D.K. AGRAWAL versus COUNCIL OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
[2021] 7 S.C.R. 1043, Supreme Court of India, 2021
Outcome: Appeal(s) allowed (Granted)
Segment: Arguments
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D.K. AGRAWAL
v.
COUNCIL OF THE INSTITUTE OF CHARTERED
ACCOUNTANTS OF INDIA
(Civil Appeal No. 6337 of 2021)
SEPTEMBER 23, 2021
[S. ABDUL NAZEER AND KRISHNA MURARI, JJ.]
Chartered Accountants Act, 1949 – ss.9, 17, 21, 22-A –
Complaints against appellant-Chartered Accountant received by
respondent-Institute – Council of the Institute prima facie opined
that the appellant was guilty of professional and/or other misconduct
– Case referred to Disciplinary Committee – Disciplinary Committee
submitted its report to the Council also opining the appellant to be
guilty of other misconduct – Report accepted by Council –
Recommendations made to High Court for removal of the appellant’s
name from the Register of the Members – Accepted by High Court –
On appeal, held: Observations of the Disciplinary Committee cannot
by any stretch of imagination be treated as findings – It is only the
Council which is empowered to find out whether the member is guilty
of misconduct – Power exercised by the Council u/s.21 is quasi--
judicial in nature – Recording of reasons is a principle of natural
justice and every judicial/quasi--judicial order must be supported
by reasons to be recorded in writing – In the present case,
recommendations of the Council show that it did not discuss the
report of the Disciplinary Committee, written statement and oral
submissions of the appellant while coming to the conclusion that he
is guilty of misconduct – Recommendations were made mechanically
–
High Court equally erred in accepting the said recommendations
– Recommendations passed by the Council set aside – Orders of the
High Court also set aside – Matters remitted back to the Council
for fresh consideration – Chartered Accountants Regulations, 1964
– Regulations 13-15 – Principles of Natural Justice.
Principles of Natural Justice – Recording of reasons –
Necessity of – Discussed.
[2021] 7 S.C.R. 1043
1043
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Allowing the appeals, the Court
HELD:1.1 The Institute of Chartered Accountants of India
is a statutory body created by an Act of Parliament, the Chartered
Accountants Act, 1949. In accordance with Section 9, the
management of the affairs of the Insitute are vested in the Central
Council. The Council performs its functions through three
different standing committees. The function of the Institute is to
regulate the provisions of the Act and it is also empowered to
take action against its members for any misconduct as
contemplated in the Act and relevant regulations framed
thereunder. Section 21 of the Act prescribes the procedure to be
followed with regard to an inquiry relating to the misconduct of
the members of the Institute. Section 22-A provides for filing of
an appeal by a member against imposition of penalty. Regulation
13 of the Chartered Accountants Regulations, 1964 provides for
the procedure of an inquiry before the Disciplinary Committee.
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
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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. [Paras 15-17][1052-D-G; 1055-D-E;
1056-E-H; 1057-A]
Institute of Chartered Accountants of India v. L.K. Ratna
and Ors. (1986) 4 SCC 537 : [1986] 3 SCR 1049;
Institute of Chartered Accountants of India v. Price
Waterhouse and Ors. (1997) 6 SCC 312 : [1997] 2
Suppl. SCR 267 – relied on.
