Board Resolution authorising filing complaint against CA misconduct admitted at appellate stage

Board Resolution authorising Legal Counsel to file complaint against CA misconduct can be taken on record even at appellate stage if it existed before filing complaint

ABCAUS Case Law Citation:
ABCAUS 3243 (2020) (02) AA

Important case law relied upon by the parties:
Uday Shankar Triyar v. Ram Kalewar Prasad [(2006) 1 SCC 75]
Varun Pahwa v. Renu Chaudhary [2019 SCC Online SC 300]
Vidyawati Gupta v. Bhakti Hari Nayak [(2006) 2 SCC 777]
Subbiah Pillai v. Sankarapandiam Pillai [AIR 1948 Mad 369]
Welding Rods (P) Ltd. v. Indo Borax & Chemicals Ltd. [(2002) 108 Comp Cases 747 (Guj)]
Ganesh Prasad Sah Kesari v. Lakshmi Narayan Gupta [(1985) 3 SCC 53],
Maharashtra State Mining Corporation v. Sunil [MANU/SC/2368/2006]
Parmeshwari Prasad Gupta v. Union of India [MANU/SC/0395/1973]
Goa Shipyard Ltd. v. Babu Thomas

In the instant case, at the preliminary stage a question arose before the Appellate Authority as to whether the Legal Counsel of the Complainant Company was competent to file the complaint of Professional Misconduct against the appellant Chartered Accountant

Thus, the Appellate Authority had to examine if the Complaint filed was in conformity with Rule 3 (4) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 (the Rules).

No authorisation in favour of the legal Counsel had been executed by the complainant company on the record of the Disciplinary Authority of the ICAI.

The Appellant CA had raised this objection before the Disciplinary Authority of ICAI but the issue was not dealt with by the disciplinary body.

As per record, no objection to this extent had been specifically taken by the Appellant herein in his written statement filed before the Disciplinary Authority, though he did raise this objection before the Disciplinary Authority in his additional written submissions filed during hearing. This issue was however not dealt with by the disciplinary body.   

Before the Appellate Authority, the legal Counsel for the complainant company sought permission to place on record the authorisation in his favour in terms of Board Resolution. It  was claimed that the authorisation provided by the Company had not been filed with the Complaint due to an inadvertent error, but after the request of the Disciplinary Directorate, the correct authorisation had been provided to ICAI.

The Appellant CA in the rejoinder, opposed the application on the grounds, (1) that the affidavit /application had been filed after the period of 10 days granted (2) that there is no provision under the Rules of Appellate Authority to admit any additional evidence, (3) that there was an apparent violation of Rule 3 (4) of the Rules which is a mandatory statutory requirement which cannot be waived, bypassed or ignored on the ground of inadvertence, (4) that filing a Complaint on the letterhead and under the seal of the Complainant company would not be a substitute of the requirement of filing authorisation in the form of a Board Resolution as required by Rule 3 (4) of the Rules, and (5) that the authorisation being filed now was also not as per Rule 3 (4) as the said Resolution nowhere showed authorisation in favour of the Legal Counsel to file a Complaint against the Appellant CA.

The Appellant contened that non filing of proper Board Resolution hits at the root of the matter and the Complaint becomes invalid having been filed by an incompetent and unauthorised person. It was pointed out that the defect was not removed before the Disciplinary Directorate itself, despite the requests of the Directorate and subsequent objection taken by the Appellant.

The Appellate Authority opined that the question was whether the Board Resolution could be taken on record at the appellate stage? It was noted that the said Board Resolution was dated prior to filing of the Complaint. Thus, it was not a case that there was no Board Resolution in existence.

The Appellate Authority stated that when a Board Resolution in favour of the Legal Counsel did exist, it deserved to be taken on record even at the appellate stage. Omission to file the proper Resolution and instead filing a different Resolution is only a procedural irregularity which can always be cured at any appropriate stage, and even at the appellate stage.

The Appellate Authority opined that the substantive rights of the parties cannot be allowed to be defeated and the case on merits cannot be allowed to be thrown away only on the ground that the copy of actual Board Resolution was not filed on record, which was in fact in existence at the time of filing of the Complaint.  

The Appellate Authority rejected the contention that no such document can be allowed to be taken on record under the Rules of procedure of the Authority. The Appellate Authority opined that there is no such bar or prohibition provided anywhere to this effect and it cannot be said that only the Disciplinary Authority has the power of a civil court to take evidence but no such power vests in the Appellate Authority.  Accordingly, the Appellate Authority allowed the extracts of Board Resolution to be taken on record.

The Appellant CA had contended that the Board Resolution was a general Resolution in favour of the Legal Counsel and not a specific Resolution thereby authorising him to file a Complaint before ICAI and specifically against him or his firm.

In this regard, the Appellate Authority concurred with the submission of the Complainant/Respondent to the effect that the word “specifically” appearing in Rule 3 (4) of the Rules as quoted above, is with respect to the identity of a specific individual who has been authorised to file a Complaint on behalf of the company, and not with respect to any specific authority before which a Complaint is to be filed or the specific delinquent against whom a Complaint is to be filed. The purport of Rule 3 (4) is only to the effect that an identifiable and specific individual should be there being duly authorised by a Resolution of the Board of Directors of the company to file a Complaint on its behalf.

The Appellate Authority noted that even as per the Explanation to Rule 3 (4), in case of a bank or financial institution, a general Resolution authorising an officer holding a particular position to file Complaint shall be deemed to be the specific Resolution. It implies that in case of companies / firms / bodies other than banks and financial institutions, a general Resolution in favour of an officer holding a particular post or designation shall not be sufficient and such Resolution has to be in favour of a particular individual who could be identified through his name. No other view is possible to be taken in view of the language of Rule 3 (4).

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