The facts, as stated by the petitioners, are as follows:-
The first petitioner is an Association of Chartered Accountants, registered under the Societies Registration Act, 1860. Petitioners no.2 to 6 are said to be practising Chartered Accountants. The petitioners seek to challenge the amendment to Section 63 of the Karnataka Co-operative Societies Act, 1959 (Hereinafter referred to as the ‘KCS Act’, for brevity), whereby auditing of accounts by Cost Accountants of a firm of Cost Accountants is permitted.
It is asserted that the KCS Act was enacted by the State Legislature as legislation in respect of the subject ‘co-operative societies’, which finds place under Entry 32 of List II of the Seventh Schedule to the Constitution of With the 97th Constitutional Amendment Act, 2011, having received the assent of the President of India, and with the introduction of Articles 243ZH to 243ZT, inter- alia, required the State legislatures to introduce a law with a mandate that every co-operative society shall maintain accounts and audit such accounts in each financial year and such audit was to be done by an Auditor or an Auditing firm.
Consequently, the KCS Act was sought to be amended by the Karnataka Amendment Act no.3 of 2013. Section 63 was amended to make auditing of the accounts of co-operative societies compulsory. The auditing was to be assigned to departmental auditors or to Chartered Accountants. This was made to bring the provision in consonance with the 97th Amendment to the Constitution.
It is the case of the petitioners that succumbing to the pressure of lobbying and political pressure, brought by the members of the Cost Accountants fraternity, the State Legislature sought to bring a further amendment to Section 63 of the KCS Act, by Act no. 35 of 2014. By the said amendment, the definition of ‘auditor’ was enlarged to include a Cost Accountant, within the meaning of the Cost and Works Accountants Act, 1959. This action on the part of the legislature, according to the petitioners, permitted Cost Accountants to do the work of auditing thereby encroaching on the profession of Chartered Accountants, which would run counter to the 97th Amendment as well as the Chartered Accountants Act, 1949.
The petitioners contend that the State legislature has overlooked the classification of two distinct classes of professionals. A Chartered Accountant is governed by the Chartered Accountants Act, 1949, whereas a Cost Accountant is governed by the Cost and Works Accountant Act, 1959. The petitioners have depicted the distinction between the two professions, in a tabular form, thus :
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