Discipline; T.O. Aleyas Vs. Institute of Chartered Accounts of India [Kerala High Court, 21-05-2012]

Contents

Chartered Accountants Act, 1949 –¬†Sections 21 –¬†Whether the Disciplinary Committee ¬†without giving any reasons, decide not to initiate disciplinary action against chartered accountants, especially when the Director (Discipline), without giving any reasons arrives at a prima facie opinion on the commission of misconduct by one of them, who are partners of a firm of chartered accountants, which firm was engaged for auditing the accounts of a company, in respect of which audit, the complaints were raised?


IN THE HIGH COURT OF KERALA AT ERNAKULAM

S. Siri Jagan, J.

W.P(C) Nos. 29211 & 29212 of 2011 (B)

Dated this, the 21st day of May, 2012

FOR PETITIONER(S): BY SRI.P.K.SURESH KUMAR, SENIOR ADVOCATE. ADV. SMT.N.P.ASHA FOR RESPONDENT(S): R1 TO R3 BY ADVS. SRI.E.K.NANDAKUMAR, SRI.K.JOHN MATHAI, SRI.P.BENNY THOMAS, SRI.P.GOPINATH. R4 BY ADV. SRI.BECHU KURIAN THOMAS.

J U D G M E N T

The issues involved in these two writ petitions area as to whether, on a complaint received from an aggrieved person, the Board of Discipline and the Disciplinary Committee (the respective 3rd respondent in these two writ petitions), constituted by the Institute of Chartered Accountants of India, (the 1st respondent herein), under

# Sections 21A and 21B of the Chartered Accountants Act, 1949

(hereinafter referred to as the Act), can, without giving any reasons, decide not to initiate disciplinary action against two chartered accountants, especially when the Director (Discipline), the 2nd respondent herein, without giving any reasons in exercise of powers under Section 21 (2) of the Act, arrives at a prima facie opinion on the commission of misconduct by one of them, who are partners of a firm of chartered accountants, which firm was engaged for auditing the accounts of a company, in respect of which audit, the complaints were raised, while exercising statutory powers under Section 21 (3) of the Act and also whether in respect of the identical misconduct one of the partners can be absolved, when the allegations are in respect of audit for which the firm was engaged. The short facts leading to the two writ petitions may be summarised as under.

2. The 4th respondent in each of these two writ petitions were partners of a firm of chartered accountants by name M/s. Abraham & Kurian. They conducted audit of the accounts of a company by name St. Mary’s Hotels Pvt. Ltd., of which the petitioner is a shareholder/Managing Director. Alleging several specific acts of misconducts on the part of the 4th respondent in each of these two writ petitions, the petitioner filed complaints before the 1st respondent, seeking initiation of disciplinary action as per the provisions of the Act. As enjoined by Section 21 (2) of the Act, the 2nd respondent considered the complaints first and arrived at a prima facie opinion that the 4th respondent in W.P. (C) No. 29211/2011 is guilty of professional misconduct, falling within the meaning of clause 9 of Part I of the First Schedule and Clause 7 of Part I of the Second Schedule of the Act and that the 4th respondent in W.P. (C) No. 29212/2011 is not guilty of professional misconduct falling within the meaning of Clause 7 of Part I of the Second Schedule of the Act. The 2nd respondent placed his prima facie opinion before the respective 3rd respondent in each of the writ petitions as required under Sub Section 3 of Section 21 of the Act. Thereafter, as per Exts. P4 in each of the two writ petitions, the Deputy Secretary of the Disciplinary Directorate of the 1st respondent informed the petitioner as follows:

W.P. (C) No. 29211/2011

“I have been directed to inform you that your Complaint, Written Statement of the Respondent, your Rejoinder and additional documents along with the prima facie opinion formed by the Director (Discipline) under Rule 9(1) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules 2007, were considered by the Disciplinary Committee. The Committee on a consideration of the same did not agree with the prima facie opinion of the Director (Discipline). In view of the above, the Disciplinary Committee decided to close the matter. Accordingly, under Rule 9(2)(c), the Committee passed order for closure of the aforesaid Complaint. Your above mentioned Complaint thus stands closed.”

W.P. (C) No. 29212/2012

“I have been directed to inform you that your Complaint, Written Statement of the Respondent and your Rejoinder along with the prima facie opinion formed by the Director (Discipline) under Rule 9(1) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules 2007, were considered by the Board of Discipline. The Board of Discipline on a consideration of the same agreed with the prima facie opinion of the Director (Discipline) that the respondent was not guilty of any professional or other misconduct under the Chartered Accountants Act, 1949 (as amended by the Chartered Accountants (Amendment) Act, 2006. Accordingly, under Rule 9(3)(a), the Board has passed order for closure of the aforesaid Complaint. Your above mentioned Complaint thus stands closed.”

The petitioner is challenging Ext. P4 decisions of the respective 3rd respondent in these two writ petitions.

3. The petitioner inter alia contends that the impugned orders are arbitrary and violative of the fundamental rights of the petitioner under Article 14 of the Constitution of India, as also principles of natural justice. In W.P. (C) No. 29211/2011, he contends that while exercising statutory functions in the matter of disciplinary action against a chartered accountant, the decisions of the Director (Discipline) and the Disciplinary Committee should be transparent, especially when instituted on the complaint of an aggrieved person, so as to inspire confidence in the minds of the public, in the 1st respondent institution and the procedure adopted by respondents 2 and 3. According to him, when the 3rd respondent gives a decision on his complaint without giving reasons, that too disagreeing with the prima facie opinion of the Director (Discipline), that amounts to arbitrary exercise of power. He submits that as a complainant, who has invoked the jurisdiction of the 1st respondent, the petitioner has a right to know the reasons which prompted the 3rd respondent not to proceed with the complaint, when the 2nd respondent, who has after conducting an enquiry into the veracity of the complaint as prescribed under the Act, found a prima facie case for proceeding with disciplinary action against the 4th respondent. In the other writ petition, the petitioner would contend that when the complaint against the two 4th respondents in the two writ petitions were in their capacity as partners of the very same firm, which was engaged to audit the accounts of a company, in respect of their conduct in the audit of the company, in which the petitioner is a shareholder, both have to sail or sink together and the decision of the 2nd respondent to indict one and to absolve the other is clearly perverse and arbitrary. He would further point out that the circumstances prove that the 3rd respondent in that writ petition has not applied their mind while taking the decision on the complaint of the petitioner. The petitioner seeks the following prayers in these two writ petitions:

“i Issue a writ, order or direction to call for the records leading to Ext.P4 and set aside the order of respondents 2 and 3 in the matter relating to the 4th respondent.

ii. issue a writ, order or direction in the nature of mandamus directing respondents 1 to 3 to initiate action against the 4th respondent on the basis of Ext.P1 complaint and or reconsider the order referred to Ext.P4.”

