Case: D.K. AGRAWAL Vs. COUNCIL OF THE INSTITUTE OF CHARTERED  ACCOUNTANTS OF INDIA

Civil Appeal No. 6337 of 2021 (Arising out of SLP (Civil) No. 24350 of 2017, and Civil Appeal No. 6338 of 2021 (Arising out of SLP (Civil) No.5652 of 2018)2. The appellant-D.K. Agrawal is a chartered accountant having his Office as M/s, Dinesh K. Agrawal & Co., Chartered Accountants, 46-A, Madhav Kunj, Pratap Nagar, Agra. Information was received by the Institute of Chartered Accountants of India (for short, the Institute) from the Office of the Inspecting Assistant Commissioner of the Income Tax alleging that the appellant had deposited in local treasury unit of Income-tax Department at Agra a total sum of Rs.2514/- being the last digit of amount, outstanding against the assessees. The Office of the Inspecting Assistant Commissioner of the Income Tax further alleged that the appellant had interpolated assessees copies of challans to show higher figures and claimed the higher amount from them. The said information was conveyed to the appellant vide Institutes letter dated 14.02.1980 and he was requested to send his written statement in response. The appellant submitted his duly verified written statement dated 18.10.1980. At its 96th meeting held on 20/21.07.1981, the Council of the Institute (for short, the Council)was of the prima facie opinion that the appellant was guilty of professional and/or other misconduct and accordingly referred the case to the Disciplinary Committee constituted under the Chartered Accountants Act, 1949 (for short, the Act).3. The Disciplinary Committee held various meetings between 05.10.1981 and 21/22.02.1989 for the purpose of enquiry. After hearing the parties, recording the evidence of the witnesses and on perusal of the documents which were produced before the Disciplinary Committee, the Disciplinary Committee submitted its report on 12.09.1989 to the Council. The Disciplinary Committee was of the view that the appellant had involved himself in respect of two parties, namely, M/s. United Pulverisers and M/s. Bharat Gas Agencies, for depositing money only to the extent of last digit and claiming from them full amount as indicated in the information and that the appellant was guilty of other misconduct under Section 22 read with Section 21 of the Act. A copy of the report of the Disciplinary Committee was forwarded to the appellant vide Institutes letter dated 20.08.1990 and he was requested to send his written representation, if any, and also if he so desired, to appear before the Council on 14.09.1990 either in person and/or through a member of the Institute duly authorized him and to make his oral submissions. The appellant submitted his representation dated 05.09.1990. However, at the request of the appellant, that his counsel has expressed his difficulties to appear before the Council, the consideration of the report was postponed by the Council. Thereafter, the appellant was informed vide Institutes letter dated 12.11.1990 that the report of the Disciplinary Committee would be considered by the Council at its meeting to the held from 6th to 8th December, 1990 and if he so wished, he might appeal before the Council either in person and/or through a member of the Institute duly authorized by him on 07.12.1990. The consideration of the report by the Council was adjourned at an oral request of the appellant and his authorized representative made at the time of meeting on the ground of preoccupation of the appellants authorized representative. By his letter dated 19.01.1991, the appellant requested that the report of Disciplinary Committee might not be placed before the Council in March 1991 which was scheduled to be held at Bangalore. His request was acceded to. The appellant was further informed vide Institutes letter dated 8th July, 1993 that the report of the Disciplinary Committee would be considered by the Council at its meeting scheduled to the held from 5th to 7th August, 1993. The appellant appeared before the Council on 06.08.1993 and made his oral submissions that his counsel was out of Delhi and in his absence, it was not possible for him to proceed with the case. He again requested for postponement of the hearing. This process went on till the month of September 1994. On 02.09.1994 the appellant appeared before the Council and made his oral submissions. The Council passed the following orders:On consideration of the report of the Disciplinary Committee, written representations and the oral submissions made by the respondent-D.K. Agrawal before the Council on 2nd September, 1994, the Council accepted the Report of the Disciplinary Committee and found 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 two years.4. The respondent-Institute, after the lapse of about five years of the report of the Disciplinary Committee, made a reference bearing Reference No.1 of 1999 before the High Court of Judicature at Allahabad for removal of the name of the appellant from the register of the membership for two years. The High Court, on consideration of the reference, confirmed the Resolution of the Council that the appellant was guilty of other misconduct warranting appropriate punishment and, therefore, ordered the removal of the name of the appellant from the membership of the respondent-Institute for a period of five years.5. The appellant filed a review petition before the High Court for review of the aforesaid order. The said review petition was also dismissed by the High Court. The appellant has challenged the aforesaid two orders in these appeals.Civil Appeal No. 6340 of 2021 (Arising out of SLP (Civil) No.8118 of 2018) and Civil Appeal No. 6339 of 2021 (Arising out of SLP (Civil) No.5733 of 2018)6. These two appeals have also been filed by the aforesaid D.K. Agrawal. In these cases, the respondent-Institute received a complaint dated 07.02.1986 from Shri A.K. Swahney, the then Inspecting Assistant Commissioner of Income-tax, (Assessment), Agra, alleging that: (i) the appellant had been found to be indulging in acts which were unbecoming of a professional holding the position of Chartered Accountant and was guilty of professional misconduct; (ii) by his unethical practice, the appellant had duped the exchequer and deprived it of a large chunk of money by way of evading taxes; (iii) by his corrupt practices, the appellant had also lured the personnel of Income-tax Department by giving them illegal gratification.7. A copy of the complaint was forwarded by the Institute to the appellant on 30.05.1986 