1.2 As per sub- section (5) of Section 21, where the Council
has found any member of the Institute to be guilty of misconduct
other than any such misconduct as is referred to in sub-section
(4), it is required to forward the case to the High Court with its
recommendations and, under sub-section (6) of Section 21, the
High Court has to pass the orders in accordance with sub-section
(6)(a) to (d) of Section 21 of the Act. Section 22-A provides for
appeal by a member against imposition of penalty. 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 have been made
mechanically by the Council. [Paras 20, 21][1059-C-G]
1.3 Recording of reasons is a principle of natural justice
and every judicial/quasi-judicial order must be supported by
reasons to be recorded in writing. It ensures transparency and
fairness in the decision-making process. The person who is
D.K. AGRAWAL v. COUNCIL OF THE INSTITUTE OF CHARTERED
ACCOUNTANTS OF INDIA
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adversely affected wants to know as to why his submissions have
not been accepted. Giving of reasons ensures that a hearing is
not rendered as a meaningless charade. Unless an adjudicatory
body is required to give reasons and make findings of fact
indicating the evidence upon which it relied, there is no way of
knowing whether the concerned body genuinely applied itself to
and evaluated the arguments and the evidence advanced at the
hearing. Giving reasons is all the more necessary because it gives
satisfaction to the party against whom a decision is taken. Justice
should not only be done but should also be seen to be done. An
unreasoned decision may be just, but it may not appear to be so
to the person affected. A reasoned decision, on the other hand,
will have the appearance of fairness and justice. [Para 22][1059-
G-H; 1060-A-C]
M/s. Woolcombers of India Ltd. v. Woolcombers Workers
Union and Ors. (1974) 3 SCC 318 : [1974] 1 SCR
504; State of West Bengal v. Atul Krishna Shaw and
Anr. (1991) 1 Suppl. SCC 414 – relied on.
1.4 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. The High Court has equally erred in accepting
the recommendations of the Council without applying its own logic
to this aspect of the matter. The Council has to reconsider the
matter afresh after granting the appellant an opportunity of being
heard. The recommendations/order(s) passed by the Council of
the Institute of Chartered Accountants of India which were the
subject matter of the aforesaid two reference cases, are set aside.
Consequently, the orders of the High Court impugned are also
set aside. These matters are remitted back to the Council for
fresh consideration and disposal in accordance with law and in
the light of the observations made above. [Paras 25-27][1061-F-
H; 1062-A-C]
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Case Law Reference
[1986] 3 SCR 1049
relied on
Para 18
[1997] 2 Suppl. SCR 267
relied on
Para 19
[1974] 1 SCR 504
relied on
Para 23
CIVIL APPELLATE JURISDICTION: Civil Appeal No.6337 of
2021.
From the Judgment and Order dated 25.04.2017 of the High Court
of Judicature at Allahabad in Reference Against Misc. Acts No.1 of
1999.
With
Civil Appeal Nos. 6340, 6339 And 6338 of 2021
Anubhav Kumar, Kanhaiya Priyadarshi, Advs. for the Appellant.
Pankaj Garg, Miling Garg, Ms. Nikita Jain Garg, Yaksh Garg,
Suvidutt M. S., Advs. for the Respondent.
The following Order of the Court was passed
O R D E R
S. ABDUL NAZEER, J.
1. Leave granted.
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 Institute’s letter dated
D.K. AGRAWAL v. COUNCIL OF THE INSTITUTE OF CHARTERED
ACCOUNTANTS OF INDIA
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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 Institute’s
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
Institute’s 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 appellant’s 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
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acceded to. The appellant was further informed vide Institute’s 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)
D.K. AGRAWAL v. COUNCIL OF THE INSTITUTE OF CHARTERED
ACCOUNTANTS OF INDIA [S. ABDUL NAZEER, J.]
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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 Institute’s 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
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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 appellant’s 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.
11. The learned counsel appearing for the appellant has mainly
contended that the conclusion reached by the Council was on the basis
of conjectures and surmises. In fact, the appellant has filed his written
submissions objecting to the report of the Disciplinary
Committee. The
appellant has presented his case before the Council. However, without
independently considering any of the materials placed before it, including
the written and the oral submissions made by the appellant, the Council
unilaterally accepted the report of the Disciplinary Committee and found
that that appellant was guilty of “other misconduct”. The Council had
failed to appreciate the materials produced by the appellant, the appellant’s
written submissions and his oral submissions made before it. In this
connection, he has drawn our attention to the report of the Council and
also Section 21 of the Act.
