Report on CA, CMA and CS (Amendment) Bill, 2021

STANDING COMMITTEE ON FINANCE
(2021-2022)

SEVENTEENTH LOK SABHA

‘THE CHARTERED ACCOUNTANTS, THE COST AND WORKS ACCOUNTANTS AND THE COMPANY SECRETARIES (AMENDMENT) BILL, 2021’

(MINISTRY OF CORPORATE AFFAIRS)

FORTY-FIFTH REPORT

LOK SABHA SECRETARIAT
NEW DELHI

March, 2022 / Chaitra, 1944 (Saka)

FORTY-EFTH REPORT

STANDING COMMITTEE ON FINANCE
(2021-2022)

(SEVENTEENTH LOK SABHA)

‘THE CHARTERED ACCOUNTANTS, THE COST AND WORKS ACCOUNTANTS AND THE COMPANY SECRETARIES (AMENDMENT) BILL, 2021’

(MINISTRY OF CORPORATE AFFAIRS)

Presented to Lok Sabha on ……….. March, 2022

Laid in Rajya Sabha on ………. March, 2022

LOK SABHA SECRETARIAT
NEW DELHI

March, 2022 / Chaitra, 1944 (Saka)

INTRODUCTION

I. the Chairperson of the Standing Committee on Finance having been authorised by the Committee present this Forty-fifth Report on The Chartered Accountants, The Cost And Works Accountants And The Company Secretaries (Amendment) Bill, 2021′

2. ‘The Chartered Accountants, The Cost And Works Accountants And The Company Secretaries (Amendment) Bill, 2021‘, introduced in Lok Sabha on 17 December, 2021 was referred to the Committee on 22 December, 2021 for examination and report thereon, by the Speaker, Lok Sabha under Rule 331E of the Rules of Procedure and Conduct of Business in Lok Sabha.

3. The Committee ,took evidence of the representatives of the Ministry of Corporate Affairs at their sitting held on 9 February, 2022.

4. The Committee at their Sitting held on 3 February, 2022 heard the views of the representatives of the Institute of Chartered Accountants (ICAI), the Institute of Cost Accountants of India (ICoAl) and the Institute of Company Secretaries of India (ICSI).

5. The Committee considered and adopted this report at their Sitting held on 21 March, 2022.

6. The Committee wish to express their appreciation to the officials of the Ministry of Corporate Affairs concerned with the Bill for their co-operation and all the organisations for their valuable suggestions on the Bill. The Committee would like to also thank Shri R. Narayanaswamy, Retired Professor of Finance and Accounting, IIM Bangalore, PRS Legislative Research and Confederation of Indian Industry (CII) for their views and suggestions on the Bill.

7. For facility of reference, observation/ recommendations of the Committee have been printed in bold in the body of the Report.

New Delhi
21 March, 2022
30 Phalguna, 1943 (Saka)

Chairperson,
Shri Jayant Sinha
Standing Committee on Finance

Report

BACKGROUND

The Chartered Accountants Act, 1949, the Cost and Works Accountants Act, 1959 and the Company Secretaries Act, 1980, were enacted to regulate the professions of chartered accountants, cost accountants and company secretaries, respectively. On account of multiple important changes in the economic and corporate environment of the country, it has become necessary to amend the Act.

1.2 A High-Level Committee was constituted by the Ministry of Corporate Affairs in 2017 to examine the existing provisions in the Acts, Rules and Regulations of the three Professional Institutes, namely, ICAI (Institute of Chartered Accountants of India), ICoAl (Institute of Cost Accountants of India) and ICSI (Institute of Company Secretaries of India) and to give its recommendations for strengthening the existing mechanism and ensure speedy disposal of the disciplinary cases. The Committee was constituted in the backdrop of rising disciplinary cases against the members of the three Institutes, predominantly in the ICAI. Large pendency of cases, unreasonable high average disposal time and involvement of the auditors in some alleged financial scams created a need to revisit the existing disciplinary processes in the three Institutes. In this context, it has been proposed to amend the Chartered Accountants Act, 1949, the Cost and Works Accountants Act, 1959 and the Company Secretaries Act, 1980. Accordingly, The Chartered Accountants, The Cost and Works Accountants and The Company Secretaries (Amendment) Bill 2021 was introduced in the Lok Sabha on 17111 December, 2021.

A. Institute of Chartered Accountants of India (ICAI)

1.3 The ICAI is a statutory body established by an Act of Parliament, viz; The Chartered Accountants Act, 1949 for regulating the profession of Chartered Accountancy in the country. The Act was previously amended in 1959 and 2006 and last amended by the CA (Amendment) Act, 2011. The Institute functions under the administrative oversight of the Ministry of Corporate Affairs, Government of India. The affairs of the Institute are managed by the Council in accordance with the provisions of the Chartered Accountants Act, 1949. The Council constitutes of 40 members of whom 32 are elected by the members of the Institute and remaining 8 are nominated by the Central Government. The institute is headquartered at Delhi with 5 Regional Councils across India. The Institute has over 3.27 lakh Members.

B. The Institute of Cost Accountants of India (ICoAl)

1.4 The ICoAl is a statutory body established by an Act of Parliament, viz; The Cost and Work Accountants Act, 1959 for regulation of the profesion of Cost Accountancy in the country. The Act was previously amended in 2006 and last amended by the CWA (Amendment) Act, 2011. The Institute functions under the administrative control of the Ministry of Corporate Affairs, Government of India. ICoAl has its headquarters at Kolkata and has 04 Regional Councils. At present, the Institute has more than 85,000 members.

C. The Institute of Company Secretaries of India (ICSI)

1.5 The ICSI is a statutory body established by an Act of Parliament, viz. the Company Secretaries Act, 1980 for regulation of the profession of Company Secretary in the country. The Act was previously amended in 2006 and last amended by .the CS (Amendment) Act, 2011. The Institute functions under the administrative control of the Ministry of Corporate Affairs, Government of India. ICSI has its headquarters at Kolkata and has 04 Regional Councils. At present, the Institute has more than 62,000 members.

2. SALIENT FEATURES OF THE BILL, 2021

Salient features of the Bill as submitted by the Ministry of Corporate Affairs in a written note are as under:

a) introduction of provision for making distinction between actionable and non-actionable complaints and information to be determined by the Disciplinary Directorate within 30 days of receipt of a complaint or information;

b) Before taking a decision on whether a complaint or information is actionable or non-actionable, the complainant or informant is to be given fifteen days’ time to file additional documents, if any;

c) Provision for appointment of at least two Joint Directors (Discipline) in the Disciplinary Directorates of the Institutes (not below the rank of Deputy Secretary of the Institutes) to deal with the disciplinary cases. At present, there is no provision for appointment of Joint Directors. The appointment of Joint Directors would enhance the capacity of the Disciplinary Directorate to deal with the complaints and information and thus reduce the time taken for the disposal of disciplinary cases;

d) Preliminary Examination Report (PER) to replace Prima Facie Opinion (PFO) by Director (Discipline) holding the respondent guilty or not guilty in his/her opinion;

e) Director or Joint Director {Discipline) to give opportunity to respondent to submit a written statement within twenty-one days which may be further extended by another twenty-one days on a specific request with reasons for seeking further extension. Rejoinder to be submitted by the complainant or the informant upon receipt of written submissions of the respondent within twenty-one days;

f) Submission of PER by Director or Joint Director (Discipline) within 30 days upon receipt of written submissions and rejoinder, if any, if prima fade case is made out;

g) Complaint filed by an authorized officer. of Government or statutory authority accompanied by an investigation report Or extract thereof along with supporting evidence is to be treated as PER. At present, the said complaints go through PFO route and are first examined by Director (Discipline). This would avoid delays in concluding inquiries in such cases at the preliminary stage;

h) Non-actionable complaints and information to be submitted to Board of Discipline within 60 days of receipt. Board of Discipline may ask Director (Discipline) to re­examine the information or complaint;

i) Withdrawal of complaint not permitted at any stage;

j) Appointment, re-appointment and termination of appointment of Director (Discipline) and Joint Director (Discipline) by the Council of the Institutes with the previous approval of the Central Government as a check and oversight mechanism to enable the officers engaged in investigation of the complaints or information to discharge their functions in an independent and unbiased manner, without any fear or favour;

k) Inclusion of Firms under the purview of Disciplinary Mechanism and a new chapter proposed for Registration of Firms with the Institutes;

l) The Council shall continue to constitute Board(s) of Discipline (BoDs) and Disciplinary Committees. (DCs) as at present. However, the majority will be of non-members of the Institutes (commonly called as lay members) in these bodies.

