be denuded of
the power to call for further report, obviously, rendering Regulation 16 (3)
as surplusage. [286-G-H; 287-A-C]
D
4. It is settled rule of interpretation that all the provisions would be
read together harmoniously so as to give effect to all the provisions as a
consistent whole rendering no part of the provision as surplusage. Otherwise, by process of interpretation, a part of the provision or a clause would
be rendered otiose. Keeping this legal principles, perspectives, practical
E effect and contents of the power of the Disciplinary Committee or Council
the view expressed by the High Court is clearly incorrect and it would
defeat the object of the Act of maintaining professional standards of the
professional conduct or other conduct consistent with the dignity of the
profession of the accountants. [287-C-E]
F
5. That the Council had not applied its mind to the facts of this case
is not correct. In fact, the proceedings dated December 21, 1993, viz., "on
consideration of the report of Disciplinary Committee and your written
statement, the Council decided that further enquiry in the case was necessary to be made by the Disciplinary Committee keeping in view the followG ing issues" do indicate the active application of its mind and consideration
to various aspects mentioned in the questionaire based thereon and,
therefore; it is not a case of mechanical incantation of the provisions of
sub-regulation (3) of Regulation 16. [287-G-H; 288-A; G-H]
H
Per S. Saghir Ahmad J. (Dissenting) :

272
SUPREME COURT REPORTS (1997] SUPP. 2S.C.R.
A delinquent employee was guilty and proceed to. inflict the appropriate
- ~
punishment according to law.
[297-D-H; 298-A-B]
3. A further enquiry can be ordered only where the Disciplinary
Committee has initially found the member to be "guilty" and has recorded
B a finding to that effect. An order for furth~r enquiry can bt: passed only
on a consideration of the report of the Disciplinary Committee and the
representation of the member made against such report. What is implicit
in this provision is that a member to whom a copy of the finding is
furnished may have the occasion to challenge or to accept the findings. On
C copy being furnished, the Member gets an opportunity to look into the
contents of the report. He may find that the procedure adlopted by the
Disciplinary Committee was not proper and was not in consonance with
the requirements of law or principles of natural justice or that the manner
in which the evidence was scrutinised by the Committee was incorrect or
that the case required certain material evidence to be brought on record.
D In such a situation, the President, who is the Chief Executiv1: Authority of
the Council and is also the President of the Disciplinary Committee as also
other members will come to know of the grievances of the delinquent
Member through his representation. The Council may, on a 1wnsideration
of the report and the representation, feel that it was a case where further
E enquiry was to be made by the Disciplinary Committee in the light of the
various contentions raised by the delinquent Member. It will then call
upon the Disciplinary Committee to hold further enquiry and submit a
further report. On the submission of the further report by th1~ Disciplinary
Committee, the Council will take the final decision in the matter either
itself or refer the case to the High Court together with its recommendaF
tions. This exercise is not to be undertaken where the Committee has
recorded a finding that the delinquent member was not "guilfry". (299-B-Fl
4. In the earlier Regulation, there was undoubtedly a power in the
Council· to order further enquiry even where the finding was recorded by
the Disciplinary Committee that the member was "not guilty". There was
G no distinction between the finding of "not Guilty" and finding of "guilty".
Separate procedures were not prescribed, and therefore, \'lith regard to
amended provision it could be validly said that even where a report was
submitted by the Disciplinary Committee that the member was "not guilty",
the Council could still direct further enquiry. This cannot be said in respect
H of Regulation 16 as introduced in place of Regulation 14 by an Amendment
...
INSTITUTEOFCHARIBREDACCOUNfANfS v. PRICEWAIBRHOUSE 273
in 1988. Here two separat~ procedures have been indicated and it has been A
provided in the Proviso appended to Regulation 16 (4) that ifthe l'eport of
the Committee was that the Member was "not guilty", the Council would
not record its findings contrary to that report. The Council is injuncted
from taking a contrary view and has to adopt the report of the Disciplinary
Committee that the Member was "not guilty". If it is held that the Council B
can still order a further enquiry even in those cases in which a finding of
"not guilty", has been recorded, it would amount to altering the provisions
of the Act and the Regulations, which are not permissible under the law.