4. The common 1st respondent and the respective 4th respondent in the writ petitions have filed counter affidavits supporting the impugned orders in both the writ petitions. They would contend that the scheme of the Act does not contemplate giving of reasons for the decisions of the 3rd respondent in each of the writ petition. It is contended that as a responsible statutory authority, the Board of Discipline and the Disciplinary Committee take decisions based on the materials collected by the 2nd respondent and if the records show that the respective 3rd respondent has taken the decision after taking into account the materials on record, that would be sufficient compliance with the procedure prescribed under the Act and the Rules framed thereunder. With the help of the prima facie opinions of the 2nd respondent and the resolutions of the respective 3rd respondent in each of the two writ petitions, copies of which are produced along with the counter affidavits of the 1st respondent, in the two writ petitions, the 1st respondent would contend that the decisions of the 3rd respondent in the two complaints, which are the subject matter of the two writ petitions are unimpeachable, especially in the absence of allegations of malafides. According to them, rules of natural justice cannot be confined to any strait-jacketed formula and without proving prejudice to the petitioner on account of the alleged violation of principles of natural justice, the petitioner cannot challenge the orders on the ground of violation of principles of natural justice. According to them, no civil consequences follow from the impugned decisions to the petitioner and therefore no prejudice is caused to him because of the alleged non- compliance with principles of natural justice and the impugned orders. The respondents rely on the following commentaries in page 285 of “Administrative Law” by David Foulkes, Seventh Edition (1990):

“Where the administration is merely initiating a procedure or seeking to establish whether a prima facie case exists, the courts will not be likely to extend the statutory procedure at least where it gives a full opportunity to be heard later in the proceedings. In Wiseman v. Borneman a tribunal’s function was to decide whether, on the basis of documents submitted to it by the taxpayer and by the Inland Revenue, there was a prima facie case for the Revenue to recover unpaid tax. The House of Lords held that the taxpayer was not entitled to see and answer the statements in the Revenue’s documents to the tribunal. But some of the judgments suggest that that procedure would not have been adequate if the tribunal had been entitled to pronounce a final judgment: in that case the courts could supplement it as in Cooper v. Wandsworth Board of Works. Likewise, in Pearlberg v. Varty, the tax payer was not entitled to be heard before a commissioner gave leave for an assessment of tax to be made against him. The opportunity to be heard would come later. . . . . .”

They would also rely on the decisions of the Supreme Court in

# Institute of Chartered Accountants of India V. L.K. Ratna & others, (1986) 4 SCC 537

# Union of India & others V. E.G. Nambudiri, (1991) 3 SCC 38

and

# State of Bihar & another V. P.P. Sharma, IAS & another 1992 Supp (1) SCC 222,

in support of their contentions.

5. In answer, the petitioner would rely on the decisions of the Supreme Court in

# State Bank of Patiala & others V. S.K. Sharma (1996) 3 SCC 364

# Rajesh Kumar and others v. Dy. CIT and others, (2007) 2 SCC 181

# Kranti Associates (P) Ltd. V. Masood Ahmed Khan (2010) 9 SCC 496

and

# Secretary and Curator, Victoria Memorial Hall v. Howrah Ganatantrik Nagarik Samithy and others (2010) 3 SCC 732

6. I have considered the contentions of both parties in detail. At the outset, I may note that the very object of the Act is to ensure purity and honesty in the profession of chartered accountants. Like in other professions, unhealthy practices are increasing in the profession of chartered accountants also. The duty of the chartered accountants is to see that financial dealings of individuals, firms and corporate personalities are conducted honestly and without any harm to the public and the government who deal with such entities. Many statutory authorities like Income Tax authorities, Sales Tax authorities, Registrar of Companies etc. and the public who invest in companies, rely heavily on the audited balance sheets and profit and loss accounts certified by chartered accountants, for ensuring that the returns submitted by those entities conform to law and that the investments made by public in those entities are secure. Therefore, the Government and the public repose confidence in the profession for arranging their business and statutory dealings with such financial entities. As is clear from the preamble to the Act, the Act has been enacted to make provision for the regulation of the profession of Chartered Accountants. It is to regulate the profession, the Institute of Chartered Accountants have been established and powers have been conferred on the Institute to issue certificates of practice, without which no person can practice the profession and to take disciplinary action against erring chartered accountants. The Council of the Institute itself is comprised of chartered accountants. The Disciplinary Committee constituted under Section 21B of the Act comprises mainly of chartered accountants and the Board of Discipline constituted under Section 21A also has a chartered accountant as one of the members. That being so, when they consider the case of a fellow chartered accountant, there is room for the public to doubt that personal prejudice and favouritism may influence their judgment and decision. Therefore, it is their duty to allay the fears of the public against such possibilities and to inspire confidence in the public and the Government. The principle that justice should not only be done but also manifestly appear to have been done squarely applies to such proceedings under the Act. This can be ensured only by transparency in their decisions. A crucial aspect of such transparency is the reasoning for their conclusions. In fact, the decisions of the Board of Discipline, Disciplinary Committee and the Director (Discipline) are quasi-judicial in nature, in view of the very fact that Section 21C of the Act confers on them the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, in the matter of summoning and enforcing attendance of witnesses, discovery and production of any document and receiving evidence on oath. It is settled law that a quasi-judicial authority must record reasons in support of its conclusions. Summarising the law on the subject of necessity to give reasons in administrative and quasi-judicial decisions, the Supreme Court has held thus in Kranti Associates’ case (supra) in paragraph 47 thereof:

“Summarizing the above discussion, this Court holds:

a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially.

b. A quasi – judicial authority must record reasons in support of its conclusions.

c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.

d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi – judicial or even administrative power.

e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations.

f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi – judicial and even by administrative bodies.

g. Reasons facilitate the process of judicial review by superior Courts.

h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice.

i. Judicial or even quasi – judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants’ faith in the justice delivery system.

j. Insistence on reason is a requirement for both judicial accountability and transparency.

k. If a Judge or a quasi – judicial authority is not candid enough about his / her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.

l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or ‘rubber – stamp reasons’ is not to be equated with a valid decision making process.

m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See

# David Shapiro in Defence of Judicial Candor, 1987 (100) Harward Law Review 731-737

n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See 1994 (19) EHRR 553, at 562 para 29 and

# Anya v. University of Oxford, 2001 EWCA Civ 405

wherein the Court referred to Art.6 of European Convention of Human Rights which requires, “adequate and intelligent reasons must be given for judicial decisions”.

o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of “Due Process”.

