Full Text
$~
IN THE HIGHCOURT OF DELHI AT NEW DELHI
JUDGMENT
+ CHAT.A.REF 4/2012
COUNCIL OF THE INSTITUTE OF CHARTERED
ACCOUNTANTS OF INIDA ...... Petitioner
Through: Ms. Vibhooti Malhotra, Mr. Bhuvnesh Satijaa and Mr. Udit
Sharma, Advocates
Through: Mr. Sanjiv Kakra, Senior
Advocate with Mr. Akash Madan
& Mr. Irfan Ahmad, Advocates for R-1
R-1 is also present in person
HON'BLE MR. JUSTICE RAVINDER DUDEJA
PROLOGUE
1. This is a Reference under Section 21 (5) of the Chartered Accountants Act, 1949 [ “Act”] as it was prior to its amendment in the year 2006 in respect of Sh. Gurvinder Singh, Chartered Accountant (hereinafter referred to as “the Respondent”), whereby, the Council of the Institute of Chartered Accountants of India (hereinafter referred to as “the Petitioner”) had proposed the removal of respondent’s name from the Register of Members for a period of six months vide order dated 14.12.2011.
FACTUAL BACKGROUND:
2. Brief facts, as enumerated from the reference are that complainant Sh. Mohit Gupta, vide his complaint dated 16.03.2005, leveled allegations against the respondent that he had sold 100 shares of Aban Loyd Chiles Offshore Ltd. to him in November 1999, but the Transfer Deed for the transfer of shares was lodged only on 04.11.2004. In the interregnum, respondent continued to receive dividends and in July 2004, obtained duplicate shares in his name by misrepresenting and filing Indemnity Bond and Affidavit that the original Shares Certificates were lost.
3. The Council in its meeting held on 7th to 9th August, 2008, was of the prima facie opinion that respondent was guilty of professional and/or other misconduct and accordingly decided to refer the case to Disciplinary Committee for enquiry. The relevant extract of the meeting is reproduced hereunder:- Item No. 22:"Complaint" cases under Section 21 of the Chartered Accountants Act, 1949 xx xx xx xx
1167. Mohit Gupta Vs. Gurvinder Singh (M,No.16024) [25- CA(90)/2005] The Council was prima facie of the opinion that the Respondent was guilty of professional and/or other misconduct. It was, therefore, decided to refer the case to the Disciplinary Committee for inquiry.”
4. The Disciplinary Committee of the Council vide order dated 27.01.2011, found the respondent guilty of “other misconduct” under Section 22 read with Section 21 of the Act. The conclusion recorded by the Disciplinary Committee is reproduced as under:- “Thus, in conclusion, in the considered opinion of the Committee, the Respondent is guilty of 'Other Misconduct' under Section 22 read with Section 21 of the Chartered Accountants Act, 1949.”
5. The Report of the Disciplinary Committee of the Council was considered in the Special Meeting of the Council held on 14.12.2011 and upon consideration of the Report along with various written representations received from respondent, the Council decided to accept the Report of the Disciplinary Committee and accordingly held him guilty of “other misconduct” under Section 22 read with Section 21 of the Act. The Council also decided to recommend to the High Court that the name of respondent be removed from the Register of Members for a period of six months. The relevant extract of the Minutes is as under:- “Decision: On consideration of the Report of the Disciplinary Committee alongwith the written representation dated 30th May, 2011, 7th June, 2011, 10th July, 2011, 22nd July, 2011, 8th November, 2011, December, 2011 received from the Respondent, the Council decided to accept the report of Disciplinary Committee and accordingly held that the Respondent was guilty of "Other Misconduct" under Section 22 read with Section 21 of the Chartered Accountants Act, 1949. The Council also decided to recommend to the High Court that the name of the Respondent be removed from the Register of Members for a period of six months.”
6. Reference has accordingly been received by this Court under Section 21(5) of the Act. It would be apposite to reproduce Section 21(5) of the Act, which reads as under:- “Section 21(5), where the misconduct in respect of which the Council has found any Member of the Institute guilty of his 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.”
FIRST ROUND PROCEEDINGS BEFORE THE DIVISION
BENCH OF THIS COURT:
7. The Division Bench of this Court vide judgment dated 16.08.2016, after setting out Section 21 & 22 of the Act, arrived at the following conclusion:-
DECISION OF HON’BLE SUPREME COURT IN SLP (C) NO. 19564/2017
8. The aforesaid order passed by the Division Bench was challenged before the Hon’ble Supreme Court. The Hon’ble Apex Court, vide order dated 16.11.2018, set aside the order dated 16.08.2016 and remanded the matter back to the High Court and held as follows:- “6) The Disciplinary Committee has, on facts, found the Chartered Accountant guilty of a practice which was not in the Chartered Accountant’s professional capacity. This, it was entitled to do under Schedule I Part-IV subclause(2) if, in the opinion of the Council, such act brings disrepute to the profession whether or not related to his professional work.