12. Apart from the above, it was also argued that the opinion
formed by the Council was not guided by the doctrine of benefit of
doubt. The Council was under an obligation to record a finding that the
guilt of the appellant was beyond reasonable doubt which, it was argued,
is not so in the instant case. It was further argued that the High Court
ought to have accepted the submissions of the appellant and set aside
D.K. AGRAWAL v. COUNCIL OF THE INSTITUTE OF CHARTERED
ACCOUNTANTS OF INDIA [S. ABDUL NAZEER, J.]
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the recommendations, considering the fact that the recommendation of
the Council was violative of the principles of natural justice. He has also
attacked the report of the Disciplinary Committee which, according to
him, was made with a pre-determined mind and that it is perverse and
contrary to the materials placed on record.
13. On the other hand, learned counsel appearing for the
respondent-Institute has submitted that taking into consideration the
materials on record and also the written statements and submissions of
the appellant, the Council had come to the conclusion that the appellant
was guilty of misconduct. The High Court has very rightly confirmed
the recommendations of the Council and has allowed the references
accordingly.  There is no error in the report of the Disciplinary Committee
or in the order of the Council. Therefore, the appellant cannot find fault
with the judgment of the High Court. He prays for dismissal of the
appeals.
14. We have carefully considered the submission of the learned
counsel for the parties and also perused the materials placed on record.
15. The Institute of Chartered Accountants of India is a statutory
body created by an Act of Parliament that is the Chartered Accountants
Act, 1949. In accordance with Section 9 of the Act, the management of
the affairs of the Institute are vested in the Central Council. The Council
performs its function through three different standing
committees
constituted under Section 17 of the Act and various other committees.
One of the standing committees of the Institute is the Disciplinary
Committee. The function of the Institute is to regulate the provisions of
the Act and it is also empowered to take action against its members for
any misconduct as contemplated in the Act and relevant regulations
framed thereunder. Section 21 of the Act prescribes the procedure to be
followed with regard to an inquiry relating to the misconduct of the
members of the Institute. Section 22-A provides for filing of an appeal
by a member against imposition of penalty. The Act was amended on
08.08.2006 by Act 9 of 2006.  However, since the alleged misconduct
relates to the year 1978, we are concerned with the unamended Sections
21 and 22-A which are as under:
“21. Procedure in inquiries relating to misconduct of members
of Institute:
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“(1) Where on receipt of information by, or of a complaint
made to it, the Council if prima facie of opinion that an member
of the Institute has been guilty of any professional or other
misconduct, the Council shall refer the case to the Disciplinary
Committee, and the Disciplinary Committee shall thereupon
hold such inquiry and in such manner as may be prescribed,
and shall report the result of its inquiry to the Council.
(2) If on receipt of such report the Council finds that the
member of the Institute is not guilty of any professional or
other misconduct, it shall record its finding accordingly and
direct that the proceedings shall be filed or the complaint
shall be dismissed, as the case may be.
(3) If on receipt of such report the Council finds that the
member of the Institute is guilty of any professional or other
misconduct, it shall record a finding accordingly and shall
proceed in the manner laid down in the succeeding sub-
sections.
(4) Where the finding is that a member of the Institute has
been guilty of a professional misconduct specified in the First
Schedule, the Council shall afford to the member an
opportunity of being heard before orders are passed against
him on the case, and may thereafter make any of the following
orders, namely :
(a) reprimand the member;
(b) remove the name of the member from the Register for such
period, not exceeding five years, as the Council thinks fit:
Provided that where it appears to the Council that the
case is
one in which the name of the member ought to be removed
from the Register for a period exceeding five years or
permanently, it shall not make any order referred to in Clause
(a) or Clause (b), but shall forward the case to the High Court
with its recommendations thereon.
