HIGH COURT OF GUJARAT
CA Rajesh
Versus
Disciplinary Committee
SPECIAL CIVIL APPLICATION NO. 10813 OF 2012
NOVEMBER 6, 2012
JUDGMENT
In present petition, the petitioner has prayed that:-
“5.1b. A Writ of Certiorari or any other Writ, order or direction in the nature of Certiorari to stay the implementation of the impugned order dated 05-05-2012 till the final disposal of this petition;
c. A writ of Mandamus or any other writ, order or direction in the nature of mandamus restraining the Respondent not to give effect to the operation of the said order in the interest of justice;”
1.1 The petitioner is, thus, aggrieved by two concurrent orders whereby punishment of removal of petitioner’s name from the register for a period of 1 year is imposed and confirmed.
2. The relevant facts, involved in and leading to submission of present petition are that, the petitioner, a practicing Chartered Accountant [hereinafter referred to as “CA”] had undertaken, on agreement, assignment as Chartered Accountant of a multi location unit i.e. M/s. Sumilon Industries Ltd, Surat. The assignment also included work of auditing the accounts of the said company. It appears from the record that on the basis of the certificate issued by the petitioner in his capacity as CA, the Excise Department had made certain assessments and liability of the said company towards excise duty under Excise Act were assessed. Thereafter, it came to the notice of the Excise Department that the accounts and audit report submitted by the petitioner was inaccurate and there were several serious and material discrepancies and anomalies. In this view of the matter, the office of Commissioner of Central Excise, Surat lodged complaint with the institute of the Chartered Account [hereinafter referred to as “the institute”] and vide letter dated 24.10.2008 brought to the notice of the institute the irregularities as well as the inaccuracies, anomalies and mistakes committed by the petitioner in the accounts and audit report.
2.1 After examining the said complaint by the Joint Commissioner (Audit) of Excide Department, the institute called for certain information and details from the petitioner vide institute’s letter dated 6.3.2009. Subsequently, the Disciplinary Committee of the institute, prima facie, examined the said complaint dated 24.10.2008 and the information supplied by the petitioner and through Director (Discipline) of the Disciplinary Committee of the institute, prima facie, opinion dated 12.10.2009 of the Disciplinary Committee was submitted to the institute. In the said opinion, the Disciplinary Committee formed prima facie opinion that the petitioner is guilty of professional and other misconduct falling within the meaning of Clause (7) of Part-I of IInd Schedule to the Chartered Accountants (Amendment) Act, 2006 [hereinafter referred to as “the Act”].
2.2 The said prima facie opinion was supplied to the petitioner and his explanation and reply was called for. In response, the petitioner filed his written statement dated 25.4.2009 (which was submitted in response to the notice/intimation dated 6.3.2009) and another written statement dated 27.5.2010 (which was submitted in reply to the notice/intimation dated 11.3.2010).
2.3 Thereafter, the institute, vide its communication dated 18.7.2011 granted personal hearing to the petitioner and intimation about the date and time for personal hearing was informed to the petitioner under the said letter dated 18.7.2011.
2.4 Upon conclusion of the hearing before the Disciplinary Committee, a report dated 10.2.2011 was submitted by the Disciplinary Committee. In the said report dated 10.2.2011, the Disciplinary Committee, concluded, inter alia, that the respondent is guilty of professional misconduct falling within the meaning of Clause (7) of Part-I of IInd Schedule of the Act. The said report and conclusion of the Disciplinary Committee was considered by the competent authority of the institute and upon consideration of the entire material including the report and conclusion dated 10.2.2011, the competent authority of the institute passed order under Section 21(B)(iii) of the Act read with Rule 19(1) of the Chartered Accountant’s Procedure of Investigation of Professional and other Misconduct and Conduct of Cases Rules, 2007[ hereinafter referred to as “the Rules”] suggesting and recommending punishment of removal of petitioner’s name from member’s register for a period of 1 year. The said order was passed by the competent authority on 12.9.2011 and was forwarded to the petitioner under institute’s letter dated 15.9.2011.