asking him to submit his written statement by 20.06.1986. In these cases as well, several rounds of correspondence took place between the respondent-Institute and the appellant. The matter was referred to the Disciplinary Committee for the purpose of an inquiry to be held on 07.03.1988. The appellant submitted several paper books before the Disciplinary Committee. Again, in these cases as well, the appellant went on taking time on one pretext or another before the Disciplinary Committee. The Disciplinary Committee on perusal of the documents produced before it, upon recording the evidence of the witnesses and after hearing the submission made by the complainant and the appellant, submitted its report to the Council on 12.09.1989. The Disciplinary Committee was of the opinion that the appellant was guilty of other misconduct under Section 21 read with Section 22 of the Act. A copy of the report of the Disciplinary Committee was forwarded to the appellant as also to the complainant vide Institutes letter dated 08.08.1991 and they were informed that the report would be considered by the Council at one of its forthcoming meeting and that they were required to send their written representations, if any, and also if they so desired, to appear before the Council either in person and/or through a member of the Institute duly authorized by them at the time of the consideration of the report.8. The report of the Disciplinary Committee was fixed for consideration by the Council at its meeting scheduled to the held from 5th to 7th August, 1993. At the request of the appellant, the matter was adjourned. The appellant went on taking time for hearing. Finally, on consideration of the report of the Disciplinary Committee and the written representations of the appellant, the Council accepted the report of the Disciplinary Committee and found that the appellant guilty of other misconduct under Section 21 read with Section 22 of the Act insofar as the first two charges were concerned and he was also found guilty of professional misconduct under Clause 10 of Part I of first schedule to the Act in respect of the third charge. The council decided to recommend to the High Court that the name of the appellant be removed from the Register of the Members for a period of five years. Accordingly, in terms of Section 21(5) of the Act, the disciplinary case was forwarded to the High Court to pass necessary orders in accordance with Section 21(6) of the Act.9. The High Court, by its order dated 28.09.2016 in Reference No.2 of 1999 accepted the Resolution of the Council and directed removal of the appellants name from the Register of the Membership permanently.10. Feeling aggrieved by the aforesaid order of the High Court, the appellant filed a review application which was dismissed by the High Court. The appellant has challenged the validity and correctness of the aforesaid Judgments and orders of the High Court in these appeals.

Reasoning:
17. It is clear from the above provisions that the report of the Disciplinary Committee will contain a statement of the allegations, the defence entered by the members, the recorded evidence and the conclusions expressed by the Disciplinary Committee. The conclusions of the Disciplinary Committee are tentative and the same are not recorded as findings. It is only the Council which is empowered to find out whether the member is guilty of misconduct. If on receipt of the report, the Council finds that the member is not guilty of misconduct, Section 21(2) requires that it shall record its finding accordingly and direct that the proceedings shall be filed or the complaint shall be dismissed. On the other hand, if the Council finds that the member is guilty of misconduct, Section 21(3) requires it to record a finding accordingly and to proceed in the manner laid down in the succeeding sub-sections. The findings by the Council constitute the determinative decision as to the guilt of the member and because it is determinative in character, the Act requires it to be recorded. Thus, the Council has to determine that a member is guilty of misconduct and the task of recording of the findings has been specifically assigned to the Council. Sub-section (4) of Section 21 mandates that where a member of the Institute has been guilty of professional misconduct specified in the First Schedule of the Act, the Council shall afford to such member an opportunity of being heard before any orders are passed against him. After recording a finding that a member is guilty of misconduct, the Act moves forward to the final stage of penalisation. The recording of the finding by the Council is the jurisdictional springboard for the penalty proceedings which follow.18. In Institute of Chartered Accountants of India v. L.K. Ratna and Ors. 1986 4 SCC 537   this Court considered the duties of the Council as under :12. Now when it enters upon the task of finding whether the member is guilty of misconduct, the Council considers the report submitted by the Disciplinary Committee. The report constitutes the material to be considered by the Council. The Council will take into regard the allegations against the member, his case in defence, the recorded evidence and the conclusions expressed by the Disciplinary Committee. Although the member has participated in the inquiry, he has had no opportunity to demonstrate the fallibility of the conclusions of the Disciplinary Committee. It is material which falls within the domain of consideration by the Council. It should also be open to the member, we think, to point out to the Council any error in the procedure adopted by the Disciplinary Committee which could have resulted in vitiating the inquiry. Section 21(8) arms the Council with power to record oral and documentary evidence, and it is precisely to take account of that eventuality and to repair the error that this power seems to have been conferred. It cannot, therefore, be denied that even though the member has participated in the inquiry before the Disciplinary Committee, there is a range of consideration by the Council on which he has not been heard. He is clearly entitled to an opportunity of hearing before the Council finds him guilty of misconduct.13. At this point it is necessary to advert to the fundamental character of the power conferred on the Council. The Council is empowered to find a member guilty of misconduct. The penalty which follows is so harsh that it may result in his removal from the Register of Members for a substantial number of years. The