Case: Institute of Chartered Financial Analysts of India and Ors Vs. Council of the Institute of Chartered Accountants of India and Ors

Appellant No.1 herein is a Society registered under the Andhra Pradesh (Telangana Area) Public Societies Act, 1350F. At the time of its registration it was known as Institute of Certified Financial Analysts, which was changed to The Institute of Chartered Financial Analysts of India. Appellants contend that it offers the Chartered Financial Analyst Course/Programme, which is entirely different from that offered by Respondent No.1 It has sought for opinion from the Director General of Investigation and Registration in terms of Sections 11 and 36 of the Monopolies and Restrictive Trade Practices Act, 1969 on 11.02.1988, whereto a reply was sent by the appellants on 24.02.1988. A notice, however, was published in the journal of Respondent No.1 herein, wherein a purported caution to members about the appellant-Institute was published in the followinghas come to the notice of the Institute that the Institute of Chartered Financial Analysts of India, Hyderabad is conferring the designation of "Chartered Financial Analyst" and permitting its members to use the letters C.F.A. after their names. The Additional Solicitor General of India has opined that the designation "Chartered Financial Analyst", would seem to be similar to the designation Chartered Accountant especially when the letters C.F.A. are added to the name, which is very close to the letters F.C.A. conferred by the Institute of Chartered Accountants of India. He has further opined that the activities of the Institute of Chartered Financial Analysts of India are violative of Section 24A of the Chartered Accountants Act, 1949. The Institute has already filed an application under Section 36 of the MRTP Act, 1969 with the Director General, MRTP Commission, New Delhi against the activities of the said Institute and the matter is under investigation by the Commission.It is, however, not in dispute that no investigation was initiated by the MRTP Commission in that behalf. A notice was sent by Appellant No.1 to Respondent No.1, asking for a copy of the opinion of the Additional Solicitor General so as to enable it to know the facts placed before him for his opinion. But no response was received thereto. A reminder thereto was sent on 15.06.1989 and by a letter dated 11.07.1989, the Secretary of Respondent No.1 refused to send the copies of the case and the opinion of the Additional Solicitor General. On or about 03.08.1989, a notification was issued by Respondent No.1 herein prescribing that if any member of the Respondent-Institute i.e. any Chartered Accountant, who obtained the qualification of the Chartered Financial Analyst on or after 01.01.1990; or having obtained the said qualification earlier did not surrender the same before the said date, would be held to be guilty of professional misconduct in term of the provisions of the Chartered Accountants Act, 1949 (for short, the Act).3. A writ petition was filed before the Andhra Pradesh High Court by Appellant No.1 herein on or about 16.11.1989. The said writ petition was dismissed by a learned Single Judge by a judgment and order dated 21.11.1990, inter alia,proviso to a section cannot be expected to nullify the effect of the main Section. The proviso must be treated as an exception and subservient to the object sought to be achieved by the main Section. Under Appendix No. (8) it was agreed that the Institutes previously recognized under the Auditors Certificate Rules, 1932, be recognized for the purposes of Section 7 for the use of letters, F.S.A.A. Further the Council decided that letters or description in respect of membership of bodies other than Accountancy Institutes can be used provided such use does not amount to the use of designation and in the case of Accountancy Institutes prior recognition of the Council in this behalf is necessary. It was also decided that in respect of Accountancy Institutes prior recognition of the Council in this behalf is necessary. It was also decided that in respect of Accountancy Institutes, which are recognized and in respect of Institutes other than Accountancy Institutes the word London in brackets may be allowed to be added provided that in each case the respective Institutes had permitted such addition. The Council also decided that the Institute of Costs and Works Accountants is not an Accountancy Institute within the meaning of Section 7 and therefore there was no bar to the use of these letters by the members of that Institute, if they happen to be their members.A combined reading of Section 7 and the Appendix (8) makes it clear that Chartered Accountants who have been registered as members of the 1st respondent-Institute alone are permitted to use the letters or description which are recognized by it. Therefore it is clear that the designation of Chartered Financial Analyst is not recognized by the 1st respondent-Institute or for that matter by the Central Government or by any Statute. Therefore, under Section 24A of the Act the 1st respondent-Institute can impose restrictions on all the members of the 1st petitioner-Institute not to use the unrecognized diploma or designation that has been awarded by the 1stto the petitioners, the course of study that is being taught at the Institute is different. But the 1st respondent Institute contends that the course of study is similar. The respondents filed an Annexure-X to the counter giving a comparative table of syllabi of ICFAI and ICAI. But one should not forget the fact that the 1st respondent-Institute has got authority to change the syllabus from time to time depending upon the changes in the economic environment in the national and international sphere and the Chartered Accountants can function not only as Accountants, Auditors, Financial Advisors, but also as Financial Analysts. The Chartered Accountancy course is fairly exhaustive and includes areas in financial and investment management, micro economics and security evaluation, project appraisal and Indian financialwrit appeal filed thereagainst was dismissed by a Division Bench of the High Court relying on or on the