CAs guilty of misconduct on bringing disrepute whether or not related to professional work

Chartered Accountants guilty of misconduct on bringing disrepute to the profession whether or not related to his professional work – Delhi High Court confirms penalty in set aside proceedings

In 2018 Supreme Court had over ruled the judgment of Delhi High Court and held that a Chartered Accountants shall be guilty of misconduct on bringing disrepute to the profession whether or not related to his professional work, in set aside proceedings, the Delhi High Court confirmed the penalty.

ABCAUS Case Law Citation:
ABCAUS 2648 (2018) (11) abcaus.in SC
ABCAUS 4332 (2024) (12) abcaus.in HC

In 2016, the Hon’ble Delhi High Court had held that when a chartered accountant was acting as an individual in his dealings with the complainant which were pure commercial and was not discharging any function in relation to his practice as a Chartered Accountant, he could not be said to be unbecoming , guilty of “other misconduct” as contemplated by Sub-Section (1) of Section 21 of the Chartered Accountants Act, 1949.

The High Court had dismissed the reference made by the ICAI and quashed the removal of CA’s name from the Register of Members.

However, the ICAI had taken up the case with the Hon’ble Supreme Court by filing a SLP.

The Hon’ble Supreme Court opined that the High Court had not correctly appreciated Section 21(3) of the Chartered Accountants Act, 1949.

The Hon’ble Supreme Court observed that the Disciplinary Committee of ICAI had, on facts, found the Chartered Accountant guilty of a practice which was not in the Chartered Accountant’s professional capacity. The Council was entitled to do so under Schedule I Part-IV sub clause (2) if, in the opinion of the Council, such act brings disrepute to the profession whether or not related to his professional work.

The Hon’ble Supreme Court held that the impugned judgment of the High Court was incorrect set aside the same. The matter was remanded to the High Court to be decided afresh.

In set aside proceedings, the Hon’ble High Court observed that even though, respondent claimed that an amicable settlement has taken place with the complainant, but no copy of the agreement had been produced. Moreover, in view of Section 21(8), notwithstanding any settlement between the parties, even the complainant cannot withdraw the complaint once filed.

The Hon’ble High Court further noted that a Division Bench had held that proceedings against a member of ICAI are in the nature of disciplinary proceedings. The object is to ensure that professional standards are maintained and Chartered Accountants maintain the professional standards, and conduct themselves in a manner, so as not to bring disrepute to the profession. Such proceedings cannot be viewed with the prism of a private lis between the Complainant and the Chartered Accountant. Therefore, disciplinary proceedings cannot be said to have been affected due to the absence of the complainant.

The High Court further observed that the Disciplinary Committee found that respondent had failed to act in a bona fide manner and the said conduct was derogatory in nature and highly unbecoming of a Chartered Accountant and brought disrepute to the profession.

The Court also examined the issue whether the punishment was too harsh but opined that there has to be some degree of integrity and probity, which is expected of a Chartered Accountant because of the trust that is posed in him by his clients. Such conduct, as displayed by the respondent, erodes the credibility and brings disrepute to the Institution of Chartered Accountants.

The High Court opined that the punishment awarded was not unduly harsh.

Accordingly, the High Court accepted the recommendation of the Council to the effect that the name of respondent be removed from the Register of Members for a period of six months.

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