7) This being the case, it is clear that the impugned judgment is incorrect and must, therefore, be set aside. We thus remand the matter to the High Court to be decided afresh leaving all contentions open to both parties.”
FINDINGS OF THE DISCIPLINARY COMMITTEE AND COUNCIL OF THE INSTITUTE OF CHARTERED ACCOUNTANTS
9. The Disciplinary Committee made enquiry on the complaint against respondent and found that respondent purchased shares in 1997 and sold them to the complainant in the year 1999, as confirmed by the transfer deed. However, despite selling these shares, he continued to be the registered holder of the shares with the company and continued receiving the dividends until the year 2004. Respondent denied selling the shares to the complainant and instead claimed that the complainant had stolen the share certificates from him when he relocated in the year
2000. However notably, respondent did not file any police report or First Information Report (FIR) regarding the alleged theft. The four years delay in applying for duplicate share certificates remained unexplained. The Committee noted various irregularities in the defence of the respondent. Firstly, respondent claimed that the issue had been amicably settled with the complainant through an agreement. But when pressed for details, respondent failed to provide a copy of the agreement or any concrete evidence of the terms of the settlement. He could not explain how the settlement occurred without any compensation being exchanged nor could he substantiate his claim that complainant had agreed to withdraw the complaint filed with the Institute of Chartered Accountants of India.
10. The Committee concluded that respondent was unable to provide categorical answers or supporting documents, observing that he often provided evasive replies instead of direct responses. The Committee further concluded that respondent had knowingly attempted to reclaim shares he had already sold to the complainant by misrepresenting the facts to the company. His application for duplicate share certificates coupled with absence of any theft report of the missing documents, led the Committee believe that respondent had ulterior motives. The Committee viewed the respondent’s conduct as an attempt to mislead, thereby raising serious concerns about his professional integrity.
11. The Council of Institute of Chartered Accountants of India, upon reviewing of the Disciplinary Committee’s findings concluded that despite having been given an opportunity, respondent failed to provide any additional evidence in his written representation to refute the findings and accordingly the Council found that respondent’s actions amounted to “other misconduct” under Section 22 read with Section 21 of the Act and recommended that the name of the respondent be removed from the Register of Members for a period of six months.
SUBMISSIONS OF RESPONDENT
12. Respondent asserts that he had never sold the shares and denied having any prior dealings with the complainant. He has tried to explain that an employee of broker M/s. Bharat Bhushan & Company made him sign a blank transfer deed on the pretext that it was needed for some unrelated share delivery issue. According to the respondent, this blank deed was subsequently used for transfer of disputed shares.
13. Furthermore, the respondent emphasizes that complainant had agreed to settle the matter and sent a letter to the Council through his counsel for withdrawal of the complaint. Relying on this, respondent No. 1 believed that the matter had been resolved. However, two years later, the Institute asked the respondent to submit a written statement, disregarding the complainant’s withdrawal letter dated 21.07.2007.
14. Learned counsel for respondent has argued that no documentary evidence has been placed by the complainant on record and the Disciplinary Committee unfairly used the settlement as evidence of the guilt of the respondent, inasmuch as, settlement does not constitute an admission of guilt. It is also argued that complainant did not appear before the Disciplinary Committee, but the Committee proceeded with the enquiry even in the absence of the complainant. It is also argued that there is no evidence of share purchase such as purchase bill, contract note or other similar documents as required by accounting standards and that the Disciplinary Committee relied upon unsubstantiated claims.
STAND OF RESPONDENT IN HIS ADDITIONAL AFFIDAVIT DATED 12.08.2024
15. In his additional affidavit, respondent affirmed that he had held 100 shares of M/s. Aban Loyd Chiles Offshore Ltd., which were duly transferred into his name on 05.08.1997. He further stated that in July 2024, he noticed that the original share certificates were not in his possession and therefore he immediately applied for duplicate share certificates. According to him, the shares were in his name on the date when he made a request to company to issue duplicate shares. He had accordingly submitted the indemnity bond and affidavit with the company to obtain duplicate share certificates.
16. Respondent took the stand that he never sold the shares since their initial transfer in his name and had been receiving the dividends from the company regularly till 2004. It has been further stated by respondent in his affidavit that he amicably resolved the matter with the complainant on 31.08.2005 and handed over the duplicate shares to him.
