HIGH COURT OF BOMBAY
Ameyas Infraprojects (P.) Ltd.
Ajay B. Garg
WRIT PETITION NO. 5605 OF 2011
SEPTEMBER 6, 2012
R.D. Dhanuka, J.
Rule returnable forthwith. By consent the petition is taken up for final hearing.
2. The Petitioner has prayed for a Writ of Certiorari for quashing an Order dated 7th October, 2008 passed by the Council of the Institute of Chartered Accountants of India holding that the complaint filed by the Petitioner against Mr. Ajay B. Garg, a Chartered Accountant and the Member of the Institute of Chartered Accountants of India was frivolous and the papers relating to the case had been accordingly filed. The Petitioner has also prayed that the complaint made by the Petitioner against the 1st Respondent shall be decided after complying with the principles of natural justice.
3. The Petitioner was one of the partners of M/s. AAP Construction Company (hereinafter referred to as the said firm) having partners viz. (1) Atlanta Ltd. (2) PBA Infrastructure Ltd. and (3) Ameya Developers Pvt. Ltd. The partnership came into existence by Deed of Partnership executed by the partners on 1st February, 2002. On 1st November, 2004 the Petitioner retired from the said firm. On retirement of the Petitioner, dispute arose between the partners regarding the settlement of the accounts of the firm.
4. According to the Petitioner, the Lucknow office of the Petitioner firm had prepared base accounts as on 30th November, 2004 and circulated amongst the partners for their comments. M/s. Atlanta Ltd. thereafter made the changes in the accounts without consent of the Petitioner which were detrimental to the interest of the Petitioner. It is the case of the Petitioner that the 1st Respondent did not take proper care while certifying the accounts of the said firm for the broken period of financial year 2004-05.
5. According to the Petitioner, during the arbitration proceedings filed by M/s. Atlanta Ltd. against the Petitioner and the other partners, the said M/s. Atlanta Ltd. submitted a purported audited accounts of the said firm as on 10th November, 2004 alongwith the affidavit of the Managing Director of the said M/s. Atlanta Ltd. on 8th March, 2006. According to the Petitioner, the 1st Respondent had not carried out audit but had certified the purported balance-sheet. It is the case of the Petitioner that since the vouchers of the firm were at the Lucknow Office in the custody of the Petitioner, it was not possible for the Chartered Accountant to verify such vouchers. The certificate issued by the Chartered Accountant that he had verified the vouchers while carrying out the audit was thus incorrect. The 1st Respondent was though aware that the said firm was not registered, certified that the firm was registered without ascertaining the facts. The said firm, appointed Mr. Shadilal Chopra as a Sole Arbitrator for adjudicating the disputes between the parties arising out of the Deed of Partnership dated 1st July, 2002. Before the Arbitrator, all the three partners including the Petitioner filed separate Statement of Claims. Various issues were raised before the Arbitrator by the parties. One of the issue was regarding the total profit and loss of the firm that would come to the share of each of the partner including the Petitioner.
6. During the pendency of the said arbitration proceedings, on 3rd November, 2006, the Petitioner filed a complaint against the 1st Respondent before the Institute of Chartered Accountants of India (hereinafter referred to as the institute) alleging various acts of misconduct and praying for disciplinary action. In the said complaint, reference was made to the then pending arbitration proceedings before the Sole Arbitrator Mr. Shadilal Chopra. The Petitioner submitted some of the correspondence exchanged between the Petitioner with the 1st Respondent alongwith its complaint. M/s. Atlanta Ltd. relied upon the audited balance-sheet in question duly signed by its two of the partners of the said firm in the said proceedings. The said audited balance-sheet for the Financial Year 2004-05 (1.4.2004 to 10.11.2004) was filed alongwith affidavit filed by the Managing Director of M/s. Atlanta Ltd. before the Learned Arbitrator. It was stated that Mr. Koregiri, the Accountant of M/s. Atlanta Ltd. had to maintain the accounts of the firm M/s. AAP Construction Company and the same was finalised and on the basis of such accounts prepared by Mr. Koregiri, the 1st Respondent who was auditor of the firm, had finalised the balance-sheet of the profit and loss account. The said witness on behalf of M/s. Atlanta Ltd. had filed an affidavit to prove the contents of the accounts audited by the 1st Respondent.
7. The 1st Respondent filed reply before the Institute opposing the complaint filed by the Petitioner. The Petitioner thereafter filed rejoinder. The Institute obtained comments of the 1st Respondent on the contents of the rejoinder filed by the Petitioner. During the pendency of the said complaint, the said Arbitrator made an Award on 14th March, 2007. In the said Award, the Learned Arbitrator accepted the figures as reflected in the balance-sheet which was audited by the 1st Respondent and was duly signed by the other two partners of the said firm. The Learned Arbitrator accepted the balance-sheet of the firm based on books of accounts maintained in the regular course duly audited by the 1st Respondent. The Arbitrator also gave a finding that inspite of the repeated opportunity given to cross examine the witness examined by M/s. Atlanta Ltd. who had produced balance-sheet of the firm audited by the 1st Respondent was not cross examined by the Petitioner herein. The record produced in this proceedings indicate that a reference was made to the said Award dated 14th March, 2007 and copy thereof was produced by the parties before the Institute which was ceased of the complaint filed by the Petitioner. By letter dated 24th August, 2007, the Institute informed the Petitioner that comments of the 1st Respondent on the rejoinder filed by the Petitioner had been received and the matter would be placed before the Council for its prima-facie opinion. The Institute refused to supply the copy of the comments to the Petitioner as there was no provision for providing such copy to the Complainant. The Institute informed that the matter would be placed before the Council for its prima-facie opinion and the decision that would be taken by the Council would be indicated to the parties concerned.