m) The present practice of direct nomination by the Central Government in the BoD and DCs is proposed to be discontinued. Instead, the Presiding Officers will be selected by the Central Government from out of a panel of suitable persons with experience in law, having knowledge of disciplinary matters and the profession and lay members will be selected from out of a panel of persons of eminence having experience in the field of law, economics, business, finance or accountancy. The presiding officers’ and lay members shall not be the members. of .the Institutes. The panels of non-members of Institute will be prepared and provided by the Councils of the Institutes.

n) On the other hand, appointments of the members of the Institute in BoDs and DCs will be done by the Council itself out of a panel of such members to be prepared by the Council. Regulations for such matters will be made;

o) Provision for more BoDs for quicker disposal of cases on the lines of DCs;

p) Provision for Presiding Officers and lay members in the BoD of the ICSI and ICoAl in place of existing practice of nomination of only members of the Institutes by the Councils of these two Institutes on the lines of ‘CAI;

q) Insertion of the word ‘development along with regulation’ in the preamble of the Chartered Accountants Act, 1949 and the Cost and Works Accountants Act, 1959 to provide for developmental mandate for the members of the Institutes;

r) Proposal to enhance the term of the Council of ICAI from 03 years to 04 years and maximum two consecutive terms of 04 years for a person in the Council;

s) Enhancement in Penalties/Fines in case of misconduct;

t) Autonomy to the Councils of the Institutes in the matter of fixation of fees;

u) Provision to enable the Institutes to remove the name of the firms or members in case of non-payment of penalties;

v) Disposal of Disciplinary Cases within 180 days by Disciplinary Committee and 90 days by Board of Discipline;

w) Entire Disciplinary proceedings, since filing of complaint to be completed within 365 days;

x) Audit of annual accounts of the Councils of the Institutes by a firm of chartered accountants to be appointed annually by the Councils from the panel of auditors maintained by the Comptroller and Auditor General of India; and,

y) Nomenclature of “Cost -and Works Accountants Act, 1959” proposed to be changed to “Cost Accountants Act, 1959”.

3. ISSUES DISCUSSED

In view of the detailed examination of “The Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Bill, 2021″and suggestions received from the stakeholders, the Committee endorse the provisions of the Bill in general and have commented upon some of the important clauses of the Bill, which are as under:

A. Constitution of a Coordination Committee

3.2 The provision for a Coordination Committee currently does not exist in the Principal Acts.

Clause 9 of the Bill reads as under:

After section 9 of the principal Act, the following section shall be inserted, namely:—

“9A. (1) There ‘shall be a Coordination Committee consisting of the President, Vice-President and the Secretary of the Council of each of the Institutes of Chartered Accountants of India, the Cost Accountants of India and the Company Secretaries of India for the development and harmonisation of the professions of Chartered Accountants, Cost Accountants and Company Secretaries.

(2) The meeting of the ” Coordination Committee shall be chaired by the Secretary, Ministry of Corporate Affairs.

(3) The meeting of th6 Coordination Committee shall be held once in every quarter of a year.

(4) The Committee shall be responsible for the effective coordination of the functions assigned. to each Institute and shall—

(i) ensure quality improvement of the academics, infrastructure, research and all related works of the Institute;

(ii) focus on the coordination and collaboration among the professions, to make the profession more effective and robust;

(iii) align the cross-disciplinary regulatory mechanisms for inter professional development;

(iv) make recommendations in matters relating to regulatory policies for the professions;

(v) perform such other functions incidental to clauses (i) to (iv) above.”.

3.3 Views and suggestions from the three Institutes on the proposed Constitution of a Coordination- Committee are as under:

The Institute of Chartered Accountants of India (ICAI) during the course of evidence submitted:

“Constituting a Coordination Committee would amount to not only intruding the autonomy of the Institute but it may also hamper the decision-making authority of the Councils of the respective Institutes which is evident from the functions proposed to be assigned to this Committee, under sub-section (4).

A Coordination Committee of all the three Institutes is already in place as a .Non-Standing Committee of the Institute under Section 17. This may be made a Standing Committee and its terms of reference should be to discuss and resolve common issues like Multidisciplinary Partnership etc.”

The Institute of Cost Accountants of India (1CoAl) in a written submission stated:

“The Institute support proposal of establishment of a Co-ordination Committee. It has been submitted that it is a welcome proposal for the Secretary, Ministry of Corporate Affairs to chair meetings of the coordination committee that would facilitate coordinated decisions and actions to promote the common professional pursuits in the country and abroad.”

The Institute of Company Secretaries of India (ICSI) furnished the following suggestion:

“The main purpose of the Coordination Committee is to bring coordination and harmony among the three Institutes and it should make recommendations to that effect. The scope of the Co- ordination Committee should be for such matters/ areas that may require action by more than one Institute. It should not be made responsible for the functions assigned to each Institute. Accordingly, the words “be responsible” in Sub-section (4) be deleted and the word “work” be inserted.

The word “ensure” in sub-section 4 (i) be replaced with the words “make recommendations for”. Furthermore the words “Infrastructure” and “other related works of the Institute” may be removed’, as the same should be under the purview of the respective institutes and not of the committee.”

3.4 The Ministry of Corporate Affairs furnished the following comments on the above suggestions:

“It may be noted that the two Institutes, ICoAl and ICSI have not objected to constitution of such a Committee. The purpose of the Committee is not to interfere in the functioning of each institute but effective coordination of the functions assigned to them in order to make the profession more effective and robust. At present, often it is seen that initiatives of one institute do not find support from other Institute since there is no mechanism of regular meetings of the representatives of the three Institutes at any forum. It may be noted that an MoU was signed in the year 2000 by ICSI with the ICAI & ICoAl, two other professional Institutes, under which a Coordination Committee of the three Institutes was constituted.

The proposed mandate of the Coordination Committee inter-alia is to ensure quality improvement of the academics, infrastructure, research and all related works of the Institute.

Section 29 of IIM Act, 2017 and Section 40 of IIIT Act, 2017 also envisages a Coordination forum for all the IIM and IIIT.

The Standing Committee of a particular Institute cannot function as a coordination platform for all the three Institutes. In order to make the Coordinative effective, it is required that the representatives of the three Institutes meet periodically on a common agreeable platform. As per the proposed bill, the Coordination Committee will comprise of Presidents, Vice-Presidents and Secretaries of the three Institutes, quarterly meeting of which shall be held under the chairpersonship of the Secretary, Ministry of Corporate Affairs, which is the administrative Ministry of all the three Institutes.

3.5 Regarding the constitution of Coordination Committee, the recommendations of the High. Level Committee Report headed by Ms. Meenalcshi Datta Ghosh reads as under:

“Presently, the Co-ordination Committee among three Institutes has been constituted in an informal manner with non-specific terms of reference. The Co­ordination Committee meets in-frequently with no significant schedule for deliberation. Given the fact that these three Institutes together constitute an integral part of Corporate Governance and financial oversight across the country, effective co-ordination between three Institutes should be imperative. The Terms of Reference for this Co-ordination Committee should include all aspects of developing as well as regulating the profession.”

3.6 The Committee note that the Bill seeks to constitute a Coordination Committee for the development and harmony of the three professions of Chartered Accountants, Cost Accountants and Company Secretaries. While the intent of the proposed amendment is effective coordination between the three Institutes, the Committee find that the apprehensions expressed by the ICAI regarding dilution of autonomy and the decision-making authority of the Council may be suitably addressed. The Committee, however, note that the other two Institutes in question, that is, ICoAl and ICSI have not objected to the constitution of the Coordination Committee as proposed in the Bill. The Committee are of the view that the terms of the constitution of the proposed Coordination Committee may be reviewed in as much as it may be chaired by an eminent person from Industry, Finance or Business who is not a Member of any of the three Institutes in question, instead of the Secretary of Ministry of Corporate Affairs. The Secretary can be a member of the Committee and represent the Government side. The Chairman may thus be nominated by the Central Government out of a panel of such eminent persons prepared and provided by the respective Councils. The other Members of the Committee may be the elected office-bearers of the Council as proposed in the Bill. The Coordination Committee may act as the apex body for harmonious regulation, effective professional development, and objective disciplinary oversight of the three Institutes, particularly keeping in view the fast-emerging prospect of multi-disciplinary firms/entities and the fact that the three Professional Institutes in question together constitute the corporate governance and financial oversight framework across different sectors of our economy. The Coordination Committee may also be renamed as the Governance Committee to reflect its broader mandate of harmonious regulation, effective development, and disciplinary oversight of the three Institutes.

