Institute of Chartered Accountants of India v. Naresh Singla & Anr.

extraordinary jurisdiction thereunder can refuse to upset it with a view to doing substantial justice between the parties. Article 226 of the Constitution grants an extraordinary remedy, which is essentially discretionary, although founded on legal injury. It is perfectly open for the writ court, exercising this flexible power to pass such orders as public interest dictates & equity projects. The legal formulations cannot be enforced divorced from the realities of the fact situation of the case. While administering law, it is to be tempered with equity and if the equitable situation demands after setting right the legal formulations, not to take it to the logical end, the High Court would be failing in its duty if it does not notice equitable consideration and mould the final order in exercise of its extraordinary jurisdiction. Any other approach would render the High Court a normal court of appeal which it is not.

53. The essential features of a writ of certiorari, including a brief history, have been very exhaustively explained by B.K. Mukherjea, J. in T.C. Basappa v. T. Nagappa, AIR 1954 SC 440. The Court held that a writ in the nature of certiorari could be issued in „all appropriate cases and in appropriate manner‟ so long as the broad and fundamental principles were kept in mind. Those principles were delineated as follows:

through writs of certiorari goes on two points, as has been expressed by Lord Summer in King v. Nat Bell Liquors Limited [[1922] 2 A.C. 128, 156]. One is the area of inferior jurisdiction and the qualifications and conditions of its exercise; the other is the observance of law in the course of its exercise. ….

9. Certiorari may lie and is generally granted when a court has acted without or in excess of its jurisdiction.”

54. Relying on T.C. Basappa (supra), the Constitution Bench of this Court in the case of Hari Vishnu Kamath (supra), laid down the following propositions as well established: “(1) Certiorari will be issued for correcting errors of jurisdiction, as when an inferior court or tribunal acts without jurisdiction or in excess of it, or fails to exercise it. (2) Certiorari will also be issued when the court or tribunal acts illegally in the exercise of its undoubted jurisdiction, as when it decides without giving an opportunity to the parties to be heard, or violates the principles of natural justice. (3) The court issuing a writ of certiorari acts in exercise of a supervisory and not appellate jurisdiction. One consequence of this is that the court will not review findings of fact reached by the inferior court or tribunal, even if they be erroneous.”

55. This Court explained that a court which has jurisdiction over a subject matter has jurisdiction to decide wrong as well as right, and when the Legislature does not choose to confer a right of appeal against that decision, it would be defeating its purpose and policy if a superior court were to rehear the case on the evidence and substitute its own finding in certiorari.

56. In Syed Yakoob v. K.S. Radhakrishnan, AIR 1964 SC 477, P.B. Gajendragadkar, CJ., speaking for the Constitution Bench, placed the matter beyond any position of doubt by holding that a writ of certiorari can be issued for correcting errors of jurisdiction committed by inferior courts or tribunals. The observations of this Court in para 7 are worth taking note of:

evidence cannot be reopened or questioned in writ proceedings. An error of law which is apparent on the face of the record can be corrected by a writ, but not an error of fact, however grave it may appear to be. In regard to a finding of fact recorded by the Tribunal, a writ of certiorari can be issued if it is shown that in recording the said finding, the Tribunal had erroneously refused to admit admissible and material evidence, or had erroneously admitted inadmissible evidence which has influenced the impugned finding. Similarly, if a finding of fact is based on no evidence, that would be regarded as an error of law which can be corrected by a writ of certiorari. In dealing with this category of cases, however, we must always bear in mind that a finding of fact recorded by the Tribunal cannot be challenged in proceedings for a writ of certiorari on the ground that the relevant and material evidence adduced before the Tribunal was insufficient or inadequate to sustain the impugned finding. The adequacy or sufficiency of evidence led on a point and the inference of fact to be drawn from the said finding are within the exclusive jurisdiction of the Tribunal, and the said points cannot be agitated before a writ Court. It is within these limits that the jurisdiction conferred on the High Courts under Art. 226 to issue a writ of certiorari can be legitimately exercised…..”