8. On 7th October, 2008, the Institute informed the Petitioner that the Complaint, Written Statement of the 1st Respondent, Rejoinder filed by the Petitioner and the Comments of the 1st Respondent were considered by the Council and it was prima facie of the opinion that the 1st Respondent was not guilty of any professional or other misconduct and therefore the papers relating to the case had been filed. The Petitioner was further informed that since the Council was of the opinion that the complaint filed by the Petitioner was frivolous, deposit of Rs.100/- made by the Petitioner had been forfeited in terms of Regulation 12(4) of the Chartered Accountants Regulations, 1988. The Petitioner thereafter applied to the Institute for various information under the Right To Information Act, 2005. The Institute furnished such information to the Petitioner vide letters dated 14th November, 2008, 5th February, 2009. The copy of the comments made by the 1st Respondent from the rejoinder filed by the Petitioner also was furnished to the Petitioner. The 1st Respondent in the said comments specifically pleaded that the accounts submitted by the two partners of the firm and audited by the 1st Respondent had been accepted and confirmed in the Award given by the Arbitrator.
9. The Petitioner initially filed Appeal (Stamp) No. 8859 of 2009 in this Court challenging the Order dated 7th October, 2008 passed by the Council of the Institute. The said Appeal was allowed to be withdrawn by an Order dated 6th December, 2010 with liberty to approach the Appellate Authority.
10. The Learned Counsel appearing for the Petitioner made the following submissions :-
(a) The appointment of the 1st Respondent as an auditor was not by consent of the Petitioner.
(b) The 1st Respondent had committed gross misconduct by purporting to carry out the audit though the vouchers of the work were in the custody of the Petitioner and were not available with the Chartered Accountant.
(c) He had mentioned the status of the firm as registered for the Financial Year 2003-04 though he was aware that the firm was not registered. The Comments made by the 1st Respondent on the rejoinder filed by the Petitioner were not made available by the Institute to the Petitioner. The Official Notings placed before the Council for forming its prima-facie opinion were not disclosed.
(d) The procedure followed by the Institute is in violation of principles of natural justice.
(e) The impugned order does not disclose any reasons and is without giving any oral hearing to the Petitioner.
11. On the other hand, the Learned Counsel appearing for the Institute submits as under :-
(a) After considering/deliberating the Council in its 280th meeting upon the Complaint, Written Statement, Rejoinder and the Comments found that the said complaint would not make out even a prima-facie case of professional and/or other misconduct and accordingly the said complaint was filed in accordance with Regulation 12(11)(ii) of the Regulations. Regulations framed by the Institute under enabling powers under Section 30 of the Chartered Accountants Act 1949 which provides for procedure and enquiry before the Disciplinary Committee have to be laid before both the Houses of Parliament and have statutory force. The Petitioner has not challenged the validity of the Regulation framed by the Institute in the present petition.
(b) On 16th April, 2008, after considering the Written Statement, Rejoinder, Comments alongwith the Complaint, the President of the Institute prepared a Note that no further papers were required.
(c) The Institute has placed reliance on the Arbitration Award dated 14th March, 2007 delivered in the dispute filed by the Petitioner and other two partners in which one of the partners had produced the balance-sheet for the Financial Year 2004-05 audited by the 1st Respondent.
(d) The Arbitrator who was an independent person, after considering the evidence on record accepted the balance-sheet of the firm based on the books of the accounts audited by the 1st Respondent as correct. He submitted that the rejection of the complaint made by the Petitioner thus cannot be faulted with, once the balance-sheet audited by the 1st Respondent is accepted as correct.
12. We have heard the Learned Counsels appearing for the Petitioner and 2nd Respondent and have perused the record produced by the parties including the Award delivered by the Arbitrator on 14th March, 2007. One of the issue in the arbitration proceedings was about the determination of the profit and loss of the firm and the respective share of each of the partners of the firm. From the perusal of the Award, it is clear that one of the partners had examined the witness to prove the contents of the balance-sheet audited by the 1st Respondent which was signed by the other two partners. The Arbitrator had given a finding of fact that though repeated opportunities were given to the Petitioner to cross examine the witness examined by the one of the partners, no cross-examination was conducted by the Petitioner and as a result thereof, the statement made by the said witness remained unchallenged. The Arbitrator accepted the balance-sheet of the firm based on the books of the accounts maintained in the regular course duly audited by the 1st Respondent and accepted the figures as reflected in the said balance-sheet.
13. Considering the fact that the dispute between the partners in respect of the accounts of the said firm was referred to the arbitrator who was an independent person and the said arbitrator looking to the entire evidence has accepted the balance-sheet audited by the 1st Respondent as correct, we see no reason to interfere with the prima facie view of the Institute on the complaint filed by the Petitioner. The fact that the Award made by the arbitratior has been set aside subsequently and restored to the file of the arbitrator for fresh Award, would not vitiate the prima facie view taken by the Institute during the period the Award was subsisting. In view thereof, we are not inclined to go into the issue raised by the Petitioner regarding the alleged violation of principles of natural justice and/or alleged procedure while conducting enquiry by the Institute in these proceedings. We make it clear that we have looked into the Award for a limited purpose so as to find out whether there was any substance in the complaint made by the Petitioner against the 1st Respondent and have not expressed our view on merits of the award.
14. We, accordingly pass the following order :-
(a) Rule is discharged.
(b) There shall be no order as to costs.