B. Composition of Board of Discipline and Disciplinary Committee

3.7 With regard to the composition of the Board of Discipline and Disciplinary Committee, the existing provision and the proposed changes in the Bill are as under:

3.8 The ICAI submitted the following suggestions on the above issue:

“In regard to amendments proposed under this section, the ICAI have the following strong views/objections:-

Composition of the Board of Discipline (BOD)

The unprecedented provisions of appointment of 2 non-CAs as members (out of 3 members’ Board) may have a larger impact as the work of CAs would be majorly judged by Non-CAs. Earlier there used to be only one Govt. nominee in

BOD and Presiding officer used to be nominee of Council only.

The third member would be CA member who would be nominated by Council from a panel to be prepared by Council.

It may be mentioned that non-CA members would not be having in-depth knowledge of Accounting Standards, Standard on Auditing, scope of audit, inherent limitations of audit, basic concepts of audit like true and fair, materiality, substance over form, test base checking etc, etc. Auditing has increasingly become highly technical and specialised and the scope of audit is quite clearly defined through multiple standards.

Further, the decisions in BOD are taken unanimously i.e., with the consent of all members present including Government Nominee members. There is barely any instance when any member has dissented from the decision taken by BOD as a whole.

Composition of Disciplinary Committee (DC)

Regarding the composition of the Disciplinary Committee, the ICAI is of strong view that the conduct of professionals should be judged by the professionals only.

International Federation of Accountants (IFAC) has issued Statement of Members Obligation’s — 6 (SMOG) and ICAI being a member of IFAC needs to comply with the same. IFAC has in its communication to ICAI confirmed that ICAI is compliant with SMOG.’

Further, best efforts are made to ensure that the composition of DC is made in such a way that no member/minimum possible members hear the cases of the region to which he / she belongs.

The Appellate Authority already constituted under section 22 A of the Act has majority of non CA Members and all are appointed by Govt, The Chairperson is also a non CA member.”

3.9 In this regard, the Institute of Cost Accountants of India submitted the following suggestion:

“The Institute has no reservation on the composition and manner of constituting the Board of Discipline and Disciplinary Committee(s). We as a professional body have always followed a concept of transparency, independence, and ethics in governing our Institute and Members. Even today, our disciplinary committees have presence of Government nominated Council Members who are not Cost Accountants. Therefore, we will have no difficulty even if the Presiding Officer and few other members of the Board of Discipline or the Disciplinary Committee would be non-Cost Accountants. We would welcome this change which is purely governed by the principles of ethics and unbiased justice. Similar practices prevail in leading professional accounting bodies of other countries.”

3.10 The Institute of Company Secretaries of India submitted the following suggestion:

“1. Parameters for selection of Presiding Officer and Members of BoDs and DCs and such restriction should be specified through Rules rather than through regulations

2. It is proposed to include one member from out of the Council of the Institute as he can understand the technicalities of the profession, policies and code of conduct laid down by the Council and its practicalities or intricacies which an outside member may not be able to appreciate.”

3.11 The Ministry of Corporate Affairs commented on the above suggestions as under:

” The Council shall continue to constitute the BoDs and there will be no change in the number of members in the bodies. However, the Presiding Officer of the BoDs will be nominated by the Central Government from out of a panel of persons having experience in law and having knowledge of disciplinary matters and the profession, prepared and provided by the Council.

One Member in BoD shall be nominated by the Central Government from out of a panel of persons having experience in .the field of law, economics, business, finance or accountancy, prepared and provided by the Council. Remaining One Member in BoD shall be nominated by the Council from out of a panel of members of the Institute to be prepared by the Council.

In this regard, Global Best practices adopted in USA, UK, Australia, Canada and South Africa have been studied.

The conduct of the Chartered Accountants who are auditors of public interest entities are regulated’ by independent regulators which are constituted by the Government and in such bodies majority members are non—Chartered Accountants.

The remaining auditors and Chartered Accountants (who are not under the domain of independent regulators) are regulated either by Statuary Self-Regulatory Organisations (SROs) like India or Canada or by Self-Regulatory Organisations which are non-Government organisations like in UK, South Africa and Australia.

In India, misconduct of auditors of public interest entities comes within the domain of National Financial Reporting Authority (NFRA). The auditors or Chartered Accountants which are not covered by NFRA comes under the domain of ICAI.

Globally, there is a clear separation of elected bodies/members from Investigation and Disciplinary process in the SROs. It has been observed that members of the Council or other Committees of the Council/Board are not part of the disciplinary panels.

In UK, lay members (Non-CA) head the Disciplinary Panels. (In UK there are multiple bodies imparting education and regulating the accountancy profession, unlike India, where ICAI enjoys status of statutory monopoly).

In USA, State Boards of Accountancy regulates the profession and license to practice is also given by them. There are 56 Boards of Accountancy in USA and the members of the Board are appointed by the Government.

In the South African Institute of Chartered Accountants (SAICA), a self-regulatory organization (SRO) for Chartered Accountants in South Africa, chairperson of Professional Conduct Committee, is generally an attorney/advocate or a retired Magistrate. Similarly, the chairperson of Disciplinary Committee of SAICA also happens to be advocate/attorney or a retired Magistrate. In Accountancy Bodies in Australia and Canada, no member of the Board/Council is a member of the Disciplinary Tribunal.

International Federation bf Accountants (IFAC) an advocacy organization for the accountancy profession having more than 175 members and associates in more than. 130 countries and jurisdictions, in its Statement of Member Obligations (SMO-6), has recommended independence in investigation and discipline functions. As per IFAC recommendations, independence in regulatory functions of SROs is measured in terms of participation of non-auditors in disciplinary and investigation functions.”

3.12 During the course of evidence, the representative of Ministry of Corporate Affairs stated as under:

“There is no government interference in the constitution of these bodies. The Council will constitute these bodies. They will recommend the panel. They will also have their own nominees in this. So, there is no change. Rather than what we have done, we have withdrawn our government nominee. There will be no direct government nomination. So, it is rather giving more autonomy to them to suggest a name which they feel is good to regulate them. They will be suggesting names, we will not be suggesting names. In fact, *the earlier provision was that the Government will appoint two nominees in disciplinary committee. That we are withdrawing. So, it is in the nature of now giving more autonomy to them. Through regulations, Council will constitute BOD, DC. They will suggest names to us. Whatever name they suggest, we may agree. They are also having their own nominees in the Council.”

3.13 The ICAI during the course of evidence submitted the following data on the quantum of punishment:

QUANTUM/ NATURE OF PUNISHMENT	DC	BOD*	TOTAL
Reprimand with & without fine	165	148	313
Membership Removal upto 6 months with & without fine	94	59*	153
Membership Removal from 6 months to 1 year with & without fine	57	0*	57
Membership Removal from 1 year to 5 years with & without fine	48	0*	48
Membership Removal more than 5 years with & without fine	2	0*	2
Permanent Removal with & without fine	7	0*	7
Monetary Penalty	42	17	59
Punishment yet to be awarded	142	27	169
TOTAL	557	251	808

* BOD can remove the name of a member maximum upto 3 months

3.14 On the composition of the Disciplinary Committee, the High Level Committee headed by Ms. Meenakshi Datta Ghosh recommended as under:

“In the composition of the adjudicating bodies, the only way to strictly pre-empt conflict of interest and to sustain the independence of the adjudicating bodies, follow the good governance precedent set by Ministry of Corporate Affairs, in 2009. While constituting the Appellate Authority under sub-section (1) of Section 22A of the Chartered Accountants Act, 1949 the MCA used a formulation in clause (b) of the said sub-Section (1) which states: “The Central Government shall, by notification, appoint two part-time members from amongst the persons who have been members of the Council of the Institute of Company Secretaries of India for at least one full term and who is not a sitting member of the Council”. This precedent beautifully and specifically addresses the conflict of interest issues.

The High Level Committee recommends that for ICAI, ICSI and ICoAl, the future Disciplinary Committee will have five members, with the following composition:

i. two Govt. Nominees, as per communication addressed by Ministry of Corporate Affairs to each Institute;

ii. Two reputed professionals with not less than 15 years of relevant experience, recommended by the Council of each Institute, and appointed by the Ministry of Corporate Affairs. These two professionals should not be sitting Council Members and, once appointed to the Disciplinary Committee, shall not be eligible in seeking election to the Council for a period of one term after the expiry of their term on the DC;

iii. One member should be a professional, with a legal background, with at least 15 years experience, to be recommended and appointed by the Ministry of Corporate Affairs.”