In Rajesh Kumar’s case (supra), the Supreme Court had earlier held thus in paragraphs 20 to 23:

“20. Principles of natural justice are based on two basic pillars:

(i) Nobody shall be condemned unheard (audi alteram partem)

(ii) Nobody shall be judge of his own cause (nemo debet esse judex in propria sua causa)

21. Duty to assign reasons is, however, a judge made law. There is dispute as to whether it comprises of a third pillar of natural justice. [See

# S. N. Mukherjee v. Union of India, (1990) 4 SCC 594

and

# Reliance Industries Ltd. v. Designated Authority and Others, 2006 AIR SCW 4911

22. However, the other view is that the question as to whether reasons are required to be assigned is a matter of legislative policy which should be left to the decision of Parliament. In

# Raipur Development Authority and Others v. M/s. Chokhamal Contractors and Others, (1989) 2 SCC 721

a Constitution Bench opined:

“It is no doubt true that in the decisions pertaining to Administrative Law, this Court in some cases has observed that the giving of reasons in an administrative decision is a rule of natural justice by an extension of the prevailing rule. It would be in the interest of the world of commerce that the said rule is confined to the area of Administrative Law. We do appreciate the contention, urged on behalf of the parties who contend that it should be made obligatory on the part of the arbitrator to give reasons for the award, that there is no justification to leave the small area covered by the law of arbitration out of the general rule that the decision of every judicial and quasi-judicial body should be supported by reasons. But at the same time it has to be borne in mind that what applies generally to settlement of disputes by authorities governed by public law need not be extended to all cases arising under private law such as those arising under the law of arbitration which is intended for settlement of private disputes. As stated elsewhere in the course of this judgment if the parties to the dispute feel that reasons should be given by the arbitrators for the awards it is within their power to insist upon such reasons being given at the time when they enter into arbitration agreement or sign the deed of submission. It is significant that although nearly a decade ago the Indian Law Commission submitted its report on the law of arbitration specifically mentioning therein that there was no necessity to amend the law of arbitration requiring the arbitrators to give reasons, Parliament has not chosen to take any step in the direction of the amendment of the law of arbitration. Even after the passing of the English Arbitration Act, 1979 unless a court requires the arbitrator to give reasons for the award [vide sub-sections (5) and (6) of Section 1 of the English Arbitration Act, 1979], an award is not liable to be set aside merely on the ground that no reasons have been given in support of it.” [See also

# Rajendra Construction Co. v. Maharashtra Housing and Area Development Authority and Others, (2005) 6 SCC 678

23. We, however, need not dilate on the said question being not very necessary for the purpose of this case. But it is beyond any cavil that ordinarily unless excluded by operation of a statute, the superior courts while exercising power of judicial review shall proceed on the basis that assignment of reasons is imperative in character. When an authority be it administrative or quasi-judicial adjudicates on a dispute and if its order is appealable or subject to judicial review, it would be necessary to spell out the reasons therefor. While, however, applying the principles of natural justice, however, the court must also bear in mind the theory of useless formality and the prejudice doctrine.”

The same view was reiterated by the Supreme Court in paragraphs 40 to 42 of Victoria Memorial Hall’s case (supra):

“40. It is a settled legal proposition that not only administrative but also judicial order must be supported by reasons, recorded in it. Thus, while deciding an issue, the Court is bound to give reasons for its conclusion. It is the duty and obligation on the part of the Court to record reasons while disposing of the case. The hallmark of an order and exercise of judicial power by a judicial forum is to disclose its reasons by itself and giving of reasons has always been insisted upon as one of the fundamentals of sound administration justice – delivery system, to make known that there had been proper and due application of mind to the issue before the Court and also as an essential requisite of principles of natural justice. “The giving of reasons for a decision is an essential attribute of judicial and judicious disposal of a matter before Courts, and which is the only indication to know about the manner and quality of exercise undertaken, as also the fact that the Court concerned had really applied its mind.” [Vide

# State of Orissa v. Dhaniram Luhar AIR 2004 SC 1794 : 2004 AIR SCW 751

and

# State of Rajasthan v. Sohan Lal and Ors. (2004) 5 SCC 573 : AIR 2004 SC 4520 : 2004 AIR SCW 4321

41. Reason is the heartbeat of every conclusion. It introduces clarity in an order and without the same, it becomes lifeless. Reasons substitute subjectivity by objectivity. Absence of reasons renders the order indefensible/unsustainable particularly when the order is subject to further challenge before a higher forum. [Vide

# Raj Kishore Jha v. State of Bihar and Ors. AIR 2003 SC 4664 : 2003 AIR SCW 5095

# Vishnu Dev Sharma v. State of Uttar Pradesh and Ors. (2008) 3 SCC 172 : AIR 2008 SC (Supp) 1416 : 2008 AIR SCW 794

# Steel Authority of India Ltd. v. Sales Tax Officer, Rourkela I Circle and Ors. (2008) 9 SCC 407 : AIR 2009 SC (Supp) 561 : 2008 AIR SCW 5186

# State of Uttaranchal and Anr. v. Sunil Kumar Singh Negi AIR 2008 SC 2026 : 2008 AIR SCW 2684

# U.P.S.R.T.C. v. Jagdish Prasad Gupta AIR 2009 SC 2328 : 2009 AIR SCW 3132

# Ram Phal v. State of Haryana and Ors. (2009) 3 SCC 258 : AIR 2009 SC (Supp) 1410 : 2009 AIR SCW 5076

# Mohammed Yusuf v. Faij Mohammad and Ors. (2009) 3 SCC 513 : AIR 2009 SC (Supp) 1741 : 2009 AIR SCW 601

and

# State of Himachal Pradesh v. Sada Ram and Anr. (2009) 4 SCC 422] : AIR 2009 SC (Supp) 302 (2) : 2009 AIR SCW 2916)

42. Thus, it is evident that the recording of reasons is principle of natural justice and every judicial order must be supported by reasons recorded in writing. It ensures transparency and fairness in decision making. The person who is adversely affected may know, as why his application has been rejected.”