basis of a decision of this Court in Dr. Haniraj L. Chulani v. Bar Council of Maharashtra & Goa [JT 1996 (4) SC 162 : (1996) 3 SCC 342 ], holdingthe instant case too what is sought to be prevented is membership of a Chartered Accountant, who is governed by the Chartered Accountants Act, 1949 from being a member of the 1st appellant-institution and should a Chartered Accountant not like this imposition, he may be free to resign from being a Chartered Accountant and then can be free to choose to be a member of any other institution including that of the 1st respondent. But, so long as he continues to be the Chartered Accountant under the Act, his degree and practice can be regulated only under the provisions of the said Act. The authorities under the Act also found that the degree of C.F.A. affixed is causing confusion and gullible public may be misguided and in order to streer clear off such confusion and in larger public interest, the authorities thought that the Chartered Accountants registered under the Act and governed by the Council of the Institute of Chartered Accountants of India not to acquire the C.F.A. and if already acquired, shed the said membership. Having regard to the reasons stated in the impugned notification as also the reasoning given by the learned single Judge, it cannot be said that there is no nexus for the object to be achieved and that the impugned notification is irrational. Fundamental right to practice a profession guaranteed under Article 19(1)(g) of the Indian Constitution can always be hedged with restrictions; but the said restrictions should be reasonable restrictions and in the instant case, having regard to the facts and circumstances discussed and legal it cannot be said that the restrictions imposed are unreasonable so as to negate the fundamental rights of the Chartered Accountants to practice their profession."

Reasoning: 11. In our opinion the contentions of the learned counsel for respondent no.1 are not tenable. By the notification dated 3.8.1989 it was directed that Chartered Accountants shall be deemed to be guilty of professional misconduct if they become members of the ICFAI. The C.As. had been directed to surrender their membership of ICFAI before 1st January, 1990.12. We find it strange that the ICAI, renowned in its own field and with various statutory responsibilities, should go out of its way to stop its members i.e. Chartered Accountants from enhancing their knowledge, training and ability by acquiring a CFA qualification. Instead of appreciating such aspirations of Chartered Accountants who seek to widen theirand horizons they are sought to be harassed and termed as being guilty of professional misconduct. Surely this cannot be regarded as reasonable.13. We find it difficult to understand how does the term professional misconduct apply to a Chartered Accountant seeking additional training and qualification of CFA? In our opinion the impugned notification clearly and flagrantly violates the fundamental rights of the writ petitioners under Articles 14 and 19(1)(g) of the Constitution of India.14. With respect to the court below it has obviously misunderstood the difference between the nature of functions of the Chartered Financial Analysts and the Chartered Accountants. Thousands of Chartered Accountants who have become students and/or have qualified as CFAs from the Institute of Chartered Financial Analysts of India could not have done so if the CFA programme did not offer training and education that was not available in the CA programme. Their involvement in such large numbers is in itself the testament to the CFA qualification.Our attention, in this behalf, has been drawn to two decisions of this Court in The Council of the Institute of Chartered Accountants of India & Another v. B. Mukherjea [(1958) SCR 371 : AIR 1958 SC 72 ] and H.A.K. Rao v. Council of Institute of Chartered Accountants of India, New Delhi [AIR 1967 SC 1257 ]. They were, however, rendered in different fact situation.21. In B. Mukherjea (supra), the question which arose for consideration before this Court was as to whether a Chartered Accountant while acting in the capacity of a liquidator appointed by the High Court could refuse to furnish any information to this Court and, thus, committed a misconduct.22. In H.A.K. Rao (supra), the question which arose was as to whether canvassing for the purpose of contesting an election to the post of an Institute is permissible in law.Whether misconduct has been conducted or not would depend upon the statute in question and the nature of misconduct said to have been committed. A misconduct must be definite or precise but subject to its generic meaning in absence of any statutory definition. When a person is otherwise entitled to acquire any additional qualification, such qualification per se, in our opinion, cannot be termed to be a misconduct in its generic sense.Submission of Mr. Ganesh that Section 7 should be read with Section 24A of the Act, in our opinion, cannot be accepted. An institute may commit an offence for awarding a degree in respect of attainment of any qualification or competence similar to that of a member of institute. But answer to such a question must be rendered as and when the same is raised. It is not for us to proceed on the presumption that the appellant has committed an offence. It is also not possible to hold that the appellant has committed anotherwise, Section 24A of the Act is a penal provision. It must receive a strict construction. What is, therefore, not contemplated is a misconduct under the Act, in our opinion, cannot be termed to be a misconduct by reason of an administrative order. A statutory authority, as ismust not only act within theof the statute, it also must act fairly and reasonably.29. Our attention has been drawn to certain subsequent events. We do not think that we should go thereinto. It would be for the appropriate authority to take a decision on the basis of the said subsequent events. Submission of Mr. Ganesh that the decision taken by Respondent No. 1 having been taken by an expert decision and, thus, the same does not deserve any interference at the hands of the court, in our opinion, is