Reading into the provisions that the Council has power to call for a further
report even in those cases where the finding given by the Committee is that
the delinquent Member is "not guilty'', would amount to altering the terms C
of the Statue and introducing a provision which did not exist, unless it is a
case of Casus Omissus, which, admittedly, it is not. (300-C-E; 301-C-DJ
5. It is said that a Statute is an edict of Legislature. The elementary
Princi pie of interpreting or construing a Statute is to gather the Mens or D
Sententia Legis of the Legislature. The tragedy is that although in the matter
of correspondence or conversation the person who has spoken the words or
used the language can be approached for clarification, the Legislature cannot be approached as the Legislature, after enacting a law or Act, becomes
Functus Officio as for as that particular Act is concerned and it cannot itself
interpret it. Statute being an edict of the Legislature, it is necessary that it is E
expressed in clear and unambiguous language. Where, however, the words
were clear, there is in obscurity, there is no ambiguity and the intention of the
Legislature is clearly conveyed, there is no scope for the Court to innovate or
take upon itself the task of amending or alterir 'he Statutory provisions. A
construction which requires, for its support, addition or substitution of
words or which results in rejection of words, has to be avoided, unless it is F
covered by the rule of exception, including that of necessity, which is not the
case here. Applying the above principles to the instant case and applying all
the basic principles of interpretation, including the guiding rules, the rule of
mischief, the rule of harmonious construction, the rule of internal and external aid to construction, the rule of reading all the provisions together as also G
the rule of giving effect to a particular part of the Statute so as not to render
the other part as otiose, together with all other principles, relating to interpretation of Statutes, it cannot but be said that the provisions contained in
Regulation 16 are not capable of the meaning which is being assigned to
these provisions. The decision of this Court in In~titute of Cha1tered Accountants Of India v. L.K Rama and Ors., [1986] 4 SCC 537 is not a judg· H
274
SUPREME COURT REPORTS [1997] SUJPP. 2 S.C.R.
A ment on the question involved in this case. It was rendered 11rior to the
amendment introduced in the Regulation in 1988.
[301·E; F-G; 302-A; C; 303-D·F]
Palace Administration Board v. RVB Thampuran and Ors., AIR (1980)
SC 1187 (1195) = (1980] 3 SCR 187; Kirby v. Leather, (1965] 2 ALL ER
B 441; Gwalior Rayon Silk Mfg. (Wvg) Co Ltd. v. Custodian of Vested Forests
Pa/ghat & Anr., AIR (1990) SC 1747 (1752) = (1990] 2 SCIR 401; Smt.
Shyam Kishori Devi v. Patna Municipal Corporation & AllT., AIR (1966) SC
1678 (1682) = (1966] 3 SCR 466; A.R. Antulay v. Ramdas S1illivas Nayak
& Anr., (1984] 2 SCC 500 (518, 519) = (1984] 2 SCR 914; State of Kera/a
C v. Mathai Verghese & Ors., [1986] 4 SCC 746 (749) = (1987] 1 SCR 317
and Union of India & Anr., v. Deoki Nandan Aggarwal, AIR (1992) SC 96
(101) = (1991) 3 SCR 873, referred to.
Frankfurter. "Some Reflections OD the reading or statutes." Essays
on Jurisprudence from Columbia Law Review p-51; Justice G.P. Singh's
D Principles of Statutory Interpretation 6th Edn, 1996, p-15-Rderred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4600 of
1997.
From the Judgment and Order dated 12.9 .96 of the Delhi High Court
E in C.W. No. 676 of 1994.
F
C.S. Vaidyanathan, K.K. Jain, Ajay K. Jain, Pramod Dayal and Shashi
Bhushan for the Appellant.
