IN THE HIGH COURT OF GUJARAT AT AHMEDABAD CHARTERED ACCOUNTANT REFERENCE No 1 of 1991 For Approval and Signature: Hon'ble MR.JUSTICE R.K.ABICHANDANI and Hon'ble MR.JUSTICE A.L.DAVE ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- COUNCIL OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA Versus P.C. PAREKH -------------------------------------------------------------- Appearance: 1. CHARTERED ACCOUNTANT REFERENCE No. 1 of 1991 MR SN SOPARKAR, SR. ADVOCATE WITH MRS. SWATI S. SOPARKAR, MR. T.P.HIMANI & MR. M.K.KAJI for Petitioner MR MEHUL S. SHAH for the Respondent -------------------------------------------------------------- CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE A.L.DAVE Date of decision: 14/02/2003 ORAL JUDGEMENT (Per : MR.JUSTICE R.K.ABICHANDANI for the Court) 1. This Reference is made under Section 21(5) of the Chartered Accountants Act, 1949, by which the Council has forwarded the case to this Court after finding the respondent, who is a member of the Institute of Chartered Accountants of India, guilty of misconduct other than the misconduct as is referred to in sub-section (4) of Section 21 of the Act, and recommended removal of the respondent's name from the Register of members of the Institute of Chartered Accountants of India for a period of six months. 2. The Charge levelled against the respondent in respect of the alleged misconduct reads as under : "The respondent had, authored a book entitled "Tax Planning for Secret Income (Black Money)". On going through the Preface as well as the contents of the book, it was seen that the author had explained in detail the various methods of creation of black money followed by different sections of society and the methods legal as well as illegal generally adopted to convert the same into white. Since it appeared that the title of the book, its preface, its contents and in totality the book was likely to create an impression in the eyes of common man that the Chartered Accountants are experts in helping in the creation of black money and its conversion into white money, though there is no direct reference as such to the Chartered Accountants, this might tend to lower the image of the profession in the public eyes. It appears that the conduct of the respondent in writing such a book was unbecoming of a chartered accountants. Thus, the respondent had committed professional and / or other misconduct under Section 21 and 22 of the Chartered Accountants Act, 1949." 3. The matter was placed before the Disciplinary Committee for holding an inquiry against the respondent, and the Disciplinary Committee, after giving an opportunity of hearing to the respondent, found that the respondent's argument that he had only described practices followed in the generation of unaccounted money cannot be accepted. The Committee observed that a Chartered Accountant as a member of the institute, has a role to play in the society and is required to observe high standards of integrity and professional ethics and is expected to discharge his professional obligation to discourage tax evasion and not to publicise methods of tax evasion which have the effect of educating the public. It was found that, despite the respondent's professed intention, the actual effect of the book authored by him was to educate the public as to how to evade tax and create unaccounted money. It was found that the respondent's conduct in publicising methods of tax evasion as narrated in the said book was unbecoming of a member of the Institute. The Committee negatived the argument that the Council cannot sit in judgement over the merits and demerits of the contents of the book authored by a member. It was held by the Committee that the matter was referred to the respondent on 28th October 1985 and therefore, there was no delay on the part of the Institution in initiating the proceedings. The Committee concluded that, in its opinion, the respondent was guilty of "other misconduct" under Section 21 read with Section 22 of the Chartered Accountants Act, 1949. The Committee consisted of a President and two members. 4. The report of the Disciplinary Committee placed before the Council, which consisted of seventeen members (excluding the members of the Committee), was taken up for consideration in its 144th meeting on 8th June 1990. The Council, after considering the written submissions of the respondent and the report of the Disciplinary Committee, reached the conclusion that the report of the Disciplinary Committee was based on correct and cogent reasons and deserved to accepted. The Council rejected the contention that the Disciplinary Committee, in its interpretation of misconduct, had gone beyond the scope of its inquiry. Taking note of the earlier order made by the Court on 11-11-1987 about the fact that there was no question of violation of the petitioner's right to freedom of speech and expression, the Council rejected that contention. 5. The proceedings that took place before the Disciplinary Committee which were minuted are on record. The book authored by the respondent and the relevant edition of the Code of Conduct have been supplied to the Court by the learned counsel for the respondent and xerox copies thereof are also placed on record. We have been taken through the book in detail by both the sides and also the material brought on record during the inquiry. The stand taken by the respodnent including his answers to the questions and material put to him during the inquiry were referred to in great detail by both the sides. 