3.15 The terms of the Statement of Objects and Reasons clearly state that the conflict of interest associated with an autonomous institution running both the administrative as well as disciplinary committees needs to be addressed. While the intent of the proposed amendments seems to bring in more accountability and transparency in the decision-making process, the ICAI have opposed the appointment of a non-CA as the Presiding Officer on the premise of lack of in-depth professional knowledge. The International Federation of Accountants (IFAC) in its Statement of Member Obligations (SMO-6), has recommended independence in investigation and discipline functions and the ICAI has submitted that they are fully compliant with SMO-6 of IF C. The ICAI further claims that disciplinary decisions have been taken unanimously and there is no conflict of interest among the members in the current setup of the Board of Discipline (BoD) and the Disciplinary Committee (DC). With regard to disciplinary proceedings, the Committee find that among the cases adjudicated by the Disciplinary Committee from 2007 to 31st December, 2021, 7 out of 557 total cases were penalised with permanent removal with or without fine. The Committee feel that while the autonomy and independence of the ProfesSional Institutes should not be interfered with unnecessarily, the integrity associated with financial reporting cannot be diminished in any way since it reflects business standards and financial robustness for the entire country. There seems to be, however, some divergence in the interpretation of the proposed amendment between the Ministry and the ICA!. While believing that the proposed amendments do not take away the professional autonomy of the three Institutes in any significant manner, the Committee are inclined to endorse the same without any modification. The members of the Disciplinary bodies may thus be appointed as proposed in the Bill.

C. Role of President and Secretary

3.16 With regard to the role of President, the existing provisions vis-a-vis the proposed amendment are as under:

Existing Provision

Proposed amendment

The existing provision provides that the ” President shall be the (B) Chief Executive Authority of the Council.

The President shall be the Head of the Council. 12(2)(A) The President shall preside at the meetings of the Council. The President and the Vice-President shall exercise such powers and perform such duties and functions as may be prescribed. (C) It shall be the duty of the President to ensure that the decisions taken by the Council are implemented. (D) If, for any reason a vacancy occurs in the office of the President, or if the President is absent or for any other reason, is unable to exercise the powers or perform the duties assigned to him, the Vice-President shall act in his place and shall exercise the powers and perform the duties of the President. 16(1)For the efficient performance of its duties, the Council shall appoint— (a) a Secretary who will carry out administrative functions of the Institute, as its Chief Executive Officer

3.17 On the above proposal, the ICAI submitted the following suggestion:

“The proposed amendments in sub-section (2) are unwarranted and contradictory in nature. As• proposed sub-section (2C) provisions itself says that it shall be the duty of the President to ensure that all decisions taken by the Council are implemented which means that this sub-section can effectively be implemented only when the President is Executive Head of the Council.

Hon’ble Standing Committee is requested to retain the already existing provision of sub-section (2) and not to make any changes as suggested in the proposed Bill or refer as “Executive Head” of the Council.”

3.18 The Ministry furnished the following comments on the above suggestion:

“This amendment is with a view to aligning the provisions in the two other Acts, namely, CWA Act, 1959& CS Act, 1980 governing the Cost Accountants and Company Secretaries respectively, wherein President is designated as Head of the Council. It may be noted that Section 12 of CWA Act, 1959 and CS Act, 1980, was amended in 2006, and President was designated as Head of the Council in place of Chief Executive Authority. However, corresponding amendment was not carried out in CA Act, 1949.

The Council is an elected body of the members of the Institute and is responsible for the functioning of the Institute. As per Provisions of Sec 15 of the CA Act, 1949, the Institute shall function under the overall control, guidance and supervision of the CoUncil.

President being Head of the Council is required to ensure that the decisions of the Council are implemented. In other Acts like, Institutes of Technology Act,. 1961, it is provided that it shall be the duty of the Chairperson to ensure that the decisions of the Board of IIT are implemented (Section 16 of the said Act).”

3.19 On the above issue, an independent witness in a written submission stated as under:

“The changes proposed in the Bill in the roles of the President and Secretary are by far the most significant. The President who is currently the “chief executive authority” will become the “head of The Council”. The Secretary who currently has no defined role in the CAs Act will now become the “chief executive officer” to carry out the administrative functions of the Institute to be specified. As a result, the president will become the non-executive head of the Council and the Secretary will perform the executive functions. This is similar to the separation of the roles of chairman and managing director in corporate boards. The President will have to ensure that the Council’s decisions are implemented.”

3.20 During the course of evidence, the Ministry presented the following data:

Country	USA	UK
Regulator	Public Company Accounting Oversight Board (PCAOB) — a private non-profit cor.oration	Financial Reporting Council (FRC) – a company limited by guarantee
Composition	05 Board members, including a Chairman. Only 02 (must) be CPAs. Independent from the profession-	Chairman, Chief Executive as an Executive Director, the Chair of the Regulatory Standard & Codes Committee, the Chair of the Conduct Committee and non-xecutive directors. No member of the Board may be a practicing auditor or a member of the governing body of an accountancy body

3.21 In order to address the fundamental administrative conflict of interest, it has been proposed that the role of the President becomes that of a Chairperson or Head of the Council and that the Secretary becomes Chief Executive Officer. The Ministry has submitted that this proposal has been made to align the provisions of the three Institutes. Globally, it can be seen that the role of the Chairman or Head has been separated from that of the Executive Authority. The Institute of Technology Act, 1961 also provides for a Chairperson to ensure the implementation of the Board’s decisions. As such, the Conimittee feel that the role of the Head of Council and the Executive Head may be separated as proposed in the Bill to bring about greater efficiency in decision making and functioning of the Council.

D. Timelines for completion of disciplinary proceedings

3.22Regarding timeline for completion of disciplinary proceedings in BoD and DC, the existing provisions vis-a-vis the proposed amendments are as under:

Existing Provisions

Proposed amendments

No specific timelines for investigation/adjudication of disciplinary cases.

Section 21 (3) While making investigation into a case which is found to be actionable, Director (Discipline) shall give opportunity to the member or the firm, as the case may be, to submit a written statement within twenty-one days, which may further be extended by another twenty-one days on specific request giving reasons for seeking further extension. 21A(4) The Board of Discipline shall conclude its inquiry within ninety days of the receipt of preliminary examination report from the Director (Discipline). 218 (4) The Disciplinary Committee shall conclude its inquiry within one hundred and eighty days of receipt of the preliminary examination report from the Director (Discipline).

3.23 On the issue of timelines for completion of disciplinary proceedings, the ICAI submitted the following suggestion:

“Timelines for pleadings and undertaking various activities by Director (Discipline) including the procedure to be followed are given in the proposed Bill itself. It is a cardinal principle of legislative drafting that the substantive law deals with or provides for substantial and enabling provisions and the procedure part, to maintain flexibility, is prescribed in the delegated legislation i.e. in Rules. Proposed Bill focus upon / emphasises more on procedural aspects whereas procedure should be defined in Rules rather in the substantive legislation.

It is pertinent to mention that the Board of Discipline and Disciplinary Committee are part time bodies that adjudicates the disciplinary cases. Thus the, timelines needs to be realistic and practical. One would also agree that any judicial or quasi-judicial forum is required to adhere to the principles of natural justice by giving a fair and reasonable opportunity to all the parties by following due procedure. For the sake of procedure or for expeditious disposal, the basic principle of natural justice cannot be overlooked.

Therefore, ICAI is of the view that time line, if any for various stages of disciplinary proceedings should only be provided in the Rules. At the most in this Section an upper limit of time for disposal of a case can be provided.”

3.24 The Ministry of Corporate Affairs furnished the following comments on the above suggestion:

“It appears that the Institute is agreeable that timelines may be provided though it does not want to commit on the particular timelines provided in the Bill.ln ICAI, it is observed that a large number of cases are pending for more than 3 years. The provision in the bill is made on the recommendations of the High Level Committee which has recommended a time line of 365 days for completion of entire proceedings and also need for a timeline for disposal of disciplinary cases. The Bill seeks to ensure timely disposal of pending cases within 180 days by Disciplinary Committee and 90 days by Board of Discipline and also prescribed timelines at the stage of PER in the Disciplinary Directorate.

In order to enable the Institutes to dispose the cases in a timely manner, the Bill s. further proposes to augment the capacity of Disciplinary Directorate by making provision for at least two Joint Directors (Discipline) in addition to Director (Discipline) and more than one BoD for quicker disposal of cases.”

3.25 On the pendency of cases, the ICAI in a written note submitted as under:

“Pendency of Cases: From 2006, new procedure of Disciplinary Mechanism for taking action against erring members has been introduced. Since 2006 to 31st December 2021, a total of 5829 cases have been registered under the new mechanism out of which 3832 cases (65.74%) were disposed off by the 31st December, 2021. Ageing analysis of remaining, 1997 (34.26%) cases is as below:

TOTAL NO OF PENDING CAS ES#	LESS THAN A YEAR	FOR 01 – 3 YEAR	MORE THAN 3 YEARS
1997	670	753	574

(#) In 79 cases, stay has been granted by the competent Court & apart from that in 2 cases although there is no stay on the proceedings, final Order cannot be passed due to Order of the competent Court.