P.P. Rao and N. Ganpathy for the Respondents.
The Judgments of the Court were delivered by
K. RAMASWAMY, J. Leave granted.
G
This appeal by special leave arises from the Judgment and Order of
the High Court of Delhi, made on September 12, 1996 in Civil Writ No.
676of1994.
The Export-Import Bank of India (for short, the 'EXIM Bank')
commissioned the services of the respondent firm to assist it in the preparaH tion of a book entitled "India - Your Software Opportunity". The need for
•
INSTI11JIBOFCHARTEREDACCOUNTANTS v. PRICEWATERHOUSE (K.RAMASWAMY,J.]
275
such booklet was explained by the EXIM Bank at the inside cover of the A
booklet which reads as under:
"The information set out in this publication, meant for general
guidance, has been complied by Price Waterhouse (India) at the
instance of the Export-Import Bank of India (EXIM BANK). B
While the booklet is not intended to be an exhaustive treatment
of the subject, the information contained is based on sources and
interpretations of applicable legal provisions believed to be reliable
for which, however, both Exim Bank and Price Waterhouse (India)
are unable to assume any liability. For further information,
clarifications and assistance, interested parties may communicate
with Price Waterhouse offices located at :
1102/1107, Raheja Chambers, Nariman Point, Bombay - 400 021.
Telephones : 235138/2870466. Telex : (011) 5791.
B-102,·Himalaya House, 23, Kasturba Gandhi Marg, New Delhi -
110 001.
Telephones : 3313591/3312856. Telex : (031) 63070."
c
D
The appellant-Council had treated the said publication as amounting E
to solicitation of professional attainments, violating clauses (6) and (7) of
Part I of First Schedule to the Chartered Accountants Act, 1949 (for short,
the 'Act') and called upon the respondent by proceedings dated December
13, 1990 to send the name of the members who were answerable to the
charge of misconduct. On January 28, 1991, respondent No. 2, Shri Amal F
Ganguli, partner of the first respondent filed his written statement. On
consideration thereof, by proceedings dated 5-6th August, 1991, the Council prime f acie opined that the second respondent was guilty of professional
and/or other misconduct and referred the case to the Disciplinary Committee for enquiry and report. The Disciplinary Committee submitted its G
report on January 16, 1993. The Disciplinary Committee sent a copy of the
report to the second respondent informing him that if he so desired, he
may send his representation against the said report within 30 days. By
further letter dated July 8, 1993, it was communicated to him that the
report of the Disciplinary Committee would be considered by the Council
in its meeting from August 5 to 7, 1993 and that he can appear in person H
276
SUPREME COURT REPORTS (1997) SUPP. 2 S.C.R.
A or through a member. On August 5, 1993, he sent a letter stating that the
report of the Disciplinary Authority may be accepted. On the even date,
the Council, after considering the report dated January 16, 1993 and the
written submissions of the second respondent dated 5.8.1993 came to the
conclusion that further enquiry was necessary and decided that the further
B enquiry should be made by the Disciplinary Committee. It was communicated to him by letter dated December 21, 1993. On receipt thereof, the
from respondent on February 2, 1994, filed the above writ petition in the
High Court challenging the power of the Council to refer the matter to
Disciplinary Committee for further enquiry. The High Court in the impugned judgment opined that by operation of the Regulation 16 made
C under the Act, the Council was devoid of the power to direct the Disciplinary Committee to hold further enquiry, Accordingly, it quashed the letter
dated December 21, 1993 and allowed the writ petition. Thus, this appeal
by special leave.
