Chartered Accountants to disclose criminal cases/convictions to ICAI

High Court directs ICAI to frame a policy for disclosure by CAs at qualifying stage/annually of criminal cases or convictions.

ABCAUS Case Law Citation
ABCAUS 3569 (2022) (01) HC

High Court has directed ICAI to frame a policy and a mechanism for disclosure by chartered accountants at the qualifying stage and also on a periodic basis of any criminal cases or convictions.

In the instant case, the Petitioner was a chartered accountant. The ICAI issued a show cause notice to him in view of his conviction by the High Court u/s 354 of IPC for assault or criminal force to woman with intent to outrage her modesty and 506-II of the IPC i.e. criminal intimidation.

It is notable that the Petitioner had passed the CA Final examination and qualified as a Chartered Accountant after the FIR was registered against him. After his enrolment as a CA, he was convicted and sentenced. Thereafter, however, he continued to render his services as a CA.

Later, the Petitioner’s wife who was also a Chartered Accountant was elected as a member of the Northern India Regional Council. Certain disputes arose between the Petitioner’s wife and the Chairman of the NIRC at that time, related to certain allegations levelled against him qua Provident Fund frauds.

As alleged by the Petitioner, the matters took an ugly turn when the Petitioner’s wife sought to contest for the Central Council of ICAI, at which point, the issue about his conviction was raised in the ICAI leading to the show cause notice being issued against him.

The ICAI was of the view that disciplinary proceedings could not had been opened against him, as the offence in question was committed prior to him having enrolled as a CA. Thereafter, a show cause notice was issued to the Petitioner, asking him to appear before the Council to explain as to why he be not disqualified under Section 8 of the Chartered Accountants Act, 1949.

Upon receiving the said impugned notice, the Petitioner had filed the present writ petition to quash the said notice.

The conclusions reached by the Hon’ble High Court were as under:

(i) There are, broadly, two categories of misconduct contemplated under   the   Act– ‘professional misconduct’ and ‘other misconduct’. These two types of misconduct are covered under Section 8(vi) read with Section 22 and the Schedules to the Act.

(ii) However, a conviction for an offence involving ‘moral turpitude’ punishable with imprisonment-is a third and higher class of offence under Section 8(v) of the Act and is stipulated as a separate class of disabilities which bars a person’s name from being entered or borne in/continued in the register of the ICAI. This is a graver offence, in terms of the scheme of the Act, juxtaposed to what is contemplated under the third part of the Second Schedule or the fourth part of the First Schedule to the Act.

(iii) In the case of an offence involving ‘moral turpitude’, for which no pardon has been granted, by a strict interpretation of the Act, the matter need not even be referred to the Board of Discipline or to the Disciplinary Committee for an inquiry. In such cases dealing with conviction for offences involving ‘moral turpitude’ covered under Section 8(v) the same would straight away fall within the jurisdiction of the ICAI Council, and even an inquiry, as contemplated in Section 21, would not be strictly required. The ICAI Council, may however, for the purposes of complying with the Principles of Natural Justice, and for the purposes of fairness, still decide to provide a hearing to the person concerned.

(iv) A reading of Sections 20, 21 & 22 would show that the discretion vested in the Council and the Director (Discipline) are vast. Inquiry can be conducted in respect of professional or other misconduct as also under any other circumstances.

(v) In the case of offences under Section 8(vi) read with Section 22 and the Schedules, the ICAI is the final   authority empowered to accept the recommendation of the Board of Discipline, in the case of misconduct specified in the First Schedule, and of the Disciplinary Committee in cases of misconduct specified in the Second Schedule, or a combination of both the Schedules.

(vi) It is further clear that if a person has been convicted for an offence involving ‘moral turpitude’, such a person’s name cannot be entered unless a pardon in respect thereof is granted.

(vii) Although,  from  a  bare  reading  of  sub-section  8(v), it may appear that  the  Central Government  would have  the  power  to remove   the   disability even  in   offences  involving ‘moral turpitude’, in the opinion of this Court,  in case of an  offence or a conviction involving ‘moral turpitude’, such power being vested  with the  Central  Government  would  be  contrary  to  the spirit  of  the statute as also contrary to the settled judicial precedents, to the effect that `moral turpitude’ would  be  a complete disqualification. The use of the expression “entered in” contained in Section 8, also shows that offences committed prior to the person qualifying as a CA are also within the purview of the disabilities mentioned under Section 8 of the Act. The only condition upon which a person convicted can be entered In the instant appeal, the assessee had challenged the order of CIT(A) in confirming or can continue on the register of ICAI, would be if the person has been granted a pardon.

The Hon’ble High Court held that in the instant case, the Petitioner’s conviction would be attracted by the disability of ‘moral turpitude’ as contemplated under Section 8(v) of the Act.

The Hon’ble High Court directed the ICAI to create a framework wherein there is proper disclosure by candidates who apply to become Chartered Accountants, at the inception itself. There is also a need for a continuing disclosure, may be on an annual basis for members to inform the ICAI if there are any criminal cases / conviction etc., against them, so that the ICAI is not kept in the dark. The power, discretion and duty of ensuring the purity of the Register of Members is upon the ICAI.

Download Full Judgment Click Here >>

read latest abcaus posts

----------- Similar Posts: -----------

Leave a Reply