3.26 On the above issue, the High Level Committee had recommended as under:

” The High Level Committee recommends a carefully calibrated schedule of time ceilings starting from receipt of complaint, such that final disposal in each complaint does not exceed 365 days/orie year, from the date the complaint is received in the Directorate of Discipline.”

3.27 One of the important objectives of the Bill is to provide time bound disposal of cases by specifying time limits for speedy disposal of cases against members of the Institute. Based on the submissiOns of the Institutes and the Ministry, the Committee feel that the introduction of timelines for. completion of disciplinary proceedings is reasonable and justified with a view to ensuring prompt disposal of disciplinary matters. The Committee would therefore endorse the timelines proposed in the Bill.

E. Liability of firms for misconduct of partner

3.28 On the issue of the liability of firms for misconduct of partner, firms are not covered in the existing Acts and the proposed changes in the Bill are as under:

“21A(6) Where on the basis of evidence brought on record or during the course of an inquiry pertaining to a member, the Board of Discipline is of the opinion that any such member who is a partner or owner of a firm, has been repeatedly found guilty of misconduct mentioned in the First Schedule during the last five years, the following action may also be taken against such firm, namely:—

(a) prohibit the firm from undertaking any activity or activities relating to* the profession of a chartered accountant in practice for such period not exceeding one year; or

(b) impose such fine as it may think fit, which may extend to twenty-five lakh rupees.

21B(6)Where on the basis of evidence brought on record or during the course of an inquiry pertaining to a member, the Disciplinary Committee is of the opinion that any such member, who is a partner or owner of a firm has been repeatedly found guilty of misconduct mentioned in the Second Schedule or in both the First Schedule and the Second Schedule, during the last five years, the following actions may also be taken against such firm, namely:-

(a) prohibit the firm from undertaking any activity or activities relating to the profession of a chartered accountant in practice for such period not exceeding two years; or

(b) suspend or cancel the registration of the firm and remove its name from the Register of firms permanently or for such period as it may think fit; or

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

3.29 The ICAI submitted the following suggestion on this issue:

“Clause (a) of sub-section (6) regarding imposing penalties on firm needs to be re-worded having regard to the following instances (which are not exhaustive).

• • ‘A’ is a partner simultaneously in more than one firm at the time of commission of misconduct and repeatedly found guilty. In such case, whether on all the firms penalty is liable to be imposed or only on one firm.
  • At the time of commission of misconduct, ‘A’ is a partner in one firm and subsequently becomes partner in another. In such cases, whether penalty is imposed on both the firms or on which firm the penalty can be imposed is not getting cleared.
  • After committing repeated misconducts and found guilty thereof, if ‘A’ dissolves the said firms and establishes a new firm, whether the new firm can be penalised for his misdeeds.
  • At first time, A is found to be guilty for misconduct as defined under first schedule and second time, he is found to be guilty for misconduct as defined under second schedule or both schedule. There can be a reverse situation also. The provisions need to be more clarificatory.
  • There may be a situation where four partners of a single firm are found to be guilty of misconduct as defined under first schedule and / or second schedule, but none of them have been found repeated guilty. Now it is not clear whether any action can be contemplated on the said firm in this case.

Further to above, ICAI is also concerned for a firm having multiple partners, paid assistants, employees and article assistant. As per the proposed provision, if any one of the partner is found to be repeated guilty, action would be initiated against the entire firm including removal of its name from the register. However, it is felt that this would lead to unnecessary hardship to all other partners, paid assistants, employees etc. who are dependent for their livelihood on the firm without any fault of them.”

3.30 The Ministry of Corporate Affairs furnished the following comments on the above suggestion:

“With regard to liability of firm, it is submitted that the proposal of fixing liability of firm has been introduced in all the three Acts through the present amendment bill along with a separate chapter on registration of firms. It is also relevant that the Institute has raised no objection as regards introduction of separate chapter on registration of firms rather there was a longstanding demand of including a separate chapter on firms and also the power to the Council to penalize them.

The action against member who is a partner or owner of a firm has been provided in the bill for misconduct under the First Schedule to be inquired by Board of Discipline and for misconduct under the Second Schedule to be inquired by Disciplinary Committee. The repeated misconduct on part of a partner of a firm in the last five years (rather than the same or identical offence) would be considered for taking action against the firm also. Here repeated misconduct refers to misconduct on part of a partner or owner of a firm on more than one occasion. Therefore, different formulation based on times of repeated offences is not required.

A professional charged with misconduct and found guilty may be partner in more than one firm. However, for the purpose of this clause, partner(s) of the firm on behalf of which he/she has carried out the audit/certification and is found to be involved in a misconduct would only be covered

The proposed formulation in the Bill has been vetted by Legislative Department.”

3.31 The recommendation of the High Level Committee Report on the above issue is as under:

“At present, the jurisdiction of the disciplinary mechanism (in all three professional Institutes), extends only up to its individual member and does not in any manner implicate the firm/partnership with which such member is associated or may be so employed. Following the Satyam scam, a High Powered Committee appointed within the ICAI, had proposed to Government of India, Ministry of Corporate Affairs in 2010 that the Chartered Accountants Act, Regulations and Rules be amended such that ICAI could “proceed against the firm, including imposition of ban, where the partners and the members of an audit team are found to be guilty of gross negligence / fraudulent activities”.

With reference to the disciplinary process, this High Level Committee, recommends that:

(i) it is logical and also high time that the firm must also be held culpable to the extent as may be prescribed for the specific misconduct of the defaulting professional.

(ii) In any disciplinary proceeding, the Complainant must furnish the name of the firm/ partnership to which the CA/CS/Cost Accountant belonged at the time when the lapse in professional conduct took place.

(iii) Similarly, in the final order passed by the adjudicating bodies of the three Institutes, the name of the firm must be stated upfront in terms of specific penalties imposed, as relevant.

(iv) And finally, in order to bring the firms of members also under the umbrella of disciplinary mechanism, the HLC recommends that the proposal of ICAI contained in letter dated 15th December 2010 should now be considered as soon as feasible. If accepted, this would require amendments in the Acts and Rules of the respective Institutes.

3.32 The inclusion of firms under the purview of the disciplinary mechanism is one of the objectives of the Bill. This was necessitated by various incidents including the major corporate accounting scandals, huge scams that shook the economy, the discovery of shell companies after demonetization and the lack of action taken or inability to take action against firms. In this regard, the Committee are surprised that the Ministry has taken an unduly !ono time in taking action on the recommendations of the High Level Committee in 2017. The Committee feel that the ICAI’s opposition to penalising firms for the repeated misconduct of its partners is unfounded as the firms have ‘a fiduciary relationship with their partners and are equally responsible for their deeds. Further, it may be noted that the Bill does not intend to penalise firms for a single misconduct of its partner but repeated misconduct within a span of five years. The Committee, therefore, endorse the amendment and hope that these are not cosmetic changes and would rather go a long way in preventing financial scams in the future.

F. Increasing Competition

3.33 During the course of evidence, the representative of Ministry of Corporate Affairs stated as under:

“In the US, for taking a license, you have to go to State Board of Accountancy. For public listed companies, there is Public Company Accounting Oversight Board (PCAOB). It has to be independent from the profession. The American Institute of Certified Public Accountants (AICPA) is a voluntary organisation but they cannot give license to practice. In fact, they are conducting seminars. May be, they are also suggesting syllabus through which the CPAs should appear in exam. Exam is conducted by National Association of State Boards of Accountancy(NASBA) and State Board of Accountancy.

In the US, there are 56 State Boards of Accountancy.. In California, there are 15 members — seven professionals and eight lay members. In Alabama, it is one lay member and six professionals. But all are appointed by the Government. They are not getting appointed by the Council. There would be the State Chartered Accountant bodies but they are not regulating themselves. Here, !CAI is giving license and conducting exam. That is why, we have said it is statutory monopoly. It is doing everything unlike USA where awarding of license is with the Government, cancellation of license is with the Government. It is completely regulated knowing the sensitivity and importance of the profession. Who will be appointing the. Members of Board of Accountancy? They are appointed by Governor, Senate or Speaker. The AICPA is only becoming an organisation where if you want to get benefit out of something and you become a member. That is a major difference. To practice in USA, you need not become a Member of AICPA. I may not be obliged to take the membership of AICPA to practice, I can take a license from the Government and practice.