D
Shri Vaidyanathan, learned senior counsel appearing for the appellant, contends that the view taken by the Division Bench is not correct in
law. Section 21 of the Act read with Regulation 16(3) and ( 4) gives power
to the Council to direct the Disciplinary Committee, which is a fact-finding
committee, to make further enquiry and to submit a report. The power
under Section 21(2) of the Act should be used only after the Council
E reaches the conclusion that the second respondent was not guilty of professional misconduct or other misconduct. The council would take further
action only after consideration of further report to be submitted by the
Disciplinary Committee. The view of the High Court, therefore, is incorrect. If the view of the High Court is upheld, the primacy would be given
F to the report of the Disciplinary Committee denuding the power to the
Council to maintain discipline among the members of the Institute which
is deleterious to maintain discipline among its members. Shri P .P. Rao,
learned senior counsel appearing for the respondents, on the other hand,
contends that the provisions, being penal in nature, require to be construed
strictly. The Disciplinary Committee is a high-power committee constituted
G under the Act. If the Disciplinary Committee finds that the guilt of misconduct has not been proved, the Council is left with no option but to
accept the finding of no-guilt and record the same under sub-section (2)
of Section 21. In case the finding of the Disciplinary Committee that the
member is guilty is not acceptable to the Council, only then, the Council
H has power to remit to the Disciplinary Committee for further e:nquiry and
•
INSTITIJTE OF CHARTERED ACCOUNT ANTS v. PRICE WATERHOUSE {K. RAMASWAMY, J.J
277
the operation of Regulation 16( 4) would come into play. In that perspec- A
tive, on a harmonious interpretation of all the provisions, the finding of the
high power committee, namely, the Disciplinary Committee, should always
be given primacy and serious consideration by the Council before accepting
ot calling for further report. From this perspective, the view of the High
Court is correct in law. He also contends that the Council has not applied . B
its mind to the imputation of misconduct as reflected in paragraph 10 of
the Special Leave Petition. Therefore, it has not applied its mind and
mechanically acted upon to refer to the Disciplinary Committee for further
enquiry. A reading of the publication itself does not posit of any professional misconduct or other misconduct to be dealt with under the Act.
Therefor!!, there is no case made 'out warranting interference under Article C
136 of the Constitution.
Having regard to the respective contentions, the question that arises
for consideration is; whether the view taken by the High Court is correct
in law? The High Court in the impugned judgment has held thus :
D
"The scheme of Regulation 16 is clear and unambiguous that in
case of disciplinary committee concluding that a member is not
guilty, it is the end of the matter and the disciplinary proceedings
have to be dropped by the Council. In case the report of the
disciplinary committee finds the member guilty, another opporE
tunity is granted to the member to make representation and on
consideration of the report and the representation, if any, the
Council can cause further enquiry to be held. The finding of
misconduct is a serious matter for a member and casts a stigma
on him and, therefore, it appears that Council has been empowered F
to get a further enquiry conduct on being satisfied on the representation of a member or otherwise even after receipt of a report
from the disciplinary committee to the effect that a member is
guilty of misconduct. There is, however, no such power when
disciplinary committee exonerates a member since. Regulation 16 G
does not permit further enquiry to be held by the disciplinary
committee when it has concluded that the member is not guilty of
any professional or other misconduct. When we compare old
Regulation 14 with the present Regulation 16, we find a clear
departure in the language of Regulation 16. Regulation 14 was
wider in its scope and ambit. Under the said Regulation it was H
278
SUPREME COURT REPORTS (1997] SUPP. 2 S.C.R.
A
permissible to cause further enquiry being held even where the
report of the disciplinary committee was that the member is not
~"""j
guilty of any professional or other misconduct. Regulation 16 is
narrow in its scope and ambit when compared to the old Regulation 14. The ·change in language of these two Regulation cannot
B
be without any purpose."
On that basis, it was held that the report of the Disciplinary Committee being that the respondent was not guilty of any professional misconduct within the meaning of clauses ( 6) and (7) of Part I of the First
Schedule of the Act, the Council had no power to direct Disciplinary
c Committee to hold further enquiry. With a view to appreciate the correctness of the above view, it is necessary to look into the relevant provisions
of the Act and the Regulations made thereunder.