6. There is no dispute about the fact that the book entitled "Tax - Planning For Secret Income (Black Money)" was authored by the respondent, who is a Chartered Accountant and a member of the Institute. The book was first published in January 1982 and its second edition was published in October 1982. Copyright was reserved with the respondent. The book was published by Shri H.P.Parekh, who is the son of the respondent. It was printed by Shri B.P.Parekh, who is also the son of the respondent. These facts appear from the book and are not disputed. On the very first page, it is announced that it is : "A Book indispensable to every Businessman, Industrialist, Government Servant, Private employee, Contractor & Engineer, Government Minister, Politican, Limited Company, Partnership, Doctor, Lawyer, Actor, Film-Wallahs, Tax-Practitioner Chartered Accountant and Indian or Foreign citizen - IN NON-TECHNICAL & EASILY UNDERSTANDABLE ENGLISH - (Income-tax; Wealth-tax; Gift-tax : Estate Duty)". The book is entitled "Tax-Planning For Secret Income (Black Money)", below which, it is written, "Tax-Management of Black Money" on the first page, where the contents of the book are shown in brief. Below that page, the name of the respondent is written, with his degrees and designation of Chartered Accountant. 7. The learned Senior Counsel appearing for the Institute contended that the Council has found the respondent guilty of misconduct other than the professional misconduct on the basis of the material on record gathered during the inquiry conducted by the Disciplinary Committee, which has been statutorily constituted. The Council has upheld the finding of the Disciplinary Committee that, in publicising methods of tax evasion as narrated in the book, the respodnent's conduct was unbecoming of a member of the Institute. It also upheld the finding of the Committee that the argument of the respondent that he had only described the practices followed in the generation of unaccounted money, could not be accepted, and that the effect of the book was to educate the public as to how to evade tax and create unaccounted money. The learned Senior Counsel argued that, on reading the book, it becomes clear that these findings against the respondent are justified and that the book was not intended merely to expose the wrongs of tax evaders but it provided direct and indirect suggestions as to the manner in which taxes could be evaded. If the book was intended only to expose the wrong doers, it would not have given details of the methods that can be employed for the purpose of tax evasion with illustrations and drafts of documents which were to be fabricated and the false entries that were to be made for the purpose of effective tax evasion. It was contended that the professional body was entitled to take disciplinary action against the member who acted against professional ethics violating the principle of integrity and truthfulness. He referred to the Code of Conduct issued by the Institute of Chartered Accountants of India (relevant edition), pointing out that the members of the Institute were required to maintain high standards of integrity and professional behaviour. He also referred to the universally recognised principles of ethics which were adopted in the profession of accountancy, including by the Institute, and submitted that the expression "other misconduct" appearing in Section 21(1) would embrace every conceivable misconduct which may not have been scheduled as a professional misconduct. It was also submitted that there was no unrestricted fundamental right of speech or expression, and that, if a member wanted to remain a member of the Institute, he was bound to abide by the behavioural rules laid down for such members. It was submitted that the disciplinary action was not meant to curb the fundamental right of speech and expression. It was submitted that the Institute and the Council were statutory bodies and the Council was invested with statutory powers of taking disciplinary action against the members also in respect of "other misconduct" and the conduct of the respondent in writing a book which had the effect of teaching the tax payers (who were willing to adopt unfair means) and methods of evading taxes in various fields and such a conduct which was not in consonance with the Code of Conduct issued by the Institute and the universally recognised principle of ethics of integrity and truthfullness was clearly "other misconduct", which warranted disciplinary proceedings against the respondent. 7.1 In support of his contentions, the learned Senior Counsel relied upon the following decisions : [a] The decision of the Supreme Court in Council of the Institute of Chartered Accountants v. B. Mukherjea, reported in AIR 1958 SC 72, which was rendered in the context of the provisions of Sections 21 and 22 of the said Act, was cited for the proposition that the misconduct alleged on the part of the Chartered Accountants may not attract any of the provisions in the Schedule and may not, therefore, be regarded as falling within the first part of Section 22; but if the definition given by Section 22 itself purports to be an inclusive definition and as the section itself in its latter portion specifically preserves the larger powers and jurisdiction conferred upon the Council to hold inquiries by Section 21 sub-section (1), 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 section 22. Section 8 sub-sections (v) and (vi) support the argument that the disciplinary jurisdiction can be exercised against Chartered Accountants even in respect of conduct which may not fall expressly within the inclusive definition contained in Section 22. It was held that if a member of the Institute was 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 member in respect of such conduct and a finding against him in such an inquiry would justify appropriate action being taken by the High Court under Section 21(3). (emphasis added). (See paragraph 5 of the judgement). [b] The