As such, it is settled law that for ensuring transparency and fairness in decision making, recording of reasons is mandatory. The decisions cited by the respondents do not lay down any different law. Therefore, while deciding not to initiate any action on the complaint of the petitioner, it was incumbent on the Board of Discipline and the Disciplinary Committee to record reasons for their decision, in so far as it was a quasi-judicial decision and principles of natural justice demanded recording of reasons for the sake of clarity, objectivity, transparency and fairness in decision making.

7. It is all the more so when the Disciplinary Committee decides to disagree with the prima facie opinion of the Director (Discipline), who, as per the provisions of the Act, is to consider, in the first instance, a complaint on misconducts on the part of a chartered accountant and to place his prima facie opinion on the alleged misconducts with the materials collected by him before the Board of Discipline or the Disciplinary Committee as the case may be. The relevant provisions of the Act in respect of action for misconduct against a chartered accountant are contained in Sections 21, 21A, 21B, 21C, and 22 which read as follows:

# “21. Disciplinary Directorate

(1) The Council shall, by notification, establish a Disciplinary Directorate headed by an officer of the Institute designated as Director (Discipline) and such other employees for making investigations in respect of any information or complaint received by it.

(2) On receipt of any information or complaint along with the prescribed fee, the Director (Discipline) shall arrive at a prima facie opinion on the occurrence of the alleged misconduct.

(3) Where the Director (Discipline) is of the opinion that a member is guilty of any professional or other misconduct mentioned in the First Schedule, he shall place the matter before the Board of Discipline and where the Director (Discipline) is of the opinion that a member is guilty of any professional or other misconduct mentioned in the Second Schedule or in both the Schedules, he shall place the matter before the Disciplinary Committee.

(4) In order to make investigations under the provisions of this Act, the Disciplinary Directorate shall follow such procedure as may be specified.

(5) Where a complainant withdraws the complaint, the Director (Discipline) shall place such withdrawal before the Board of Discipline or, as the case may be, the Disciplinary Committee, and the said Board or Committee may, if it is of the view that the circumstances so warrant, permit the withdrawal at any stage.

# 21A. Board of Discipline

(1) The Council shall constitute a Board of Discipline consisting of– (a) a person with experience in law and having knowledge of disciplinary matters and the profession, to be its presiding officer;

(b) two members one of whom shall be a member of the Council elected by the Council and the other member shall be nominated by the Central Government from amongst the persons of eminence having experience in the field of law, economics, business, finance or accountancy;

(c) the Director (Discipline) shall function as the Secretary of the Board.

(2) The Board of Discipline shall follow summary disposal procedure in dealing with all cases before it.

(3) Where the Board of Discipline is of the opinion that a member is guilty of a professional or other misconduct mentioned in the First Schedule, it shall afford to the member an opportunity of being heard before making any order against him and may thereafter take any one or more of the following actions, namely:-

(a) reprimand the member;

(b) remove the name of the member from the Register up to a period of three months;

(c) impose such fine as it may think fit which may extend to rupees one lakh.

(4) The Director (Discipline) shall submit before the Board of Discipline all information and complaints where he is of the opinion that there is no prima facie case and the Board of Discipline may, if it agrees with the opinion of the Director (Discipline), close the matter or in case of disagreement, may advise the Director (Discipline) to further investigate the matter.

# 21B. Disciplinary Committee.

(1) The Council shall constitute a Disciplinary Committee consisting of the President or the Vice-President of the Council as the Presiding Officer and two members to be elected from amongst the members of the Council and two members to be nominated by the Central Government from amongst the persons of eminence having experience in the field of law, economics, business, finance or accountancy: Provided that the Council may constitute more Disciplinary Committee as and when it considers necessary.

(2) The Disciplinary Committee, while considering the cases placed before it shall follow such procedure as may be specified.

(3) Where the Disciplinary Committee is of the opinion that a member is guilty of a professional or other misconduct mentioned in the Second Schedule or both the First Schedule and the Second Schedule, it shall afford to the member an opportunity of being heard before making any order against him and may thereafter take any one or more of the following actions, namely:-

(a) reprimand the member;

(b) remove the name of the member from the Register permanently or for such period, as it thinks fit;

(c) impose such fine as it may think fit, which may extend to rupees five lakhs.

(4) The allowances payable to the members nominated by the Central Government shall be such as may be specified.

# 21C. Authority, Disciplinary Committee, Board of Discipline and Director (Discipline) to have powers of civil court.

For the purposes of an inquiry under the provisions of this Act, the Authority, the Disciplinary Committee, Board of Discipline and the Director (Discipline) shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, in respect of the following matters, namely:-

(a) summoning and enforcing the attendance of any person and examining him on oath;

(b) the discovery and production of any document; and (c) receiving evidence on affidavit.

Explanation:- For the purposes of Sections 21, 21A, 21B, 21C and 22, “member of the Institute” includes a person who was a member of the Institute on the date of the alleged misconduct although he has ceased to be a member of the Institute at the time of the inquiry.

xx xx xx

# 22. Professional or other misconduct defined.

For the purposes of this Act, the expression “professional or other misconduct” shall be deemed to include any act or omission provided in any of the Schedules, but nothing in this Section shall be construed to limit or abridge in any way the power conferred or duty cast on the Director (Discipline) under sub-section (1) of Section 21 to inquire into the conduct of any member of the Institute under any other circumstances.”

8 The Central Government has framed the

# Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of cases) Rules 2007

(hereinafter referred to as the Rules), to regulate the procedure for investigation relating to complaints and information received regarding misconducts by chartered accountants. Rule 3 details the procedure for filing complaints, for which a form is also prescribed. Rule 4 regulates the fee for filing a complaint. Rule 5 deals with registration of a complaint, which reads thus:

# 5. Registration of complaint

(1) The Director or an officer or officers authorized by the Director, shall endorse on every complaint the date on which it is received or presented and the Director or the officer or officers so authorized, shall sign on each such endorsement.

(2) The Director or an officer or officers authorized by him shall scrutinize the complaints so received.

(3) If, on scrutiny, the complaint is found to be in order, it shall be duly registered and a unique reference number allotted to it, which shall be quoted in all future correspondence, and shall be dealt with in the manner as prescribed in Chapter III of these rules.