removal of his name from the Register deprives him of the right to a certificate of practice. As is clear from Section 6(1) of the Act, he cannot practice without such certificate. In the circumstances there is every reason to presume in favour of an opportunity to the member of being heard by the Council before it proceeds to pronounce upon his guilt. As we have seen, the finding by the Council operates with finality in the proceeding, and it constitutes the foundation for the penalty imposed by the Council on him. We consider it significant that the power to find and record whether a member is guilty of misconduct has been specifically entrusted by the Act to the entire Council itself and not to a few of its members who constitute the Disciplinary Committee. It is the character and complexion of the proceeding considered in conjunction with the structure of power constituted by the Act which leads us to the conclusion that the member is entitled to a hearing by the Council before it can find him guilty. Upon the approach which has found favour with us, we find no relevance in James Edward Jeffs v. New Zealand Dairy Production and Marketing Board – (1967) 1 AC 551 cited on behalf of the appellant. The Court made observations there of a general nature and indicated the circumstances when evidence could be recorded and submissions of the parties heard by a person other than the decision-making authority. Those observations can have no play in a power structure such as the one before us.19. Similarly, in Institute of Chartered Accountants of India v. Price Waterhouse and Ors. (1997) 6 SCC 312   it was held by this Court that the Disciplinary Committee is a fact-finding body which is subordinate to the Council as a fact-finding Authority. After analysing Section 21 and Regulation 15, this Court held that the Council is required to independently consider the explanation submitted by the member and the evidence adduced in the inquiry before the Disciplinary Committee and the report of the Committee. It was held thus:14.…A combined reading of relevant provisions in Section 21 and Regulation 16 does indicate that the recording 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 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 proceeding 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 Committee attains finality, denuding the Council of the power of discipline over the members of the Institute; that would render deleterious effect on the maintenance of discipline among the members or associate members of the Institute.21. Needless to say that, the power exercised by the Council under Section 21 is quasi-judicial in nature. Perusal of the recommendations of the Council shows that it did not discuss the report of the Disciplinary Committee, the written statement and the oral submissions of the appellant while coming to the conclusion that he is guilty of misconduct. However, the concluding portion of the recommendations of the Council made an incorrect statement that the Council had considered all the materials on record and the written and oral submissions of the appellant. The observations of the Disciplinary Committee cannot by any stretch of imagination be treated as findings. At best, they may be termed as the material which falls within the domain of consideration by the Council. The Council has failed to give its own independent findings. The recommendations made by the Council are not supported by independent reasons. The recommendations, in our opinion, have been made mechanically by the Council.23. In M/s. Woolcombers of India Ltd. v. Woolcombers Workers Union and Ors. (1974) 3 SCC 318 , while dealing with an award of an Industrial Tribunal, this Court found that the award stated only the conclusions and did not providing the supporting reasons. The matter was remitted back to the Tribunal to record fresh findings and it was observed that providing reasons in support of the conclusion is essential. The reasoning has been enumerated below:5. …The giving of reasons in support of their conclusions by judicial and quasi-judicial authorities when exercising initial jurisdiction is essential for various reasons. First, it is calculated to prevent unconscious unfairness or arbitrariness in reaching the conclusions. The very search for reasons will put the authority on the alert and minimise the chances of unconscious infiltration of personal bias or unfairness in the conclusion. The authority will adduce reasons which will be regarded as fair and legitimate by a reasonable man and will discard irrelevant or extraneous considerations. Second, it is a well-known principle that justice should not only be done but should also appear to be done. Unreasoned conclusions may be just but they may not appear to be just to those who read them. Reasons conclusions, on the other hand, will have also the appearance of justice. Third, it should be remembered that an appeal generally lies from the decisions of judicial and quasi-judicial authorities to this Court by special leave granted under Article 136. A judgment which does not disclose the reasons, will be of little assistance to the Court. The Court will have to wade through the entire record and find for itself whether the decision in appeal is right or wrong. In many cases this investment of time and industry will be saved if reasons are given in support of the conclusions. So it is necessary to emphasise that judicial and quasi-judicial authorities should always give reasons in support of their conclusions.25. As noticed above, where the Council has found any member of the Institute to be guilty of misconduct, it is required under the Act to forward the matter to the High Court with its recommendations and the High Court has to pass final order either dismissing the complaint or penalizing the member of the Institute. The order of the Council, imposing penalty upon the member, is also appealable by the members aggrieved before the High Court. In the circumstances, it is all the more necessary that the recommendation/order of the Council should contain reasons for the conclusion.26. We are of the view that the High Court has equally erred in accepting the recommendations of the Council without applying its own logic to this aspect of the matter. We are also of the view that the Council has to reconsider the matter afresh after granting the appellant an opportunity of being heard. Having regard to the above, we do not propose to consider the other contentions of the parties.