(5) Where the misconduct in respect of which the Council has
found any member of the Institute guilty is 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
D.K. AGRAWAL v. COUNCIL OF THE INSTITUTE OF CHARTERED
ACCOUNTANTS OF INDIA [S. ABDUL NAZEER, J.]
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(6) On receipt of any case under sub-section (4) or sub-section
(5), the High Court shall fix a date for the hearing of the
case and shall cause notice of the date so fixed to be given to
the member of the Institute concerned, the Council and to the
Central Government, and shall afford such member, the
Council and the Central Government an opportunity of being
heard, and may thereafter make any of the following orders,
namely:
(a) direct that the proceedings be filed, or dismiss the
complaint, as the case may be;
(b) reprimand the member;
(c) remove him from membership of the Institute either
permanently or for such period as the High Court thinks fit;
(d) refer the case to the Council for further inquiry and report.
(7)
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(8) For the purposes of any inquiry under this section, the
Council and the Disciplinary Committee shall have the same
powers as are vested in a civil Court under the Code of Civil
Procedure, 1908, in respect of the following matters, namely:
(a) summoning and enforcing the attendance of any person
and examining him on oath;
(b) the discovery and production of any document; and
(c) receiving evidence on affidavit.”
“22-A. Appeals :- (1) Any member of the Institute aggrieved by
any order of the Council imposing on him any of the penalties
referred to in sub-section (4) of section 21, may, within thirty days
of the date on which the order is communicated to him, prefer an
appeal to the High
Court:
PROVIDED that the High Court may entertain any such
appeal after the expiry of the said period of thirty days, if it is
satisfied that the member was prevented by sufficient cause from
filing the appeal in time.
(2) The High Court may, on its own motion or otherwise, after
calling for the records of any case, revise any order made by the
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Council under sub-section (2) or sub-section (4) of section 21 and
may-
(a) confirm, modify or set aside the order;
(b) impose any penalty or set aside, reduce, confirm, or enhance
the penalty imposed by the order;
(c) remit the case to the council for such further inquiry as the
High Court considers proper in the circumstances of the case;
or
(d) pass such other order as the High Court thinks fit:
PROVIDED that no order of the Council shall be
modified or set aside unless the Council has been given an
opportunity of being heard and no order imposing or enhancing
a penalty shall be passed unless the person concerned has also
been given an opportunity of being heard.”
16. Regulation 13 of the Chartered Accountants Regulations, 1964
(for short “Regulation”) provides for the procedure of an inquiry before
the Disciplinary Committee. Regulations 14 and 15 which are relevant
for the purpose of this case are as under:
“14. Report of the Disciplinary Committee
(1) The Disciplinary committee shall submit its report to the
Council.
(2) The Council shall consider the report of the Disciplinary
Committee and if, in its opinion, a further enquiry is necessary,
shall cause such further enquiry to be made whereupon a further
report shall be submitted by the Disciplinary Committee.
(3)  The Council shall, on the consideration of the report and the
further report, if any, record its findings.
(4) If the finding is that there is no case for passing one of the
orders
specified in clauses (a) or (b) of sub-section (4) of section,
the complainant and the respondent shall be informed accordingly.
15. Procedure in a hearing before the Council.
(1) If the Council, in view of its findings, is of opinion that there is
a case for passing one of the orders specified in clauses (a) or (b)
of sub-section (4) of Section 21, is shall—
D.K. AGRAWAL v. COUNCIL OF THE INSTITUTE OF CHARTERED
ACCOUNTANTS OF INDIA [S. ABDUL NAZEER, J.]
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(a) furnish to the respondent a copy of the report of the
Disciplinary Committee and a copy of its findings: and
(b) give him a notice indicating the order proposed to be passed
against him and calling upon him to appear before it on a
specified date or if he does not wish to be heard in person, to
send within a specified time, such representation in writing as
he may wish to make against the proposed order.
(2) The scope of the hearing or of the representation in writing, as
the case may be, shall be restricted to the order proposed to be
passed.
