Company filing complaints/petitions against various CAs in organised manner fined with Rs. One lakhs to discourage making litigation a business.
ABCAUS Case Law Citation:
ABCAUS 3135 (2019) (09) HC
In the instant case, the petitioner was a private limited company. The petitioner had filed the petition, inter alia, impugning the order passed by the Board of Discipline (the Board) of the Institute of Chartered Accountants of India (ICAI) whereby the Board concurred with the prima facie opinion of the Director (Discipline) of the ICAI holding that the concerned Chartered Accountant (CA) was not guilty of professional misconduct falling within the meaning of Clauses (5) to (9) of Part I of the Second Schedule to the Chartered Accountants Act, 1949 (the Act).
The said CA was a member of ICAI and was a practicing Chartered Accountant. The petitioner company alleged that the CA was guilty of professional misconduct on account of verifying forms (Forms-23 AC) containing false statements filed in respect of seven separate companies.
The Hon’ble High Court observed that the petitioner company had no relation whatsoever with either CA or any of the seven companies in respect of which allegations of misconduct were levelled. All seven companies were admittedly closely held private companies. It was also admitted that the audited accounts of the companies had disclosed the inter se relationship between them. Neither the petitioner nor its Directors have any dealing with the Companies or CA. It was contended that the petitioner had filed the complaint for the general benefit of all concerns.
The Hon’ble High Court also noticed that the petitioner had been filing repeated complaints against various Chartered Accountants and had been pursuing them almost on a professional scale. The petitioner had also filed several petitions before the High Court in respect of the proceedings before the concerned authorities of ICAI, initiated pursuant to the complaint filed by the petitioner.
It was further observed that the petitioner was a company and therefore, the High Court had pointedly asked the the petitioner whether the Charter of the Company (Memorandum of Association) permitted the petitioner to pursue this activity.
The petitioner had responded in the affirmative and had submitted that the petitioner’s objects included filing complaints against various Chartered Accountants for the general good of the profession. In view of the aforesaid assertion the Hon’ble High Court called upon the petitioner to produce its Memorandum and Articles of Association.
The Hon’ble High Court noted that the main objects of the company did not meet the assertion made by the Petitioner. However, one of the objects incidental or ancillary to the attainment of the main objects were as under:
“To carry on the business or vocation of acting as advisers, investigators, consultants, on all matters/problems relating to the Technical, industrial, civil, administrative, financial, organizational, managerial, or such other function/divisions of industry and on commencement or expansion of industry, purchasing techniques (including construction of plants and buildings), production, purchases, sales, material and cost controls, marketing, advertisement, publicity, personnel, export and import for any company, corporation, institution, concerns, bodies, associations (incorporated or unincorporated), departments and services of the government, public or local authorities, trusts, Scientific Research and Development Centres, and to be appointed as technical, financial, industrial, administration, civil consultants”
“To promote, assist or take part in and appear or lead evidence before any commission, investigation, inquiry trial or hearing whether public or private relating to matter or connected with any trade business or industry.”
Company filing complaints/petitions against various CAs fined
The Hon’ble High Court opined that the activities specified which may be carried on as incidental or ancillary to attainment of the main object. cannot be pursued independent of the main objects. The Petitioner’s Memorandum of Association included other objects also, however, filing complaints against various professionals, as an organised activity, was not one of them.
Also, the Hon’ble High Court observed that even a plain reading of the objects incidental or ancillary showed that it also contemplated activities, which were for carrying on a business or vocation and not as a vocation, by itself. The activities also did not contemplate filing complaints against various professionals wholly unconnected with the business or the activities of the petitioner company business or the activities of the petitioner company.
The Hon’ble High Court pointed out that it was clearly indicative that the petitioner was carrying on this activity of filing and pursuing complaints against various Chartered Accountants as an organised activity, independent of the objects for which it was incorporated. Given the objects of the petitioner company, it was clear that such organized activity was wholly ultra vires of the Memorandum of Association of the petitioner company. The corporate façade of the petitioner was being misused by its directors/promoters which cannot be countenanced.
The Hon’ble High Court explained that the proceedings before the Disciplinary Committee/Board of Discipline are in nature of Disciplinary proceedings to ensure that members of ICAI maintain professional standards and do not conduct themselves in a manner which brings disrepute to the profession of Chartered Accountancy. The disciplinary proceeding is principally between ICAI and its members. A complainant merely acts as a relater party that provides information relating to any misconduct on the part of a Chartered Accountant. Although a complainant has a right to be participate in the proceedings; disciplinary proceedings cannot be viewed as a private dispute between the complainant and the Chartered Accountant. It is also true that in most cases, the complainant may also have suffered on account of professional or other misconduct on the part of a Chartered Accountant; however, that does not change the nature of the disciplinary proceedings.
The Hon’ble High Court stated that the matter is, essentially, between ICAI and its members. This is also the rationale for not providing any appellate remedy to the complainant against the decision of the concerned authorities in terms of Section 22G of the Act. This right is only available to an aggrieved Member of ICAI.
The Hon’ble High Court was of the view that litigants, such as the petitioner, who have made litigation their business/vocation ought to be discouraged. Considerable judicial time is wasted by such litigants in matters that are of little significance, the petition was dismissed with costs quantified at ₹1,00,000/-.
Download Full Judgment Click Here >>
- Appeal not maintainable against computer extract of demand raised by CPC-TDS at traces website – ITAT
- Section 87A Rebate for AY 2021-22. Rebate may be reduced with increase in basic exemption limit
- Securitisation & Reconstruction of Financial Assets Amendment Rules 2020
- High Court condemns GST officials staying 8 days at searched house, says action punishable with jail
- Addition u/s 69 on premise that no prudent person keep huge amount of cash in house deleted
addition u/s 68 budget 2017-18 ca misconduct cash deposit in bank CBDT cbdt circular CBDT Instruction cbdt notification cbdt order cbdt press release cgst circular cgst notification cit revision 263 concealment penalty custom circular demonetisation due date extension e-way bill faq GST circular GST Council Meeting gst faq GSTR-3B GST rates gst refund IBBI icai income tax prosecution itat ITAT Delhi mca circular MCA notification order u/s 119 penalty 271(1)(c) penalty u/s 271(1)(c) Press Release reasons recorded reopening 148 Reopening us 147 sebi circular service tax notification transfer and postings unexplained cash credits validity of notice u/s 148 Withdrawal of 2000 500 Bank Notes----------- Similar Posts: -----------