Section 2 (b) defines 'Chartered Accountant' to mean a person who
D is a member of the Institute. Section 2( c) defines 'Council' to mean the
Council of the Institute. Under Section 2( e) 'Institute' means the Institute
to Chartered Accountants of India constituted under the Act. 'Registered
Accountant' is defined under Section 2 (h) to mean any person who has
been enrolled on the register of Accountants maintained by the Central
E
Government under the Auditor's Certificates Rules, 1932. A member of
the Institute shall be deemed "to be in practice", when individually or in
partnership with Chartered Accountants in practice, he, in consideration
of remuneration received or to be received, as postulated by sub-section
(2) thereof, engages himself in the practice of accountancy or offers to
perform or performs services involving the auditing or ve:rification of
F financial transactions, books, accounts or records, or the preparation,
verification or certification of financial accounting and related statements
or holds himself out to the public as an accountant; or renders professional
services or assistance in or about matters of principle or detail relating to
accounting procedure or the recording presentation or certification of
G
financial facts or date or renders such other services as, in the opinion of
the Council, are or may be rendered by a chartered accountant in practice
and the words 'to be in practice' with their grammatical variations and
cognate expressions shall be construed accordingly. The explanation is not
l
relevant for the purpose, hence omitted. Section 5 deals with "Fellows and
Associates" of the Institute. Section 6 deals with certificate of practice.
H Section 7 deals with "Members to be known as Chartered Accountants".
INSTIT!ITEOFCHARTEREDA=UNTANTS v. PRICE WATERHOUSE (K.RAMASWAMY.J.j '279
Section 8 concurms "disabilities" of members. Section 9 deals with the A
"Constitution of the Council of the Institute" for the management of. the
affairs of the Institute and for discharging the functions assigned to it under
the Act, the details thereof are not relevant for the purpose of this case.
The "duration and dissolution of the Council" is dealt with under Section
14. Section 19 in Chapter IV deals with the "Register" of Members. B
Chapter V with the heading 'Misconduct' which comprise Sections 21, 22
and 22A. Section 21 is relevant for the purpose of this case which reads as
under:
"21. Procedure in inquiries relating to misconduct of members of
Institute.
C
(1) Where on receipt of information by, or of a complaint made
to it, the Council is prim a f acie of opinion that any member of the
Institute has been guilty of any professional or other misconduct,
the Council shall refer the case to the Disciplinary Committee, and
the Disciplinary Commitlee shall thereupon hold such inquiry and D
in such manner as may be prescribed, and shall report the result
of its inquiry to the Council.
(2) If on receipt of such report the Council finds that the member
of the Institute is not guilty of any professional or other misconduct, it shall record its finding accordingly and direct that the E
proceedings shall be filed or the complaint shall be dismissed, as
the case may be.
(3) If on receipt of such report the Council finds that the member
of the Institute is guilty of any professional or other misconduct, F
it shall record a finding accordingly and shall proceed in the
manner laid down in the succeeding sub-sections.
( 4) Where the finding is that a member of the Institute has been
guilty of a professional misconduct specified in the First Schedule,
the Council shall afford to the member of an opportunity of being G
heard before orders are passed against him on the case, and may
thereafter make any of the following orders, namely :-
(a) reprimand the member;
(b) remove the name of the member from the Register for such H
280
A
B
c
D
E
SUPREME COURT REPORTS [1997) SUPP. 2 S.C.R.
period, nor exceeding five years, as the Council thinks fit :
Provided that where it appears to the Council that the case is one
in which the name of the member ought to be removed from the
""Register for a period exceeding five years or permanently, it shall
not make any order referred to in clause (a) or clause (b), but
shall forward the case to the High Court with its recommendations
thereon.
(5) Where the misconduct in respect of which the Council has
found any member of the institute guilty is misconduct other than
any such misconduct as is referred to in sub-section ( 4), it shall
forward the case to the High Court with its recommendations
thereon.