(3) The Council shall, after hearing the respondent, if he appears
in person, or after considering the representation, if any, made by
him, pass such orders as it may think fit.
(4) The orders passed by the Council shall be communicated to
the complainant and the respondent.”
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
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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.1 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
11986 4 SCC 537
D.K. AGRAWAL v. COUNCIL OF THE INSTITUTE OF CHARTERED
ACCOUNTANTS OF INDIA [S. ABDUL NAZEER, J.]
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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 entitledto 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.2 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
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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.”
20. It is also necessary to notice yet another aspect. As per sub-
section (5) of Section 21, where the Council has found any member of
the Institute to be guilty of misconduct other than any such misconduct
as is referred to in sub-section (4), it is required to forward the case to
the High Court with its recommendations and, under sub-section (6) of
Section 21, the High Court has to pass the orders in accordance with
sub-section (6)(a) to (d) of Section 21 of the Act. Section 22-A provides
for appeal by a member against imposition of penalty.
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.
22. Recording of reasons is a principle of natural justice and every
judicial/quasi-judicial order must be supported by reasons to be recorded
in writing. It ensures transparency and fairness in the decision-making
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process. The person who is adversely affected wants to know as to
why his submissions have not been accepted.  Giving of reasons ensures
that a hearing is not rendered as a meaningless charade. Unless an
adjudicatory body is required to give reasons and make findings of fact
indicating the evidence upon which it relied, there is no way of knowing
whether the concerned body genuinely applied itself to and evaluated
the arguments and the evidence advanced at the hearing. Giving reasons
is all the more necessary because it gives satisfaction to the party against
whom a decision is taken. It is a well-known principle that justice should
not only be done but should also be seen to be done. An unreasoned
decision may be just, but it may not appear to be so to the person affected.
A reasoned decision, on the other hand, will have the appearance of
fairness and justice.
23. In M/s. Woolcombers of India Ltd. v. Woolcombers Workers
Union and Ors.3, 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
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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.”
24.  Further, this Court in State of West Bengal v. Atul Krishna
Shaw and Anr.4 has held that failure to give reasons does not instill
public confidence in the correctness of the decisions rendered by the
adjudicatory bodies. It was held thus:
“7. ……it is indisputably true that it is a quasi-judicial proceeding.
If the appellate authority had appreciated the evidence on record
and recorded the findings of fact, those findings are binding on
this Court or the High Court. By process of judicial review, we
cannot appreciate the evidence and record our own findings of
fact. If the findings are based on no evidence or based on
conjectures or surmises and no reasonable man would, on given
facts and circumstances, come to the conclusion reached by the
appellate authority on the basis of the evidence on record, certainly
this Court would oversee whether the findings recorded by the
appellate authority is based on no evidence or beset with surmises
or conjectures. Giving of reasons is an essential element of
administration of justice. A
right to reason is, therefore, an
indispensable part of sound system of judicial review. Reasoned
decision is not only for the purpose of showing that the citizen is
receiving justice, but also a valid discipline for the Tribunal itself.
Therefore, statement of reasons is one of the essentials of justice.”
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.
4 (1991) Supp (1) SCC 414
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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.
27. Resultantly, the recommendations/order(s) passed by the
Council of the Institute of Chartered Accountants of India which were
the subject matter of the aforesaid two reference cases, are set aside.
Consequently, the orders of the High Court impugned herein are also set
aside. The appeals are accordingly allowed. These matters are remitted
back to the Council for fresh consideration and disposal in accordance
with law and in the light of the observations made above. The Council is
directed to consider and dispose of the matter(s) as expeditiously as
possible but not later than three months from the date of receipt of a
copy of this order.  All the contentions of the parties are left open. Having
regard to the facts and circumstances of the cases, both the parties are
directed to bear their respective costs.
28. Pending applications, if any, shall also stand disposed of.
Divya Pandey
Appeals allowed.