57. In Surya Dev Rai v. Ram Chandra Rai, (2003) 6 SCC 675, a Bench of two Judges held that the certiorari jurisdiction though available, should not be exercised as a matter of course. The High Court would be justified in refusing the writ of certiorari if no failure of justice had been occasioned. In exercising the certiorari jurisdiction, the procedure ordinarily followed by the High Court is to command the inferior court or tribunal to certify its record or proceedings to the High Court for its inspection so as to enable the High Court to determine, whether on the face of the record the inferior court has committed any of the errors as explained by this Court in Hari Vishnu Kamath v. Ahmad Ishaque, AIR 1955 SC 233 occasioning failure of justice.”

16. Applying the said law laid by the Apex Court to the facts of the present case, the learned Counsel for the Petitioner has not been able to point out any specific Regulation or accounting standards which Respondent No.1 has violated.

17. Learned Counsel for the Petitioner has drawn the attention of this Court to Paragraph 9.3.[1] of the order passed by the Disciplinary Committee. Paragraph 9.3.[1] of the said order reads as under:- “Para 9.3.1- However, from the documents on record, it appears that the Respondent had relied upon unaudited figures and further, the financial statements certified by CA. Mulraj D. Gala clearly indicates that it was provisional. Though the Respondent stated that it was audited financial statement as it was subject to audit report of CA. Mulraj D. Gala but he cannot bring on record copy of audit report signed by CA. Mulraj D. Gala. The Committee noted that as per para 5(2)(j) of the afore-stated Guidance note, where the statement on which CA is required to give his report or certificate, includes some information which has not been audited, CA should clearly dictate in his report or certificate the particulars of such information. Further, as per para 6.[4] of the Guidance note, if where the reporting auditor prepares his report or certificate on the basis of duly audited general purpose financial statements he may take the following precautions.

(i) He may clearly state in his report or certificate that the figures from the audited general purpose financial statements have been used and relied upon.

(ii) He may include in his report or certificate a statement showing the reconciliation between the figures in the general purpose financial statements and the figures appearing in his report or certificate. It is viewed that in both the above conditions as to whether the financial statements was audited or unaudited, the Respondent was required to mention the fact in his certificate but he appears to have failed to do so Further, it is noted that net worth as certified by the Respondent as on 30ln September, 2012 consist of paid up capital and reserve & surplus only As per provisional balance sheet, amount of net profit was Rs.[2] 42 crore which was part of reserve & surplus as mentioned in the net worth certificate of Rs 2 43 crore and the same fact clearly represents that reserve & surplus was mainly made from net profit earned by the Company during the period 01 04.212 to 30.09.2012 Since except the provisional financial statements of the Company, no other financial statement was brought on record by the Company, it has been observed that for the figures of reserve & surplus or net profit, the Respondent relied upon the provisional financial statements. As per requirement of the guidance note, the Respondent was required to mention his certificate that he relied upon unaudited financial statements so as to enable the users of the same to decide the degree of reliance to be placed on the same.” (emphasis supplied)

18. A perusal of the above paragraph shows that the Chartered Accountant should indicate in his report or certificate on the basis of duly audited general purpose financial statements and he should take the precaution of clearly stating in his report or certificate the figures from the audited general purpose financial statements have been used and relied upon and a statement showing reconciliation between the figures in the general purpose financial statements and the figures appearing in his report or certificate.

19. The Appellate Authority has come to an opinion that no guidelines have been violated. The Appellate Authority is of the opinion that the guidance note will not have a statutory aberration in following the guideline note is only a technical omission and will definitely not amount to misconduct.

20. The Appellate Authority has held that mere omission to mention that the net worth certificate is issued on the basis of provisional balance sheet does not attract any misconduct or otherwise as such omission is technical in nature. This Court is not inclined to interfere with the opinion of the Appellate Authority which consists of a retired Judge of a High Court and three expert members who have opined that the actions of Respondent No.1 are not such that it would attract a penalty of removal of his name from the Register of Members for a period of six months.

21. In view of the above, this Court is not inclined to interfere with the order of the Appellate Authority which cannot be said to be perverse calling for interference under Article 226 of the Constitution of India. However, the Respondent No.1 is directed to be more careful in future.

22. The petition is dismissed along with pending application(s), if any.

SUBRAMONIUM PRASAD, J MAY 24, 2024