(4) If the subject matter of a complaint is, in the opinion of the Director, substantially the same as or has been covered by any previous complaint or information received and is under process or has already been dealt with, he shall take any of the following action, as the case may be,-

(a) if such a previous complaint is still under the examination of the Director, then the new complaint may be clubbed with the previous complaint and in such case the fact may be conveyed to the first complainant, new complainant and respondent respectively.

(b) if prima facie opinion has been formed by the Director in such a previous complaint and the case is pending before the Board of Discipline or the Committee, then the Director shall bring the new complaint before the Board of Discipline or the Committee, as the case may be, and the latter shall either club the complaint with the previous complaint or close it or ask the Director to deal with it as a separate complaint, as it deems fit.

(c) if orders have already been passed by the Board of Discipline or the Committee on such a previous complaint, then the Director shall present the new complaint before the Board of Discipline for its closure:

Provided that even in case where the new complaint is clubbed with a previous complaint under this sub-rule, only the first complainant would be the complainant for the purposes of investigating under these rules.

(5) If, the complaint, on scrutiny, is found to be defective, including the defects of technical nature, the Director may allow the complainant to rectify the same in his presence or may return the complaint for rectification and resubmission within such time as he may determine.

(6) If, the complainant fails to rectify the defect or defects within the time allowed under sub-rule (5), the Director shall form the opinion that there is no prima facie case and present the complaint before the Board of Discipline for its closure.

(7) The Board of Discipline may, after the presentation of the complaint by the Director under sub-rule (6), either-

(a) agree with the opinion of the Director and pass an order for the closure;

(b) disagree with the opinion of the Director and advised him to further investigate the matter.”

Rule 6 permits withdrawal of a complaint, with permission from the Board of Discipline or the Disciplinary Committee.

Rule 7 deals with the action to be taken on receipt of written information containing allegations against a member or a firm other than through a complaint.

Rules 8 and 9 deal with the procedure prescribed for investigation of complaints, which read as follows:

# 8. Procedure to be followed by Director on a complaint

(1) The Director or an officer or officers authorized by the Director, within sixty days of the receipt of a complaint under rule 3, shall-

(a) if the complaint is against an individual member, send particulars of the acts of commission or omission alleged or a copy of the complaint, as the case may be, to that member at his professional address;

(b) if the complaint is against a firm, send particulars of the acts of commission or omission alleged or a copy of the complaint, as the case may be, to the firm at the address of its head office, as entered last in the Register of Offices and Firms maintained by the Institute, with a notice calling upon the firm to disclose the name or names of the member or members concerned and to send particulars of acts of commission or omission or a copy of the complaint, as the case may be, to such members:

Provided that while disclosing the name or names of the member or members, the firm shall also send a declaration signed or, as the case may be, jointly signed by the member or members concerned to the effect that he or she or they shall be responsible for answering the complaint and that the particulars of acts of commission or omission or the copy of the complaint sent to the firm by the Director had been duly received by him, her or them.

Explanation.- A notice to the firm shall be deemed to be a notice to all the members who are partners or employees of that firm as on the date of registration of the complaint.

(2) A member whose name is disclosed by the firm shall be responsible for answering the complaint, provided such a member was associated, either as partner or employee, with the firm, against which the complaint has been filed, at the time of occurrence of the alleged misconduct.

Provided that if no member, whether erstwhile or present, of the firm, own responsibility for the allegation or allegations made against the firm, then the firm as a whole shall be responsible for answering the allegation or allegations and, as such, all the members who were partners or employees of that firm, as on the date of occurrence of the alleged misconduct, shall be responsible for answering the allegation or allegations as contained in the complaint.

(3) A member who has been informed of the complaint filed against him (hereinafter referred to as the respondent) shall, within 21 days of the service of a copy of the complaint, or within such additional time, not exceeding thirty days, as may be allowed by the Director, forward to the Director, a written statement in his defence.

(4) On receipt of the written statement, if any, the Director may send a copy thereof to the complainant and the complainant shall, within 21 days of the service of a copy of the written statement, or within such additional time, not exceeding thirty days, as may be allowed by the Director, forward to the Director, his rejoinder on the written statement.

(5) On perusal of the complaint, the respondent’s written statement, if any, and rejoinder of the complainant, if any, the Director may call for such additional particulars or documents connected therewith either from the complainant or the respondent or any third party or parties, as he may consider appropriate: Provided that if no reply is sent by the respondent within the time allowed under sub-rule (3) or by the complainant within the time allowed under sub-rule (4), the Director shall presume that the respondent or the complainant, as the case may be, have nothing further to state and take further action as provided under this Chapter.

# 9. Examination of the Complaint

(1) The Director shall examine the complaint, written statement, if any, rejoinder, if any, and other additional particulars or documents, if any, and form his prima facie opinion as to whether the member or the firm is guilty or not of any professional or other misconduct or both under the First Schedule or the Second Schedule or both.

(2)(a) Where the Director is of the prima facie opinion that, –

(i) the member or the firm is guilty of any misconduct under the First Schedule, he shall place his opinion along with the complaint and all other relevant papers before the Board of Discipline;

(ii) the member or the firm is guilty of misconduct under the Second Schedule or both the First and Second Schedules, he shall place his opinion along with the complaint and all other relevant papers before the Committee.

(b) If the Board of Discipline or the Committee, as the case may be, agrees with the prima facie opinion of the Director under clause (a) above, then the Board of Discipline or the Committee may proceed further under Chapter IV or V respectively.

(c) If the Board of Discipline or the Committee, as the case may be, disagrees with the prima facie opinion of the Director under clause (a) above, it shall either close the matter or advise the Director to further investigate the matter.

(3) Where the Director is of the prima facie opinion that the member or the firm is not guilty of any misconduct either under the First Schedule or the Second Schedule, he shall place the matter before the Board of Discipline, and the Board of Discipline,-

(a) if it agrees with such opinion of the Director, shall pass order, for closure.

(b) if it disagrees with such opinion of the Director, then it may either proceed under chapter IV of these rules, if the matter pertains to the First Schedule, or refer the matter to the Committee to proceed under Chapter V of these rules, if the matter pertains to the Second Schedule or both the Schedules, or may advise the Director to further investigate the matter.

(4) The Director shall, after making further investigation as advised by the Board of Discipline under sub-rule (2) or (3) of this rule or by the Committee under sub-rule (2), shall further proceed under this rule.”

Rules 13 to 15 deal with the functioning of Board of Discipline.

Rules 16 to 19 deal with the constitution and functioning of Disciplinary Committee.