Here, you have to, take a license from ICAI, certificate of practice. Without obtaining a certificate of practice, you cannot practice. That means it is completely controlled by one Institute. There is no competition also to develop the profession unlike in other countries where there are multiple bodies competing with each other and developing the profession.”

3.34 The Ministry also provided the following information regarding Qualification and licensing in various countries:

USA

• Activities are performed by multiple bodies:
• Examination for CPAs is conducted by American Institute of Certified Public Accountants – AICPA (a voluntary professional organization of CPAs at National Level). National Association of State Boards of Accountancy- NASBA (a Not For Profit Organization) gets the scores from AICPA and transmits to the State Boards of Accountancy (SBAs – Govt. Bodies), which make scores available to the candidates
• License to practice/ revocation of license by SBAs (not by AICPA or State Societies of CPAs)
• CPAs need not be members of AICPA

UK, South Africa and Australia

• Activities are combined but performed through multiple bodies — SROs, which are Non-Governmental Bodies
• Canada
• Activities are combined but performed – through multiple Statutory Provincial Bodies — Statutory SROs

3.35 On the above issue, an independent witness submitted the following suggestion: “Establishment of Indian Institutes of Accounting

This proposal is for establishing a string of Indian Institute of Accounting (IIA) that will raise the standards of accounting education and offer competition to the Institute of Chartered Accountants of India.

Here’s an outline of what the IIAs would be like:

• The IIAs will be statutory bodies established by a Central law similar to IlTs and Wis.
• They will be set up in different parts of India.
• Each IIA will have a board of governors consisting of experts, lay persons, and government officers drawn, among others, from the Ministry of Finance, the Ministry of Education, and the Ministry of Corporate Affairs. The board size will be ten.
• The board will have full functional, financial and administrative autonomy for its efficient functioning.
• The chairman and the members will be eminent persons from business, public administration, accountancy, finance, academia, and so on.
• The board will appoint the chairman and the members and they must be free from conflict of interest of any kind i.e. professional, financial, or personal.
• The chairman and the members will serve part-time and will have a term of three years. They shall not be eligible for reappointment or extension in order to avoid entrenchment and to bring in new talent regularly.
• The board will appoint a Director (CEO) for a term of five years. The Director shall not be eligible for reappointment or extension in order to avoid entrenchment. This is particularly important because the board is part-time and the Director could develop deep roots.
• Each IIA will have an Academic Council that will develop the curriculum. The undergraduate curriculum will have financial and cost accounting, auditing, tax, law, business strategy, organisational behavior, management, governance and public administration, technology, data science, psychology and other fields relevant to the wide role that accountants play.
• IIAs will start with a five-year undergraduate programme in accounting. Overtime, they will develop post-graduate programmes in specialized areas such as forensic accounting, business analytics, cyber security, valuation, international tax, and other relevant ‘fields. Once these programmes stabilize, they will develop PhD programmes.
• Admission will be through a national entrance test after secondary schooling under the National Educational Policy 2020.
• IIAs will be research-driven. They will support research and publications efforts by their faculty generously.
• IIAs will work closely with national and regional educational institutions such as the Indian Institutes of Management, the Indian Institutes of Technology, the National Law Universities, and other universities and institutions.
• From the beginning IIAs will have an international outlook. They should have students from all over the world including from developing countries. They should aim to get the best faculty from around the world.
• They should price their education reasonably and provide liberal financial aid to needy students. Access, equity, inclusion, diversity, and fairness are important. They should work to raise endowments from industry.
• Those who qualify in the undergraduate programme will be given two degrees, a Bachelor of Accounting and a Bachelor of Business. This will give them a choice of the stream they want to go into.
• They will be given a license to practice similar to CAs. The license-holders will be called Certified Professional Accountants (CPAs). They will be required to register themselves with a Central Licensing Authority (such as NFRA) which will handle their disciplinary matters.

The proposal visualizes the IIAs as academic institutions that educate licensed professionals similar to AIIMS, PGI, JIPMER, National Law Schools, and so on. In contrast, the Institute of Chartered Accountants of India will be a professional certification agency, much the same way it is now.”

3.36 During the course of examination of the Bill and scrutinizing global practices with regard to the profession of accountants, it has been observed that the qualification and licensing of accountants in advanced countries like US, UK and Canada is done by multiple bodies unlike in India where one Institute has statutory monopoly over the whole profession. As such, the scope for improving the quality and competency of the profession remains limited. The Committee during their deliberations feel that multiple bodies on the lines of advanced countries is required in order to promote healthy competition, raise the standard and quality of auditing and accounting and improve the credibility of financial reporting. The Committee desire that the Government should consider setting up of Institutes of Accounting (11A) akin to IITs and 1lMs for further development of the accounting and finance profession in the country.

G. Substitution of Section 22- Professional or other misconduct defined

3.37 Clause 26 of the Bill states that:

“For section 22 of the principal Act, the following section shall be substituted, namely:-

’22. For the purposes of this Act, the expression “professional or other misconduct” shall be deemed to include any act or omission, on the part of any member of the Institute either in his individual capacity or as partner or owner of a firm, as mentioned 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 such member or firm, under any ‘other circumstances.”

3.38 The Committee recommend addition of the word “commission” in Clause 26 (Section 22 of Principal Act) as indicated below:

“For the purposes of this Act, the expression “professional or other misconduct” shall be deemed to include any act of commission or omission, on the part of any member of the Institute either in his individual capacity or as partner or owner of a firm, as mentioned 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 such member or firm, under any other circumstances.”

H. Change in nomenclature

3.39 Clause 39 of the Bill states as under:

“In section 1 of the principal Act, in sub-section (1), for the words “Cost and Works Accountants”, the words “Cost Accountants” shall be substituted.

3.40 The Institute of Cost Accountants of India submitted the following suggestion in this regard:

” The Bill proposes to substitute the existing words ‘Cost and Works Accountants’ with the words ‘Cost ‘Accountants’. In this regard, the Institute submits that instead of substituting the existing words ‘Cost and Works Accountants’ with the words ‘Cost Accountants’, these should be substituted with the words “Cost and Management Accountants” in line with the title of the qualification of its members, viz., ACMA and FCMA and institute’s name is changed as “The Institute of Cost and Management Accountants of India”. The change would be in line with the changing role of the professionals known earlier as cost and works accountants of similar institutes in developed and developing countries such as UK, USA, Australia, Bangladesh, Sri Lanka, etc. In support, we give below the global list of all CMA Institutes:

– Chartered Institute of Management Accountants, UK

– Institute of Management Accountants, USA

– Institute of Certified Management Accountants, Australia

– Institute of Certified Management Accountants, Hong Kong

– Institute of Certified Management Accountants, Sri Lanka

– Institute of Cost and Management Accountants of Bangladesh, Bangladesh

it may be seen that except India, all other Institutes carry the title as Cost & Management Accountants or simply Management Accountants. It is only in India that the Institute carries the title of only Cost Accountants, which is misleading as the domain of cost accounting has matured itself to cost & management accounting.”

3.41 The Committee note that Clause 39 of the Bill proposes to substitute the words “Cost Accountants” instead of “Cost and Works Accountants”. However, the Institute of Cost Accountants of India have suggested that the nomenclature may be changed to ‘Institute of Cost and Management Accountants of India’ in keeping with international practice. In this regard, they have cited the example of UK where it is Chartered Institute of Management Accountants, Institute of Management Accountants in USA and Institute of Certified Management Accountants in Australia. In this regard, the Committee would suggest that the Ministry of Corporate Affairs may consider suitable change to the nomenclature of the Institute as per international practice/benchmarks.

New Delhi;
21 March, 2022
30 Phalguna, 1943 (Saka)

SHRI JAYANT SINHA,
Chairperson
Standing Committee on Finance

Minutes of the Seventh sitting of the Standing Committee on Finance (2021-22) The Committee sat on Thursday, the 03rd February, 2022 from 1500hrs. to 1600 hrs. in Main Committee Room, Parliament House Annexe, New Delhi.