(6) On receipt of any case under sub-section (4) or sub-section
(5), the High Court shall fix a date for the hearing of the case and
shall cause notice of the date so fixed to be given to the member
of the Institute concerned, the Council and to the Central Government, and shall afford such member, the Council and the Central
Government an opportunity of being heard, and may thereafter
make any of the following orders, namely :-
(a) direct that the proceedings be filed, or dismiss the com·
plaint, as the case may be;
(b) reprimand the member;
F
( c) remove him from membership of the Institute either perG
H
manently or for such period as the High Court thinks fit;
( d) refer the case to the Council for further inquiry and report;
(7) Where it appears to the High Court that the transfer of any
case pending before it to another High Court will promote the
ends of justice or tend to the general convenience of the parties,
it may so transfer the case, subject to such conditions, if any, as it
things fit to impose, and the High Court to which such case is
transferred shall deal with it as if the case had been forwarded to
it by the Council.
-
..
INSI1TUTEOFCHAR1EREDACCOUNTANTS v. PRICEWAIBRHOUSE [K.RAMASWAMY,J.J
281
Explanation I : In this section "High Court" means the highest civil A
court of appeal, not including the Supreme Court, exercising
jurisdiction in the area in which the person whose conduct is being
inquired into carried on business, or has his principal place of
business at the commencement of the inquiry :
Provided that where the case relating to two or more members of B
the Institute have to be forwarded by the Council to different High
Courts, the Central Government shall, having regard to the ends
of justice and the general convenience of the parties, determine
which of the High Courts to the exclusion of others shall hear the
cases against all the members.
C
Explanation II :- For the purpose of this section "member of the
Institute" includes a person who was a member of the Institute on
the date of the alleged misconduct although he has ceased to be
a member of the Institute at the time of the inquiry.
(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 :-
D
(a) summoning and enforcing the attendance of any person and E
examining him on oath;
(b) the discovery and production of any document; and
( c) receiving evidence on affidavit.
"Professional misconduct" is defined in Section 22, which reads as
under: ·
"22. Professional misconduct defined.
F
For the purposes of this Act, the expression "professional G
misconduct" shall be deemed to include any act or omission
specified in any of the Schedules, but nothing in this section shall
be construed to limit or abridge in any way the power conferred
or duty cast on the Council under sub-section (1) of Section 21 to
inquire into the conduct of any member of the Institute under any H
A
282
SUPREME COURT REPORTS (1997] SUPP. 2S.C.R.
other circumstances."
The procedure to enquire into the misconduct on the part of the
members of the Institute is dealt with in Section 21. Sub- sections (1), (2),
(3), ( 4) and (5) are relevant for the purpose of this case.
B
By exercise of the power under Section 30, the Council is empowered
to make Regulations to carry out the object of the Act. Sub-section (2)
postulates that in particular and without prejudice to the generality of the
foregoing power, "such regulations may provide for all or any of the
following matters". Section 30(2)(s) speaks of "the exercise of disciplinary
C powers conferred by the Act" and Section 30(2)(L) of "any other matter
which is required to be or may be prescribed under the Act". Regulation
16 whcih was amended in 1988 reads as under :
"Report of the Disciplinary Committee.
D
(1) The Disciplinary Committee shall submit its report to the
Council.
E
F
G
H
(2) Where the finding of the Disciplinary Committee is that the
respondent is guilty of professional and or other misconduct, a
copy of the report of the Disciplinary Committee shall be furnished
to the respondent and he shall be given the opportunity of making
a representation in writing to the Council.
(3) The Council shall consider the report of the Disciplinary
Committee along-with the representation in writing of the respondent, if any, and if, in its opinion, a further enquiry is necessary,
shall cause such further enquiry to be made whereupon a further
report shall be submitted by the Disciplinary Committee.
( 4) The Council shall, on the consideration of the report and the
further report, if any, and the representation in writing of the
respondent. if any, record its findings.