Rule 18 prescribes the procedure to be followed by the Committee, which lays down as follows:

# 18. Procedure to be followed by the Committee

(1) The Committee shall be guided by the principles of natural justice and shall follow the procedure in dealing with all cases before it, as laid down in this Chapter.

(2) If the Committee decides to proceed further under clause (b) of sub-rule (2) of rule 9 or if it receives a reference from Board of Discipline under clause (b) of sub- rule (3) of rule 9, it shall expeditiously cause to deliver to the respondent and the complainant, a copy each of the following,-

(a) prima facie opinion formed by the Director, and

(b) particulars or documents relied upon by the Director, if any, during the course of formulation of prima facie opinion.

(3) The Committee shall inform the respondent, as the case may be, to file a written statement, within such time as may be specified. Provided that the Committee may give him additional time for submitting his written statement, on application by the respondent on his adducing sufficient reasons to the satisfaction of the Committee for seeking additional time:

Provided further that such additional time shall not be given more than once and if the respondent still does not submit a written statement, the Committee shall presume that he has no further submissions to make and shall proceed to decide the case on merits.

(4) The respondent shall send a copy of his written statement, along with supporting documents and a list of witnesses, to the Director and the complainant within the stipulated time.

(5) The complainant or the Director may, after receipt of the written statement, submit a rejoinder to the Committee, with a copy to the respondent, along with supporting documents, if any.

(6) The Presiding Officer of the Committee shall fix a date, hour and place of hearing, which shall not ordinarily be later than 45 days from the date of receipt of prima facie opinion and the committee shall cause a notice to be sent of such date, hour and place to the Director, respondent and complainant and require them to appear before it in person to make oral submissions, if any.

Explanation.- For the purpose of this rule, the appearance includes, unless and otherwise directed, appearance by an advocate or through any authorized representative, who may be a Chartered Accountant, Cost Accountant or Company Secretary.

(7) During the first hearing, the Committee shall read out the charge or charges to the respondent along with the summary of prima facie opinion arrived at by the Director, and ask the respondent whether he pleads guilty to the charge or charges made against him.

Provided that if the respondent does not appear for the first hearing even after one adjournment, the reading out of charge or charges along with the summary or prima facie opinion shall be made in his absence and the case proceeded with in accordance with the provisions of this Chapter.

(8) If the respondent pleads guilty, the Committee shall record the plea and take action as per provisions under rule 19.

(9) If the respondent does not plead guilty, then the Committee shall fix a date for examination of witnesses and production of documents.

(10) The Committee may, on application of the Director, issue notice for appearance to any of his witnesses directing him to attend or to produce any other document or material evidence.

(11) On the date so fixed, the Committee shall proceed to take all such evidence as may be produced by the Director, including oral examination of witnesses and production of documents:

Provided that the Committee may permit the cross- examination of any witness to be deferred until any other witness or witnesses have been examined or recall any witness for further cross-examination.

(12) After the presenting of evidence by the Director is over, the complainant shall be given an opportunity, if present during the hearing, to present any additional evidence after satisfying the Committee that such evidence is relevant and has not been brought forward during the presentation by the Director.

(13) The respondent shall be then called upon to enter upon his defence and produce his evidence.

(14) If the respondent applies to the Committee to issue any notice for compelling attendance of any witness for the purpose of examination or cross-examination, or the production of any document or any material object, the Committee shall issue such notice unless it considers that such application should be refused on the ground that it is made for the purpose of vexation or delay or for defeating the ends of justice and such ground shall be recorded by it in writing.

(15) The witnesses summoned at the instance of the complainant under sub-rule (12) or the respondent under sub-rule (14) shall not be eligible for reimbursement of expenses incurred for attending the hearing.

(16) After evidences have been presented, the Director and the respondent shall present their arguments before the Committee:

Provided that after the Director has presented his argument, if the complainant, provided he is present during the hearing, feels that any vital argument has been left out by the Director, may present the argument, after convincing the Committee of the same.

(17) The Committee shall consider the evidences and arguments produced before it and arrive at a finding on whether the respondent is guilty or not of any professional or other misconduct.

(18) The Committee may, at the request of any of the parties before it or due to other reasons, and on such terms as it thinks fit, and at any stage of the proceedings, adjourn the hearing:

Provided that such adjournment shall not be given more than once at any stage of the proceedings.

Explanation:- For the purpose of this rule, inability of the complainant, advocate, authorized representative or witness, to appear shall not be treated as a valid reason for adjournment of a hearing.”
Rule 19 relates to orders of the Disciplinary Committee, which reads as follows:

# 19. Orders of the Committee

(1) On arriving at a finding under sub-rule (8) or sub-rule (17) of rule 18 that the respondent is guilty of professional or other misconduct, the Committee shall give the respondent an opportunity to be heard before passing any order under sub-section (3) of section 21B of the Act:

Provided that if the respondent does not appear before the Committee at the time directed to do so when given such an opportunity to be heard, the Committee shall presume that he has nothing more to represent before it and shall pass orders under sub-section (3) of section 21B of the Act.

(2) On arriving at a finding under sub-rule (17) of rule 18 that the respondent is not guilty of professional or other misconduct, the Committee shall pass orders closing the case.

(3) The Committee shall send, free of charge, to the director, respondent and the complainant a certified copy of the final order.”

8. The main plank of the contentions of the respondent is that the procedure before the Disciplinary Committee is summary in nature, which shows that the committee need not give elaborate reasons for its decision. According to them if the records show sufficient reasons supporting the decision they have arrived at, the same would be sufficient compliance with the procedure prescribed by the Rules. They would contend that Ext. R1(b) resolution of the Disciplinary Committee contains sufficient reasons for disagreeing with the prima facie opinion of the 2nd respondent.

9. I shall first consider whether Ext. R1(b) resolution of the Committee contains sufficient reasons for the disagreement. The same reads thus:

“Item No. 2 Placing of the papers relating to the Complainant(s) wherein the Director (Discipline) has formed the prima facie opinion under Rule 9(2)(a)(ii) of the Chartered Accountant (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases ) Rules, 2007.

The Committee noted that 28 cases falling within the ambit of Clause (ii) of sub rule (2)(a) of rule 9, where the opinion of the Director (Discipline) is that the member or the firm is guilty of misconduct under the Second Schedule or both the Schedules have been placed before it. The Committee thereafter took up consideration of the case and decided as under:

18. Shri. T.O. Aleyas, Thiruvalla (Kerala) -vs- CA. M.S. Venkitachalam (M.No.201186), Thiruvalla (Kerala) [PR-72/09-DD/201/2009]

The Committee considered the prima facie opinion of the Director (Discipline) dated 18th July, 2011 along with the Complaint, written statement, rejoinder and additional documents. The Committee on consideration of the same did not agree with the prima facie opinion of the Director.