PRESENT ‘

Shri Jayant Sinha — Chairperson

LOK SABHA

2. Shri S.S. Ahiuwalia

3. Shri Subhash Chandra Baheria.

4. Shri Shrirang Appa Barne

5. Dr. Subhash Ramrao Bhamre

6. Shri Manoj Kotak

7. Shri Pinaki Misra

8. Prof. Sougata Ray

9. Shri Gopal Shetty

10. Dr. (Prof.) Kirit Premjibhai Solanki

11. Shri Manish Tewari

12. Shri Rajesh Verma

RAJYA SABHA

13. Shri Ahmad Ashfaque Karim

14. Shri Sushil Kumar Modi

15. Shri A. Navaneethakrishnan

16. Shri Praful Patel

17. Dr. Amar Patnaik

18. Shri Mahesh Poddar

19. Dr. C.M. Ramesh

20. Shri G.V.L Narasimha Rao

21. Smt. Ambika Soni

SECRETARIAT

1. Shri Siddharth Mahajan . Joint Secretary

2. Shri Ramkumar Suryanarayanan Director

3. Shri Kulmohan Singh Arora Additional Director

4. Shri Kh. Ginlal Chung – Deputy Secretary

LIST OF WITNESSES

The Institute of Chartered Accountants of India

1. CA. Nihar N Jambusaria, President

2. CA. (Dr.) DebaShis Mitra, Vice President

3. CA. (Dr.) Jai Batra, Secretary

The Institute of Cost Accountants of India

1. CMA P. Raju lyer, President

2. CMA B.M. Sharma, Past President

3. CMA B.B Goyal, Advisor

The Institute of Company Secretaries of India

1. CS Devendra Deshpande, President

2. CS Ranjeet Pandey, Past President and Council Member

3. CS Asish Mohan, Secretary

3. At the outset, the Chairperson welcomed the witnesses to the sitting of the Committee. After the customary introduction of the witnesses, the President, ICAI made a powerpoint presentation on ‘the Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Bill, 2021’ and went on to highlight the suggested modifications to the Bill alongwith representatives of the ICoAl and ICSI. The major issues discussed include the need for formation of a Coordination Committee among the three Institutes, the changes proposed in the composition of the Board of Discipline and Disciplinary Committee, the rationale behind penalizing firms for offence of partners, high pendency of disciplinary cases and the need for time-bound disposal of cases and conflict of interest between disciplinary and administrative arms of the Institutes.

4. The witnesses responded to the queries raised by the Members on the subject.

The Chairperson directed the witnesses to furnish written replies to the queries which could not be readily replied by them during the sitting.

The witnesses then withdrew.

The Committee then adjourned.

A verbatim record of the proceedings has been kept.

Minutes of the Eighth sitting of the Standing Committee on Finance (2021-22)

The Committee sat on Wednesday, the 09th February, 2022 from 1500hrs. to 1600
hrs. in Main Committee Room, Parliament House Annexe, New Delhi.

PRESENT’

Shri Jayant Sinha — Chairperson

LOK SABHA

2. Shri S.S. Ahluwalia

3. Shri Subhash Chandra Baheria

4. Dr. Subhash Ramrao Bhamre

5. Smt. Sunita Duggal

6. Shri Gaurav Gogoi

7: Shri Manoj Kotak

8. Prof. Sougata Ray

9. Shri Gopal Shetty

10. Dr. (Prof.) Kirit Premjibhai Solanki

11. Shri Bala Showry Vallabhaneni

RAJYA SABHA

12. Shri Ahmad Ashfaque Karim

13. Shri Sushil Kumar Modi

14. Shri A. Navaneethakrishnan

15. Dr. Amar Patnaik

16. Shri Mahesh Poddar

17. Shri G.V.L Narasimha Rao

SECRETARIAT

1. Shri Siddharth Mahajan Joint Secretary

2. Shri Ramkumar Suryanarayanan Director

3. Shri Kulmohan Singh Arora Additional Director

4. Shri Kh. Ginlal Chung Deputy Secretary

LIST OF WITNESSES

Ministry of Corporate Affairs

1. Shri Rajesh Verma, Secretary

2. Shri Manoj Pandey, Joint Secretary

3. At the outset, the Chairperson welcomed the witnesses to the sitting of the Committee. After the customary introduction of the witnesses, the Secretary, Ministry of Corporate Affairs made a powerpoint presentation on the proposed amendments in ‘The Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Bill, 2021’. The major issues discussed .include the rationale behind the constitution of Coordination Committee, change in the composition of Board of Discipline (BoD) and Disciplinary Committee, need for multiple bodies for qualification and licensing of accountants to increase competition as per global best practices, quantum of punishment for misconduct of partners, need for addressing conflict of interest in disciplinary and administrative arms.

4. The witnesses responded to the queries raised by the Members on the subject. The Chairperson directed the witnesses to furnish written replies to the queries which could not be readily replied by them during the sitting.

The witnesses then withdrew.
The Committee then adjourned.

A verbatim record of the proceedings has been kept.

Minutes of the Fourteenth sitting of the Standing Committee on Finance (2021-22) The Committee sat on Monday, the 21st.March, 2022 from 1500hrs. to 1530 hrs. in Committee Room ‘8’, Parliament House Annexe, New Delhi.

PRESENT

Shri Jayant Sinha — Chairperson

LOK SABHA

2. Shri S.S. Ahluwalia

3. Shri Subhash Chandra Baheria

4. Dr. Subhash Ramrao Bhamre

5. Smt. Sunita Duggal

6. Shri Manoj Kotak

7. Shri Pinaki Misr

8. Shri Gopal Shetty

9. Shri Parvesh Sahib Singh

10. Shri Bala Showry Vallabhaneni

RAJYA SABHA

11. Shri Ahmad Ashfaque Karim

12. Shri Sushil Kumar Modi

13. Shri A. Navaneethakrishnan

14. Shri Praful Patel

15. Dr. Amar Patnaik

16. Shri Mahesh Poddar

17. Shri G.V.L Narasimha Rao

SECRETARIAT

1. Shri Siddharth Mahajan Joint Secretary

2. Shri Ramkumar Suryanarayanan Director

3. Shri Kulmohan Singh Arora – Additional Director

4. Shri Kh. Ginlal Chung Deputy Secretary

2. At the outset, the Chairperson welcomed the Members to the sitting of the Committee. Thereafter, the Committee took up the draft Report on ‘the Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Bill, 2021’ for consideration and adoption. After some deliberations, the Committee adopted the draft Report and authorised the Chairperson to finalise and present the Report to the Parliament.

The Committee then adjourned.

Bill No. 161 of 2021

THE CHARTERED ACCOUNTANTS, THE COST AND WORKS
ACCOUNTANTS AND THE COMPANY SECRETARIES
(AMENDMENT) BILL, 2021

A

BILL

further to amend the Chartered Accountants Act, 1949, the Cost and Workscoun Accountants Act, 1959 and the Company Secretaries Act, 1980.

BE it enacted by Parliament in the Seventy-second Year of the Republic of India as follows:—

CHAPTER”

PRELIMINARY

1. Short title and commencement.

(1) This Act may be called the Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Act, 2021.

(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act and any reference in any provision to the commencement of this Act shall be construed as a,reference to the coming into force of that provision.

CHAPTER II

ANIENDMEWS TO THE CHARTERED ACCOUNTANTS ACT, 1949

2. Amendment of long title and preamble.

In the Chartered Accountants Act, 1949 (hereafter in this Chapter referred to as the 38 of 1949. principal Act), in the long title and preamble, for the word “regulation”, the words “regulation and development” shall be substituted.

3. Amendment of section 2.

In section 2 of the principal Act, in sub-section (1),—

(i) after clause (aaa), the following clause shall be inserted, namely: —

(ab) “Board of Discipline” means the Board of Discipline constituted under sub-section. (1) of section 21A;’;

(ii) after clause (b), the following clauses shall be inserted, namely:—

(ba) “Coordination Committee” means the Coordination Committee constituted under section 9A;

(bb)’ Companies Act” means the Companies Act, 2013 or any other previous ;’18 of 2013. company law as defined in sub-section (67) of section 2 of the said Act;’;

(iii) in clause (c), after the words “Council of the Institute”; the words “constituted 15 under section 9” shall be inserted; •

(iv) after clause (ca), the following clauses shall be inserted, namely:—

(cb) “Director (Discipline)” means the Director (Discipline) referred to in section 21 and includes Joint Director (Discipline);

(cc) “Disciplinary Committee” means the Disciplinary Committee 20 constituted under sub-section (1) of section 21B;

(cd) “Disciplinary Directorate” means the Disciplinary Directorate 4stablished under sub-section (1) of section 21;

(ce) “fellow” means a fellow member of the Institute;’;

(v) in clause (ea), after the words “Official Gazette”, the words `and the term 25 “notify” shall be construed accordingly’ shall be inserted; •

(vi) for clause (g), the following clause shall be substituted, namely:—

(g) “Register” Means the Register of members of the Institute maintained under section 19 or the Register of firms of the Institute maintained under section 20B, as the case may be;’;

(viz). after clause (haa), the following clause shall be inserted, namely:7–

(haaa) “Standing Committee” means a Standing Committee constituted under sub-section (1) of section 17;’.