ANALYSIS & FINDINGS:
17. The Chartered Accountants Act, 1949 has been amended in the year 2006 by the Chartered Accountants (Amendment) Act, 2006, whereby, various provisions of the Act have been amended and certain new provisions have been inserted in the Act. The amended provisions have become effective from November 2006. Section 21-D of the amended Act, however, provides that all the complaints pending before the Council or any enquiry initiated by the Disciplinary Committee or any reference or appeal made to a High Court prior to the commencement of Chartered Accountants (Amendment) Act, 2006 shall continue to be governed by the provisions of the Act as if the Act had not been amended. Since the present matter is related with the complaint filed before the Council prior to the amendment in the Act, it is to be dealt with under the provisions of the un-amended Act only.
18. Much has been argued about the purported settlement between the complainant and the respondent, consequent to which, complainant has agreed to withdraw his complaint. In this regard, we may refer to Section 21(8) of Chartered Accountants Act, 1949, which provides as under:- “8. A complaint filed with the Disciplinary Directorate shall not be withdrawn under any circumstances.”
19. Hence, in view of Section 21(8), notwithstanding any settlement between the parties, even the complainant cannot withdraw the complaint once filed.
20. Another reason for assailing the finding of the Disciplinary Committee is that the complainant was not examined as a witness in the case and had not participated in the disciplinary proceedings. The scope of the disciplinary proceedings conducted under Chartered Accountants Act have been described by the Division Bench of this Court in the case of Wholesale Trading Services P. Ltd. v. The Institute of Chartered Accountants of India & Ors., W.P.(C) 8071/2019, wherein, in Paras No. 27 to 29, it has been observed as under:-
views over the views of the concerned authorities (Board of Discipline or Disciplinary Committee), as the case may be.”
21. Similarly, in the case of Rajiv Bhatnagar v. The Disciplinary Directorate of the Institute of Chartered Accountants of India (ICAI) & Ors., W.P. ( C) 9317/2014, the Division Bench of this Court observed as under:-
22. In view of the scope of the disciplinary proceedings as laid down above, the present disciplinary proceedings cannot be said to have been affected due to the absence of the complainant.
23. Admittedly, respondent had purchased the shares in the year 1997, but denied having sold them to the complainant. Surprisingly, the signatures on the share transfer deed has been admitted by the respondent. He tried to render an explanation that an employee of the broker made him sign the blank transfer deed on the pretext that it was needed for some unrelated share delivery issue, which may have been fraudulently used for the purpose of selling shares to the complainant. However, the explanation given does not look probable, inasmuch as, respondent is a qualified Chartered Accountant and it is difficult to believe that he would sign blank transfer deed. Similarly, the defence of the respondent that his share certificates were stolen, is also not acceptable as he has not placed any evidence regards the same, so much so, no FIR was lodged regarding the theft. Respondent has also failed to render any explanation for four years delay in applying for duplicate share certificates. No satisfactory explanation for four years delay in applying for duplicate share certificates has been put forth by the respondent. The continued receipt of dividends after the sale of certificates reflects an attempt on his behalf to take benefit from shares, he no longer owned.
24. Even though, respondent claimed that an amicable settlement has taken place with the complainant, but no copy of the agreement has been produced. It is also not understood as to why the respondent entered into an agreement with the complainant, if he had not sold the shares to him. He would have rather contested the matter and would not have returned shares to the complainant upon compensation being paid to him as per settlement.
25. We find that the findings of the Council and Disciplinary Committee are based on cogent material and reasoning. The record of the case reveals that respondent was the owner of 100 shares of M/s. Aban Loyd Chiles Offshore Ltd. and the same were acquired by him in the year 1997. Thereafter, complainant purchased the said shares from the market but did not register the same with the concerned company and respondent continued to be the registered shareholder in the records of the company and received dividends. Respondent even sought issuance of duplicate share certificates from the company. It was only when that the complainant found that his transfer deed has expired and applied for revalidation from Registrar of Company, Haryana, that misconduct of the respondent came to the light.
26. It is well settled that the scope of interference with the decision of any Authority under Article 226 of the Constitution of India is limited. Even though, it was contended on behalf of the respondent that the decision of the Disciplinary Committee was perverse and unreasonable, we find the said contention to be wholly bereft of any merit.
27. We find that the Disciplinary Committee found that respondent had failed to act in a bona fide manner and the said conduct was derogatory in nature and highly unbecoming of a Chartered Accountant and brought disrepute to the profession.
28. We have also examined the issue whether the punishment is too harsh but we find that there has to be some degree of integrity and probity, which is expected of a Chartered Accountant because of the trust that is posed in him by his clients. Such conduct, as displayed by the respondent, erodes the credibility and brings disrepute to the Institution of Chartered Accountants.
29. Under these circumstances, we are of the view that punishment awarded to the respondent is not unduly harsh. We accept the recommendation of the Council to the effect that the name of respondent be removed from the Register of Members for a period of six months.
30. The Reference is thus disposed of with the above observations.
RAVINDER DUDEJA, J. YASHWANT VARMA, J. November 27, 2024