2.5 Thereafter, the petitioner preferred appeal against the decision of the competent authority. The appeal was registered by the appellate authority as Appeal No.17/ICAI/ICSI of 2011.
2.6 On 28.1.2011, the appellate committee heard the petitioner and after considering the record including the report of the Disciplinary Committee and the decision of the competent authority, passed order dated 5.5.2012. The appellate committee concurred with the decision of the competent authority i.e. order dated 12.9.2011 and observed that, the appellant i.e. present petitioner is rightly held guilty of professional misconduct within meaning of clause (7) of Part-I of IInd Schedule to the Act. The appellate committee also held that the petitioner did not exercise due diligence and he had shown gross negligence and carelessness in certifying Tax Audit Report which did not reflect true and fair picture of the affairs of the company and he signed the Tax Audit Report without actually performing the audit as required.
2.7 Aggrieved by the said two concurrent orders, the petitioner has preferred present petition.
3. Mr. Shah, learned advocate, has appeared for the petitioner and submitted that the impugned order dated 12.9.2011 and the order dated 5.5.2012 are arbitrary, too harsh and non-commensurate with the alleged misconduct. The learned counsel for the petitioner contended that the petitioner cannot be said to have shown gross negligence (as contemplated under clause (7) of Part-I of IInd Schedule to the Act) in preparing and submitting tax audit report. Mr. Shah, learned counsel for the petitioner submitted that the tax audit report contained some minor and irrelevant typographical errors which are negligible and the said mistakes/errors did not cause or did not result into any actual financial loss to the Excise Department. He submitted that the errors in the tax audit report cannot be construed as or classified as gross negligence as contemplated under clause (7) of Part-I of IInd Schedule to the Act. Mr. Shah, learned advocate for the petitioner also claimed that the report/order dated 12.9.2011 by the competent authority of the institute also suffers from vice of violation of principles of natural justice, inasmuch as despite the fact that the petitioner had requested for adjournment vide his letter dated 26.7.2011, the request was not granted and the committee/competent authority proceeded to pass final order as regards penalty without hearing the petitioner on the issue as regards quantum of penalty. Mr. Shah, learned advocate for the petitioner, referred to the tax audit report prepared and submitted by him in relation to the above-named company and tried to contend that actually there are no mistakes in the report and the petitioner has separately shown the inter-departmental transfer/consumption of material and the sale of material in the market by the company and the conclusions by the institute are not correct. Mr. Shah, learned advocate for the petitioner, submitted that the matter deserves to be remanded for reconsideration by the appellate committee so far as the guantum of penalty is concerned.
Mr. Shah, learned advocate for the petitioner, relied on the decision by the Apex Court in case of In Re: An advocate [AIR 1989 SC 245] and the decision in case of V.P. Kumaravelu v. The Bar Council of India, New Delhi & Ors. [AIR 1997 SC 1014] to support the contention that there was no motive or intention on the part of the petitioner and that the alleged mistakes cannot be construed as gross negligence.