The Committee was of the view that the present Complainant is the outcome of the dispute between the Complainant and the other Directors of M/s. St. Marys Hotel Pvt. Ltd. and prima facie no professional and/or other misconduct was apparent on the part of the Respondent.

Therefore, the Committee decided to close the matter as per clause (c) of sub rule (2) of Rule 9 of these Rules and directed the Directorate to inform both the parties accordingly.”

Of course the same states that the Committee has considered the prima facie opinion of the Director (Discipline) along with the complaint, written statement, rejoinder and additional document and that the present complaint is the outcome of the dispute between the complainant and the other Directors of M/s. St. Mary’s Hotel Pvt. Ltd. and prima facie no professional and/or other misconduct was apparent on the part of the respondent. This has to be read along with the opinion of the 2nd respondent, after considering which the same has been passed. Paragraphs 9 to 10 of Ext R1(a) prima facie opinion of the 2nd respondent reads thus:

“9. On perusal of all the papers on record, including the Complaint, Written Statement, Rejoinder and additional documents, it is observed as under:-

9.1 The charge of the Complainant is that the Respondent did not ensure compliance with the provisions of Section 225 of the Companies Act, 1956 before accepting the said appointment and conspired with one of the directors of the Company to sign the accounts of the Company without application of mind and did fraudulent certification of share capital.

9.2 On perusal of the Balance Sheet of the Company for the financial year 2006-07, it is observed that Rs. 33,880,689/- has been shown under the head share capital (W-13). On perusal of the Schedule ‘A’ (W-15) to the said Balance Sheet wherein the details of share capital are given it is observed that Rs. 1,50,00,000/- has been shown as fully paid up share capital of the Company and Rs. 23,880,689/- has been shown as share money advance. Since the share capital of the Company was fully subscribed, the necessary disclosure in this regard had been made by the Respondent in Annexure to his audit report (W-9)

9.3 On being asked by the Directorate, the Respondent brought on record copy of the minutes of the AGM held on 15th February, 2007 wherein Sh. Abraham P. George had been re-appointed as the auditor of the Company (D- 3, D-5). Further the Respondent had stated in his Written Statement that he had been appointed as the auditor of the Company on the basis of a resolution passed by the Board of Directors of the Company in its meeting held on 18th September, 2007 and communicated to it vide the Company’s letter dated 26th September, 2007 (W-6). The Board of Directors of the Company assumes power to appoint the auditors only in the case of a casual vacancy. The Complainant in his Rejoinder stated that Shri. Abraham P. George had resigned from the position of the auditor of the Company and thus, the appointment of the Respondent could have been made only in a general meeting. This creates doubt about the authenticity of the alleged appointment letter of the respondent and the conditions under which he had been appointed specifically when the Respondent has not brought on record the copy of the Board Resolution wherein he had been appointed as the auditor of the Company.

9.4 Further, the Company communicated to the Respondent about his appointment as auditor on 26th September, 2007 (W-6) and he signed the audit report of the Company for the financial year 2006-07 on 27th September, 2007. This raised doubt about the efficacy with which the audit of the Company had been carried out.

9.5 In view of the same, the matter needs to be enquired further.

9.6 Also, it is evident that there exists dispute between the Complainant and the other director of the Company being his brother and the instant complaint is the offshoot of the same.

9.7 The Respondent brought on record copy of the audited financial statements of the Company for the financial year 2006-07 and 2007-08 alongwith its relevant schedules (W-7 to W-48).

9.8 The Complainant in his Rejoinder pointed out that the Respondent did not mention his membership number in his audit report of the Company for the financial year 2006-07 and 2007-08 leading to non compliance with the provisions of AAS 28. But, since the said charge had not been alleged by the Complainant in Form ‘I’, no prima facie opinion can be formed about the same.

10. In view of the above, I am of the prima facie opinion that the Respondent is guilty of professional misconduct falling within the meaning of Clause (9) of Part I of the First Schedule and Clause (7) of Part I of the Second Schedule to the Chartered Accountants (Amendment), 2006.”

The only reason stated in Ext. R1 (b) of the 3rd respondent in W.P. (C) No. 29211/2011 to disagree with the prima facie opinion of the 2nd respondent is that the same is the result of disputes between the complainant and other directors of the company whose accounts were audited by the 4th respondents’ firm. The same does not state that the reasoning given by the 2nd respondent for the prima facie opinion is not correct. I am not satisfied that the same is sufficient reason to disagree with the prima facie opinion of the 2nd respondent. Even if there are disputes between the petitioner and the other directors, the same does not mitigate the misconduct of the 4th respondent, if any. The Committee failed to note that the allegation of the complainant is that the misconduct was a result of collusion between the other directors and the 4th respondent. It can also be that the misconduct itself was necessitated for strengthening the stand of the other directors who are at loggerheads with the complainant. The petitioner has in his complaint, stated about the litigation pending before the Company Law Board as between the petitioner and the other directors and the same is not a new finding by the 3rd respondent. In fact the 2nd respondent had in Ext. R1(a) noted the disputes between the petitioner and the other directors and despite the same the 2nd respondent formed a prima facie opinion of misconduct on the part of the 4th respondent. That being so the Committee ought to have stated reasons as to how the disputes discredit the prima facie opinion of the 2nd respondent, which is not evident from Ext. R1(b). In the above circumstances I am satisfied that Ext. R1(b) does not contain any plausible reasons for the disagreement by the Committee.