decision of the Supreme Court in the matter of Mr. "P", an Advocate, reported in AIR 1963 SC 1313, which was rendered in context of misconduct of an advocate was cited to point out that the Supreme Court, in paragraphs 7 and 8 of its judgement, held that wherever conduct proved against an Advocate is contrary to honesty, or opposed to good morals, or is unethical, it may be safely be held that it involves moral turpitude. The Supreme Court observed that, in dealing with the matter of professional propriety, we cannot ignore the fact that the profession of law is an honourable profession and it occupies a place of pride in the liberal professions of the country. Any conduct which makes a person unworthy to belong to the noble fraternity of lawyers or makes an advocate unfit to be entrusted with the responsible task of looking after the interests of the litigant must be regarded as conduct involving moral turpitude. It was held that; "An Advocate invites disciplinary orders not only if he is guilty of professional misconduct; but also if he is guilty of other misconduct; and this other misconduct which may not be directly concerned with his professional activity, as such, may nevertheless be of such a dishonourable or infamous character as to invite the punishment due to professional misconduct itself". It was held that the advocate on record acted with gross negligence in the matter of taxation of costs of his client in the appeal filed in the Supreme Court and such conduct amounted to professional or other misconduct within the meaning of that expression in the rules of Order IV - A of the Supreme Court Rules. The name of the advocate was ordered to be removed from roll for five years. [c] The decision of the Supreme Court in N.G.Dastane v. Shrikant S. Shivde, reported in AIR 2001 SC 2028, which was rendered in context of the provisions of section 35 of the Advocates Act, 1961, by which the State Bar Council was empowered to refer the case for disposal to its disciplinary committee when it had reason to believe that any advocate on its roll has been guilty of "professional or other misconduct", was cited to point out that, it was held by the Supreme Court; "The collocation of the words "guilty of professional or other misconduct" has been used for the purpose of conferring power on the disciplinary committee of the State Bar Council. It is for equipping the Bar Council with the binocular as well as whip to be on the qui vive for trading out delinquent advocates who transgress the norms or standards expected of them in the discharge of their professional duties. The central function of the legal profession is to help promotion of administration of justice. Any misdemeanor or misdeed or misbehaviour can become an act of delinquency, if it infringes such norms or standards, and it can be regarded as misconduct". The Supreme court held that an advocate abusing the process of court is guilty of the misconduct. [d] The decision of the Supreme Court in R.D.Saxena v. Balaram Prasad Sharma, reported in AIR 2000 SC 2912 was cited to pointed out that, it was held in paragraph 19 of the judgement that the word "misconduct" used in the expression "misconduct, professional or otherwise" in section 35 of the Advocates Act was a relative term and it had to be considered with reference to the subject matter and context herein such term occurs. It literally means wrong conduct or improper conduct. [e] The decision of the Supreme Court in P. Balakotaiah v. Union of India, reported in AIR 1958 SC 232 was cited for the proposition that, even if a person had a right to form association under Article 19(1)(c), there would not be a fundamental right to continue in employment by the State and when their (i.e. members of the association) services are terminated by the State, they cannot complain of the infringement of any of their constitutional right when no question of violation of Article 311 arises. [f] The decision of the Supreme Court in M.H.Devendrappa v. the Karnataka State Small Industries Development Corporation, reported in AIR 1998 SC 1064 was cited for the proposition that the Code of Conduct required to be observed with proper discharge of functions by a government servant cannot be flouted in the name of other freedoms. The Court was concerned with Rule 22 of the Service rules under which the employer was entitled to take disciplinary action. That rule was not meant to curtail freedom of speech or expression or the freedom to form association or union, but it was clearly meant to maintain discipline within the service to ensure efficient performance of duty by the employees of the Corporation and to protect the interest and prestige of the Corporation. The Supreme Court held that, a rule which is not primarily designed to restrict any of the fundamental rights, cannot be called in question as violating Article 19(1)(a) or 19(1)(c) of the Constitution. (See paragraph 13 of the judgement). [g] The decision of the Supreme Court in Jamuna Prasad Mukhariya v. Lachhi Ram, reported in AIR 1954 SC 686, which was rendered in context of the provisions of Sections 123(5) and 124(5) of the Representation of the Peoples Act and Article 245(1) of the Constitution, was cited to point out that, in paragraph 5 of the judgement, the Supreme Court negative the contention that Article 245(1) prohibited the making of laws which violate the Constitution, and that the impugned sections interfered with a citizen's fundamental right to freedom of speech. It was held that the provisions did not stop a man from speaking, but they merely prescribe conditions which must be observed, if he wanted to enter the Parliament. The Court held: "The right to stand as a candidate and contest an election is not a common law right. It is a