4. Mr. Soparkar, learned Senior Counsel, with Mrs. Soparkar, learned advocate, has appeared for the respondent institute and submitted that the penalty imposed by the institute is minimum penalty which could be imposed in such type of cases. The learned Senior Counsel submitted that the institute is responsible for maintaining professional standards and standard of accuracy of the reports submitted by its members, more particularly when the report by the members of the institute are being relied on, almost blindly, by all private as well as Government organizations. Mr. Soparkar, learned Senior Counsel, also submitted that in his reply submitted to the committee, the petitioner accepted the inaccuracies and anomalies in his report/certificate. He also submitted that the details mentioned by the Disciplinary Committee in its report enumerates the inaccuracies and anomalies. Mr. Soparkar submitted that the mistakes from the tax audit report submitted by the petitioner demonstrate that the petitioner did not exercise due diligence and/or he was grossly negligent in performing his professional duties. Mr. Soparkar submitted that in view of the provision contained under clause (7) of Part-I of IInd Schedule to the Act, existence of motive or intention is neither relevant nor necessary when question under consideration is about exercising due diligence and/or committing gross negligence in performing professional duty. He also submitted that the Disciplinary Committee/Institute has taken entire aspect and record as well as submissions of the petitioner into consideration and after examining entire material vis-à-vis the gravity of the charge or the proved professional misconduct, the institute has taken appropriate decision which does not call for any interference in exercise of writ jurisdiction by the Court. So far as the petitioner’s allegation about violation of principles of natural justice is concerned, Mr. Soparkar submitted that sufficient opportunity was granted to the petitioner, however, the petitioner did not remain present, but he asked for extensions and therefore, ultimately, the committee proceeded to pass order as regards quantum of penalty and that therefore, the petitioner is not right in alleging that he has not been granted opportunity of hearing as regards penalty.
Mr. Soparkar relied on the decision by the Division Bench of this Court dated 29.11.2003 in Chartered Accountant Reference No.1 of 2000 and another decision dated 14.2.2005 by Division Bench in Chartered Accountant Reference No.1 of 2004.
5. Before dealing with the petitioner’s allegations and contentions as regards the conclusion, on merits, by the Disciplinary Committee and the Appellate Committee it would be appropriate to deal with petitioner’s allegation and contention on the ground of alleged violation of principles of natural justice.
5.1 In order to contend that Disciplinary Committee/Competent Authority did not grant opportunity of hearing on the point of penalty, the learned counsel for the petitioner relied on observation in paragraph nos.3 and 4 of the order dated 12.9.2011 wherein the Committee has observed that:-
“3. That CA Rajesh Vasant Dudhwala sent a letter dated 26.07.2011 wherein he has requested for deferment of this hearing on account of his engagement in Tax returns and audit assignments.
4. The Committee had perused the facts of the case and was of the view that adjournment at this stage was not warranted. The Committee also noted that no new facts have also been brought on record by the Respondent.”
5.2 By exploiting the observation recorded in paragraph no.4 of the said order dated 12.9.2011, more particularly in light of the observation in paragraph no.3, the learned advocate submitted that vide his letter dated 26.7.2011 adjournment was requested for by the petitioner, however, the Committee/Competent Authority did not consider it proper to wait for some more time, but proceeded to pass order regarding penalty, which is unjustified and arbitrary.
5.3 While relying on the said observations in paragraph nos.3 and 4, the learned advocate for the petitioner has conveniently overlooked the fact that the report of the Disciplinary Committee was submitted on 10.2.2011 and thereafter, the petitioner was granted opportunity to submit written representation. Besides this, at his requests, under communications dated 30.5.2011 and 18.7.2011, opportunity/time was granted to the petitioner. These details and aspects are recorded in paragraph no.2 of the very same order i.e. order dated 12.9.2011, which reads thus:-
“2. That an action under Section 21B(3) of the Chartered Accountants (amendment) Act, 2006 was contemplated against CA Rajesh Vasant Dudhwala and, therefore, communications dated 30.05.2011 and 18.07.2011 were addressed to him thereby granting him an opportunity of being heard in person as also to make written representation.” (emphasis supplied)
5.4 Thus, when time/adjournments are granted and yet the petitioner continues to ask for more time only on the ground that he is engaged and busy in preparing the tax returns of his branch i.e. without any strong reason and compelling circumstance for not appearing before the committee and to avail opportunity of hearing as regards proposed penalty and/or he did not even find time to submit even written representation as regards proposed penalty then, no fault can be found with the competent authority/institute in proceeding to take the decision as regards proposed penalty and such order cannot be categorized as vitiated on the ground of denial of reasonable opportunity and cannot be set aside.