Provided that if the report of the Disciplinary Committee is that
the respondent is not guilty of any professional or other misconduct, the Council shall not record its findings contrary to the report
of the Disciplinary Committee.
INSTo11JTEOFCHARTEREDACCOUNTANTS "PRICE WATERHOUSE [K.RAMASWAMY,J.]
283
(5) The finding of the Council shall be communicated to the A
complaint and the respondent."
Section 21 read with Regulation 16 would indicate that where the
Council, upon receipt of information by, or of a complaint made to it, is
prim a f acie of opinion that any member of the Institute has been guilty of B
any professional or other misconduct defined under Section 22 of the Act,
it is enjoined to refer the case to the Disciplinary Committee. The Disciplinary Committee shall, thereupon, hold such enquiry and in such a manner
as may be prescribed and shall report the result of its enquiry to the
Council. If on receipt of such report, the Council finds that the member of
the institution is not guilty of any professional or other misconduct, it shall C
record a finding under sub-section (2) thereof and accordingly direct that
the proceedings shall be filed or complaint shall be dismissed, as the case
may be.
As seen earlier, under Regulation 16(1), it shall be the duty of the D
Disciplinary Committee to submit its report to the Council under clause
(1) thereof. In case, the finding of guilt of a member of professional
misconduct/other misconduct is reported by the Disciplinary Committee, a
copy thereof shall be furnished to the delinquent member and he shall be
given an opportunity to make representation in writing to the Council. This
would be done under sub-regulation (2) of Regulation 16. Thereon, by E
operation of sub-regulation (3), the Council shall consider the report of
the Disciplinary Committee along with the representation in writing of the
· delinquent member, if any. If on consideration thereof, the Council is of
the opinion that the further enquiry is necessary, it shall direct such further
enquiry to be made, whereupon a further report shall be submitted by the F
Disciplinary Committee. Sub-regulation ( 4) of Regulation 16 envisages that
the Council shall, on the consideration of the report and the further report,
if any, and the representation in writing of the respondent record its
findings. Under the proviso thereto, if the report of the Disciplinary
Committee is that the respondent is not guilty of any professional or other G
misconduct, the Council shall not record its findings contrary to the report
of the Disciplinary Committee. Sub-section (3) also envisages that if on
receipt of such report the Council finds that the member of the Institute
is guilty of any professional or other misconduct, it shall record a finding
accordingly and shall proceed in the manner laid down in the succeeding
sub-sections, namely, sub-sections (4), (5) and (6)in awarding appropriate H
284
SUPREME COURT REPORTS [1997) SUPP. 2S.C.R.
A punishment or may refer to the High Court, under sub-section (6), for
award of higher penalties which the High Court may deal with under
sub-section (7) thereof.
A combined reading of the above statutory provisions would indicate
B that in case the Council finds that the report of the Disciplinary Committee
recording "no-guilt" is not correct or relevant material was noi: considered
by the Disciplinary Committee, the Council has the power to call further
report from the Disciplinary Committee. Though prim a f acie the arguments
of Sri P.P. Rao is attractive, on deeper probe, it is diffo~ult to give
acceptance to the contention that the report of "no-guilt" by the DiscipliC nary Committee should be given primacy as it would deplete the content
of the power to maintain discipline among the members of the Institute.
The ultimate control over conduct of the members is by the Council. The
Disciplinary Committee is a fact-finding body which is a body subordinate
to the Council as a fact-finding authority. If its finding of guilt or non-guilt
D receives finality, it denudes the-Council of the power to direct further
appropriate enquiry into the professional or other misconduct not adequately dealt with by the Disciplinary Committee. Similarly, the Council
would be disabled to exercise effective vigil and supervision over the
professional O! other misconduct of the members of the Institute. The
Parliament has invested that power with the Council and the construction
E suggested allows the tail to wag while the controlling body, the council
lamentably look at it.