special right created by the statute and can only be exercised on the conditions laid down by the statute. The Fundamental Rights Chapter has no bearing on a right like this created by statute. The appellants have no fundamental right to be elected members of Parliament. If they want that they must observe the rules. If they prefer to exercise their right of free speech outside these rules, the impugned sections do not stop them. We hold that these sections are `intra vires". [h] The decision of the Supreme Court in Sakhawant Ali v. State of Orissa, reported in AIR 1955 SC 166, was cited for the proposition that there is no fundamental right for any person to stand as a candidate for election to the Municipality and that the only fundamental right which is guaranteed is that of practising any profession or carrying on any occupation, trade or business. The Court held; "if he wants to stand as a candidate for election, then it is but proper that he should divest himself of his paid brief on behalf of the municipality or the brief against the municipality in which event there will be certainly no bar to his candidature. Even if it be taken as a restriction on his right to practice his profession of law, such restriction would be a reasonable one and well within the ambit of Article 19 Clause 5. Such restriction would be a reasonable one to impose in the interests of the general public for the preservation of purity in public life." [i] The decision of the Supreme Court in Railway Board v. Niranjan Singh, reported in AIR 1969 SC 966 was cited for the proposition that there is no fundamental right for anyone to hold meetings in government premises. The Court held in paragraph 13 of the judgement; "The fact that the citizens of this country have freedom of speech, freedom to assembly peaceably and freedom to form associations or unions does not mean that they can exercise those freedoms in whatever place they please. The exercise of those freedoms will come to an end as soon as the right of someone else to hold his property intervenes. Such a limitation is inherent in the exercise of those rights. The validity of that limitation is not to be judged by the tests prescribed by sub-Articles (2) and (3) of Article 19. In other words, the contents of the freedoms guaranteed under Clauses (a), (b) and (c), the only freedoms with which we are concerned in this appeal, do not include the right to exercise them in the properties belonging to others." [j] The decision of the Pepsu High Court in Jang Bahadur Sant Lal v. The Principal, Mohindra College, reported in AIR 1951 SC 59 was cited for the proposition that, apart from the qualifications enumerated in Clauses 2 to 6 of Article 19, the rights guaranteed by Clause (1) are also subject to the qualification that the exercise of these rights by a citizen should not infringe the rights of others. The Court held that where a student of a college issued a handbill and therein tried to make out that the authorities were not only antinationals, but selfish, evil-minded, morally degenerate and given to intrigue, subversive and heinous activities and victimization of innocent students etc. etc., the writing not only offended against the discipline but against the ordinary law of the land. [k] The decision of the Bombay High Court in Indulal K. Yagnik v. State, reported in AIR 1960 BOM. 399 was cited for the proposition that, inducing a police officer of whatever grade, including a constable, to withhold his services or to commit breach of the rules of discipline would be incitement to commit an offence, and therefore, the restrictions imposed against the right of freedom of speech from inciting an offence spoken of in section 145 of the Bombay Police Act, 1951 would be well protected by clause (2) of Article 19 of the Constitution. (See paragraph 20 of the judgement). [l] The decision of the Mysore High Court in H.A.K. Rao v. Council of the Institute of Chartered Accountants of India, reported in AIR 1965 MYSORE 112 was cited for the proposition that, failure to conform to the statutory requirements may lead to disciplinary action being taken against the concerned member, and that may result in interference with his right to carry on as a Chartered Accountant; but this result is merely incidental to his being a member of the institute. If a member does not wish to conform to the requirements of the institute, it would be open to him to relinquish his membership of the institute. The Court relied upon the decision of the Supreme court in Jamuna Prasad Mukhariya (supra) and Sakhawant Ali (supra), while coming to this conclusion. 8. The learned counsel appearing for the respondent argued that the misconduct alleged against the respondent was not a professional misconduct as enumerated in the Schedules to the Act, but it amounted to "other misconduct" which was required to be notified under Part II (2)(b) of the Schedule. It was submitted that there was no embargo against writing books and therefore, mere writing of such a book was not a misconduct. Moreover, there was no notification issued by the Council under Part II(2)(b) of the Schedule declaring writing of any particular type of book as a misconduct. It was submitted that disciplinary proceedings under the Act were of a quasi-criminal nature and therefore, unless the misconduct was notified, a member cannot be charged for such misconduct. It was further contended that the intention of the respondent in writing the book was only to inform the public about things which were happening in the society so that they become aware of such instances and understand the consequences thereof. It was argued that there was nothing in the book which was likely to create an impression that the Chartered Accountants were expert in