5.5 The details mentioned in the order dated 12.9.2011 go to show that the petitioner was granted opportunity/time and even further time/adjournments were granted, however, the petitioner continued to delay his appearance before the competent authority/institute and/or did not even file his written representation.
5.6 Moreover, the reason advanced by the petitioner for seeking further time under his letter dated 26.7.2011 also cannot be termed as compelling and unavoidable circumstance that the petitioner could not, even for one day, spare time and appear before the authority/institute or did not/could not even file his written representation making submissions as regards penalty.
5.7 In the facts of the case, it appears that the competent authority/institute is justified in considering that the petitioner was merely delaying the proceedings.
5.8 The Court, therefore, does not find any reason or justification to interfere with and set aside the order on the said ground.
5.9 When a person does not avail the opportunity of hearing when granted, he would not be justified in alleging denial of opportunity of hearing. The rule of audi-alterum-partum and requirement of opportunity of hearing as regards proposed penalty is not infinitely elastic which can be stretched to interminable or illimitable limits and cannot be extended to boundless and unconditioned limit so as to hold that even if the concerned person does not avail the opportunity even after the opportunity is made available, the authority should continue to adjourn the proceedings ad-infinitum so as to honour and comply the requirement of granting opportunity of hearing on the issue about proposed penalty.
5.10 If the petitioner was too busy in his professional work to appear before the competent authority/institute, he could have submitted written reply/representation raising all available contentions on the point of proposed penalty. However, the petitioner, in present case, did not care to even take that trouble to submit even written reply/representation as regards proposed penalty.
5.11 The said aspects cumulatively establish that the petitioner was merely trying to delay the proceedings. Therefore, the said submission is not accepted.
5.12 In this context, reference may be made to the observations by the Hon’ble Apex Court in para-13 of the decision in the case between The Chairman, Board of Mining Examination and Chief Inspector of Mines, and Anr. v. Ramjee. [AIR 1977 SC 965], which reads thus:-
“13……Natural justice is no unruly horse, no lurking land mine, nor a judicial cure-all. If fairness is shown by the decision-maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. We can neither be finical nor fanatical but should be flexible yet firm in this jurisdiction. No man shall be hit below the belt – that is the conscience of the matter.”
6. Now, so far as the petitioner’s submissions as regards the concurrent conclusions by the disciplinary committee and appellate committee as well as the prima facie opinion are concerned, it would be appropriate, so as to consider the said aspects, to keep in focus the provision contained under clause (7) of Part-I of IInd Schedule to the Act, which read thus:-
“(7) does not exercise due diligence, or is grossly negligent in the conduct of his professional duties;”
6.1 The said Part-I of IInd Schedule (which is framed under Sections 21(3), 21(B)(3) and 22) prescribe “professional misconduct in relation to Chartered Accountants in practice”. The said clause (7) of Part-I of IInd Schedule to the Act prescribes inter alia that if practicing Chartered Accountant does not exercise “due diligence” or shows “gross negligence” and is grossly negligent in conduct of his professional duties, then, it would amount to professional misconduct.
6.2 Thus, not only gross negligence, but due diligence is equally relevant and important criterion in measuring and determining “professional misconduct” in case of a Chartered Accountant.
6.3 In present case, the Joint Commissioner (Audit), Central Excise and Customs, submitted complaint to the institute stating, inter alia, that :-
“The audit of above mentioned unit viz. M/s. Sumilon Industries Ltd. (an MLU) having its registered office at Delhi Gate, Vairagini Wadi, Surat – 395003, was being co-ordinated by the Office of Additional Director General of Audit, Customs, Central Excise & Service Tax, Ahmedabad Zonal Unit, Ahmedabad. During the course of scrutiny of documents submitted by the unit, it was observed that there were some discrepancies in the figures of Audited Annual Report for the year 2006-07. On being pointed out, the unit, vide their letter dated 15.01.2008 submitted that there are some typing errors in the notices on the accounts of schedule 19. Accordingly, they filed the revised figures as below:-