10. It is to be noted that there are two bodies vested with powers of disciplinary action under the Act, but operating in different spheres. The first is the Board of Discipline under Section 21 A of the Act and the 2nd is the Disciplinary Committee under Section 21B of the Act. The Board of Discipline is the authority to deal with professional or other misconducts mentioned in the first schedule to the Act alone and the Disciplinary Committee is the authority to consider misconducts mentioned in the Second Schedule to the Act. The Director (Discipline) has to first consider the complaint, collect materials in respect thereof and place the same before the Board of Discipline or the Disciplinary Committee, as the case may be, with his prima facie opinion. But when the Director (Discipline) is of the opinion that misconducts coming both under the First and Second Schedules are prima facie committed, he is to place his opinion for consideration of the Disciplinary Committee. Section 21A (2) of the Act and Rule 14(1) of the Rules stipulate that the Board of Discipline shall follow summary disposal procedure in dealing with all cases before it. But such a provision is not there in respect of Disciplinary Committee. Section 21B(2) prescribes that the Committee, while considering cases placed before it, shall follow such procedure as may be specified. Rule 18 (1) prescribes that the Committee shall be guided by the principles of natural justice and shall follow the procedure in dealing with all cases before as laid down in Chapter V containing Rule 18. But the procedure prescribed in Chapter V relates to only a case where the Committee decides to proceed further on the prima facie opinion of the Director (Discipline) and does not lay down the procedure to be followed when the Disciplinary Committee decides not to initiate any further proceedings. Therefore, no procedure is prescribed as to how the Disciplinary Committee should proceed further when the Committee decides to disagree with the prima facie opinion of the Director (Discipline) that a case of misconduct is made out. The only guideline regarding the procedure to be followed in such case is that the Committee shall be guided by the principles of natural justice. As I have already held above, in all quasi-judicial proceedings, reasoned decision is a mandatory requirement and that the jurisdiction of the Committee is quasi-judicial in nature. That being so the Committee is bound to give reasons. It is also part of the principles of natural justice as well. In this connection it must be noted that while laying down that the Board of Discipline shall follow summary disposal procedure in dealing with cases before it, the legislature has not chosen to lay down so in the case of cases before the Disciplinary Committee. Instead the Rule making authority has stipulated that the Committee shall be guided by the principles of natural justice. Even otherwise even if the procedure before the Committee is also summary in nature, the same does not necessarily mean that the Committee is not bound to give reasons for the disagreement with the prima facie opinion of the Director (Discipline). Giving of reasons is not part of the procedure but a necessary concomitant of a quasi-judicial decision and an ingredient of principles of natural justice. It is to be further noted that under Rule 9(2)(c), if the Board of Discipline or the Committee disagrees with the prima facie opinion of the Director, they are to either close the matter or advice the Director to investigate further. The disagreement, as the word itself suggests, has to be supported by reasons and if they are to direct the Director to investigate further, they are bound to give reasons, without which the Director would not know on what he should investigate further. Therefore I am of the opinion that the wording used in the Rules themselves suggests that the Board of Discipline or the Committee, as the case may be, is expected to give reasons for their decision, whether it is to agree or disagree.

11. It is true that as per the decisions cited by the respondents, violation of principles of natural justice will not vitiate the decision, if no prejudice is caused to the complainant. It is also well settled that principles of natural justice cannot be reduced to any hard and fast formulae and that the applicability of the same depends on the context and the facts and circumstances of each case. It is evident from Ext. R1(b) that between the petitioner and other directors of the Company Petitions are pending before the Company Law Board, where the very same issues are also matters in issue and therefore a decision in the complaints of the petitioner would naturally have some bearing on those cases as well. It is also the case of the petitioner that the 4th respondent had audited the accounts of the Company and signed and submitted the auditor’s report, when there was a restraint order from the Company Law Board and later by this Court from finalising the accounts of the Company without obtaining permission from this Court or the Company Law Board. Therefore it cannot be said that the petitioner is not prejudiced by the violation of principles of natural justice. If reasons are stated, at least the petitioner can prove before the Company Law Board that the reasons given by the Disciplinary Committee are wrong. In this connection it must be noted that the complainant has no other remedy against the decision of the Committee in so far as appeal as provided for in Section 22G is only for the member on whom penalties are imposed. The complainant is therefore entitled to know the reasons for rejection of his complaint, which is, to say the least, just and reasonable. The very object of the principles of natural justice is to ensure that there would be no failure of justice. I am of opinion that in this case, since reasons are not stated as to why the 3rd respondent disagreed with the prima facie opinion of the Director, the same certainly amounts to failure of justice for the petitioner. As such Exhibit P4 decision in W.P. (C) No. 29211/2011 is unsustainable and liable to be quashed for the said reason.

12. In W.P.(C) No. 29212/2011, the impugned decision, Ext. P4, is one by the Board of discipline agreeing with the prima facie opinion of the 2nd respondent that the 4th respondent was not guilty of any professional or other misconduct. I am of opinion that while taking that decision the Board failed to note the apparent contradiction between the prima facie opinions of the 2nd respondent in the two cases. It is the firm, in which the 4th respondent in each of the writ petitions are partners, which was appointed as the auditor of the Company M/s. St. Mary’s Hotel Pvt. Ltd. and the case of the petitioner is that such appointment was against Section 225 of the Companies Act. As such both partners of the firm, who has been appointed as the auditor, are equally responsible for the actions of the firm. Therefore, evidently, there cannot be different opinions in respect of the two partners. They have to sail or sink together in these proceedings. The decision of the Board of Discipline, to agree with the prima facie opinion of the 2nd respondent, is without taking into account this crucial fact. Ext. R1(b) resolution of the Board also does not disclose that the Board had considered this aspect of the matter by applying their mind to the materials before them. In fact the Board of Discipline took the decision on 1-8-2001, whereas the Disciplinary Committees decision was on 2-8-2011. On the date when the Board of Discipline took the decision, the prima facie opinion of the Director (Discipline) as against the other partner of the firm, had not yet been disagreed with by the Disciplinary Committee. Therefore the decision of the Board of Discipline impugned in W.P.(C) No. 29212/2011 is also unsustainable.

13. Accordingly, Ext. P4 decisions in both writ petitions are quashed. The Disciplinary Committee is directed to pass fresh orders giving reasons for their decision in respect of the 4th respondent in W.P. (C) No. 29211/2011, as expeditiously as possible, at any rate, within one month from the date of receipt of a copy of this judgment. While doing so the Committee shall examine the sustainability of the prima facie opinion of the Director (Discipline) on the other allegations of the petitioner, which were found against the petitioner, also. After the Disciplinary Committee passes orders as directed above, the Board of discipline shall pass fresh orders in respect of the 4th respondent in W.P. (C) No. 29212/2011, as expeditiously as possible at any rate within a further period of one month from the date of the decision of the Disciplinary Committee. The Board of Discipline shall also consider the sustainability of all the allegations of the petitioner against the 4th respondent. Needless to say, the orders to be so passed, as directed above, shall, on the face of them, contain the reasons for arriving at the conclusions arrived at.

The writ petitions are disposed of as above.

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