ICAI Misconduct order against two CAs quashed, CAs were held guilty on the basis of TV sting operation

Appellate Authority quashes misconduct order against two chartered accountants who were held guilty on the basis of sting operation by Aaj Tak News Channel as “Jugadu Mechanic Part-3” on black money conversion. Serious concerns was expressed over the casual and careless manner in which these matters were decided by the ICAI

ABCAUS Case Law Citation:
ABCAUS 2586 (2018) (10) AA

Important Case Laws Cited/relied upon:
Gyan Prakash Agarwal (Appeal No. 08/ICAI/2014), Rajiv Maheshwari (Appeal No. 05/ICAI/2014)
Sameer Kumar Singh Vs. ICAI (Appeal No. 07/ICAI/2014)
Alagaapuram R. Mohanraj v/s Tamil Nadu Legislative Assembly (SC) (2016) 6 SCC 82
Rajat Prasad v/s CBI (SC) (2014) 6 SCC 495
Court On Its Own Motion v/s State [146 (2008) DLT 429]
K. Anand V/s Registrar Delhi High Court (SC) (2009), 8 SCC 106
Rajiv Maheshwari Vs. ICAI & Others

In the instant case, the Appellate Authority, in view of the fact that appeals were similar and involved common issues, decided both appeals by one common judgment

In both the cases, the ICAI had awarded punishment to two appellant chartered accountants (CA-1 and CA-2) of the removal of their names from the Register of Members for a period of three months and also imposed a fine of Rs.1,00,000/-.  Earlier, the Disciplinary Board (BoD) of the ICAI had held them guilty of professional misconduct under clause (2) of Part-IV of the First Schedule to the Chartered Accountants Act, 1949 (the Act).

A sting operation was conducted by Aaj Tak News Channel and aired under the title “Jugadu Mechanic Part-3” containing allegations against both the CAs. On examination of the contents of the said video clip, it was decided to treat the same as “information” within the meaning of Rule 7 of the Chartered Accountants (Procedure of Investigation of Professional and Other Misconduct and Conduct of Cases) Rules, 2007.

In the said telecast, the CAs were shown discussing with some individual about the manner of converting black money into white money after charging a cost / charge of 30% to 40%. The Board of Discipline found the CAs having caused grave disrepute to the entire fraternity and to the Institute.

The appellant CAs had contended the non-applicability of the first scheduled, part-iv, clause (2) of the chartered accountants act, 1949. However the it was dismissed by the Appellate Authority (AA) as in past this issue had already dealt with and decided.

Apart from the above, number of other grounds were also taken, inter-alia contending that:

(i) The case was heard in a summary manner as per Rule 14 (1) of Chartered Accountants (Procedure of Investigation of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 and a summary trial was concluded. No opportunity was given to appellants to cross examine any witness. (ii) The BOD failed to examine the reporter who allegedly did the sting operation and recorded the video as alleged and failed to examine the veracity of the alleged video.

(iii) The unedited video was not made available to the Appellants till very late and thereafter no proper opportunity was given to them to rebut the same. [In case of Shri Radhey Shyam Bansal, it was made available to him pursuant to the direction of this Authority only].

(iv) The proceedings were concluded in undue haste without giving adequate opportunity to the Appellants to present their defence.

(v) An allegation based on Sting operation is not admissible as an evidence as per the law prevailing in India.

The AA observed that the CAs had not denied their appearance in the sting operation but from the very beginning they were denying the contents and the manner in which it was presented to the Institute.

The AA opined that the raw footage which was the basic evidence in these Appeals should have been made available to the Appellants Chartered Accountants and reasonable time should have been given to them to controvert the same. Admittedly, in both these Appeals, the raw footage of the video was given to them after the Board of Discipline had issued the Report of holding them guilty.

Also, the AA expressed displeasure on why the final Order was passed so hurriedly and more so in the case of one CA, whose father expired which was a very valid ground for giving him more time of defence.

The AA noted that after receipt of the raw footage, the Appellants had submitted detailed objections which needed to be properly examined, which Board of Discipline could have done, had raw footage of the video of sting operation given in time to the Appellants.  

The AA expressed surprise to note that most of the objections taken before it were filed before the Board of Discipline well within the time given by them but the Board of Discipline had not even dealt with the same in its Report. In fact, there was not even a mention of the same in the Report.

On the issue of admissibility of the sting operation, the AA stated that the Hon’ble Supreme Court has prescribed many safe guards before accepting the same as evidence. The most important is that the veracity of the evidence must be established. In case of one CA, relied upon by the Institute, the same principle has been upheld. One witness was examined but it was not on record how he verified the veracity of raw footage of the video recorded based on which news were telecasted. The request of the Appellants to cross examine him was also not acceded, which, was not justified.

In view of the deficiencies in the procedure followed by the Board of Discipline in the name of summary procedure, the AA remanded the matter back to the Board of Discipline for consideration of all the issues as raised and to decide these matters by passing a fresh Order within a period of six months.

The AA expressed serious concerns over the casual and careless manner in which these matters were decided by the Board of Discipline. Even the issues raised by the Appellants within the time allowed to them were not considered. The whole process was completed in an unnecessary hurry without any justifiable cause. The AA directed the Board of Discipline to be more careful in future while deciding the matters of such nature.

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