4. Amendment of section 4.

In section 4 of the principal Act,—

(i) for the word “Register”, wherever it occurs, the words “Register of members” 35 shall be substituted;

(ii) in sub-section (1), in clauses (v) and (vi), for the words “without India”, wherever they occur, the Words “outside India” shall be substituted;

(iii) in sub-section (3),—

(a) the words “, which shall not exceed rupees three thousand” shall be 40 omitted;

(b) the proviso shall be omitted.

5. Amendment of section 4.

In section 5 of the principal Act,—

(i) for the word “Register”, occurring at both the places, the words “Register of members” shall be substituted;

(ii) in sub-section (3),-

(a) the words “which shall not exceed rupees five thousand” shall be omitted;

(b) the proviso shall be omitted.

6. Amendment of section 6.

In section 6 of the principal Act, for sub-section (2), the following sub-section shall be substituted, namely:—’

“(2) Every such member shall pay annual fee for the certificate as may be determined, by notification, by the Council, and such fee shall be payable on or before the 1st day of April each year.”.

7. Amendment of section 8.

In section 8 of the principal Act,—

(i) for the word “Register”, wherever it occurs, the words “Register of members” shall be substituted;

(ii) in clause (iii), after the words “undischarged insolvent”, the words “or an undischarged bankrupt” shall be inserted;

(iii) after clause (iii), the following clause shall be inserted, namely—

“(iiia) is declared bankrupt under the Insolvency and Bankruptcy Code, 2016; or”;

(iv) in clause (v),—

(a) for the words “without India”, the words “outside India” shall be substituted;

(b) the words “transportation or” shall be omitted.

8. Amendment of section 9.

In section 9 of the principal Act,—

(i) in sub-section (2),—

(a) for the word “Register”, occurring at both the places, the words “Register ofmembers” shall be .substituted;

(b) for the words “three years”, the words “four years” shall be substituted;

(c) for the words “six years”, the words “eight years” shall be substituted;

(ii) in sub-section (4),—

(a) for the word “person”, the words “member of theInstitute or any partner of a firm” shall be substituted;

(b) for the words “three years”, the words “four years” shall be substituted.

9. Insertion of new section 9A.

After section 9 of the principal Act, the following section shall be inserted, namely:

“9A. Coordination Committee.

(1) There shall be a Coordination Committee consisting of the President, Coordination Committee Vice-President and the Secretary of the Council of each of the Institutes of Chartered Accountants of India; the Cost Accountants of India and the Company Secretaries of India for the development and harmonisation of the professions of Chartered Accountants, Cost Accountants and Company Secretaries.

(2) The meeting of the Coordination Committee shall be chaired by the Secretary, Ministry of Corporate Affairs.

(3) The meeting of the Coordination Committee shall be held once in every quarter of a year.

(4) The Committee shall be responsible for the effective coordination of the functions assigned to each Institute and shall—

(i) ensure quality improvement of the academics, infrastructure, research 5 and all related works of the Institute;

(ii) focus on the coordination and collaboration among the professions, to make the profession more effective and robust;

(iii) align the cross-disciplinary regulatory mechanisms for inter professional development;

(iv) make recommendations in matters relating to regulatory policies for the professions;

(v) perform such other functions incidental to clauses (i) to (iv) above.”.

10. Amendment of section 10.

Section 10 of the principal Act shall be renumbered as sub-section (1) thereof and,—

(i) in the first proviso to sub-section (1) as so renumbered, for the words “three 15 consecutive terms”, the words “two consecutive ternis” shall be substituted;

(ii) after sub-section (1) as so renumbered and amended, the following sub-section shall be inserted, namely:—

“(2) Notwithstanding anything contained in sub-section (1), a member of the Council whO immediately at the commencement of the Chartered Accountants; 20 the Cost and Works Accountants and the Company Secretaries (Amendment) Act, 2021, has held office as such member for two terms or is holding office for the second term of three years, shall be eligible to contest for one more term of four years and a member who has held office for one term or is holding office for the first term of three years, shall be eligible to contest for two more consecutive 25 terms.”.

11. Amendment of section 12.

In section 12 of the principal Act,—

(i) in sub-section (1), the.proviso shall be omitted;

(ii) in sub-section (2), for the words “Chief Executive Authority”, the word “Head” shall be substituted; 30

(iii) after sub-section (2), the following sub-sections shall be inserted, namely:—”

(2A) The President shall preside at the meetings of the Council.

(2B) The President and the Vice-President shall exercise such powers and perfonn such duties and functions as may be prescribed:

(2C)It shall be. the duty of the President to ensure that the decisions taken 35 by the Council areimplemented.

(2D) If, for any reason a vacancy, occurs in the office of the President, or if the President is absent or for any other reason, is unable to exercise the powers or perform-the duties assigned to him, the Vice-President shall act in his place and shall exercise the powers and perform the duties of the President.”.

12. Amendment of section 13.

In section 13 of the principal Act, in sub-section (2), for the word “Register”, the words “Register of members” shall be substituted.

13. Amendment of section 14.

In section 14 of the principal Act, in sub-section (1), for the words “three years”, the words “four years” shall be substituted.

14. Amendment of section 15.

In section 15 of the prilicipal Act; in sub—section (2),—

(i) for clauses (b) and (c) the following clauses shall be substituted, namely: —

“(a) the prescribing of fees for the examination. of candidates for enrolment;

(b) the granting or refusal, of registration of a firm;”;

(ii) in clause (a), for the word “Register”, the words “Register of members” shall be substituted;

(iii) for clause (A the following clauses shall be substituted, namely: —

“(f) the prescribing of guidelines for grant or refusal of certificates of practice under this Act;

(fa) to issue guidelines for the purpose of carrying out the objects of this Act;”;

(vi) clause (g) shall be omitted;

(vii) in clause (h), the words “and collection” shall be omitted;

(viii) clause (i) shall be omitted;

(vii) for clause (1), the following clauses shall be substituted, namely:—”

(l) to conduct investor education and awareness programmes;

(la) to enter into any memorandum or arrangement with the prior approval of the Central Government, with any agency of a foreign country, for the purpose of performing its functions under this Act;”.

15. Insertion of new section 15B.

After section 15A of the principal Act, the following section shall be inserted, namely:—

“15B. The functions of the Institute shall include— Functions of Institute.

(a) the examination of candidates for enrolment;

(b) the regulation of the engagement and training of articled and audit assistants;

(c) the maintenance and publication of a Register of persons qualified to practice as chartered accountants;

(d) the maintenance and publication of Register of firms;

(e) collection of fees from members, examinees and other persons;

(f) subject to the orders of the appropriate authorities under this Act, the removal of names from the Registers of members and firms and the restoration of names to the Registers of members and firms which have been removed;

(g) the maintenance of a library and publication of books and periodicals relating to accountancy and allied subjects;

(h) the conduct of elections to the Council of the Institute; and

(i) the granting or refusal of certificates of practice as per guidelines issued by the Council.”.

16. Amendment of section 16.

In section 16 of the principal Act,—

(i) for sub-section (l), the following sub’-section shall be substituted, namely:-

“(l) For the efficient performance of its duties, the Council shall appoint—

(a) a Secretary who will carry out administratiVe functions of the Institute, as its Chief Executive Officer;

(b) a Director (Discipline) and Joint Directors (Discipline) not below the rank of Deputy Secretary of the Institute, to perform such functions as 5 are assigned to them under this Act and the rules and regulations framed thereunder:

Provided that no appointment or re-appointment or termination of appointment of Director (Discipline) or Joint Director (Discipline) shall have effect unless such appointment, re-appointment or termination of to appointment is made with the previous approval of the Central Government”;

(ii) in sub-section (2),. for clause (c), the following clause shall be substituted, namely:—

“(c) prescribe the manner of appointment, powers, duties and functions of the Secretary and other officers and employees, their salaries, fees, allowances and other terms and-conditions of service;”.

17. Amendment of section 18.

In section 18 of the principal Act, for sub-section (5), the following sub-section shall be substituted, namely;—

“(5) The annual accounts of the Council shall be prepared in such manner as 20 may be prescribed and subject to audit by a firm of chartered accountants to be appointed annually by the Council from the panel of auditors maintained by the Comptroller and Auditor-G eneral of India:

Provided that a firm shall not be eligible for appointment as an auditor under this sub-section, if any of its partner• is or has been a member of the Council during the last four years:

Provided further that in the event it is brought to the notice of the Council that the accounts of the Council do not represent a true and fair view of its finances, then, the Council may itself cause a special audit to be conducted:

Provided also that, if such information, that the accounts of the Council do not 30 represent a true and fair view of its finances; is’ sent to the Council by the Central Government, then, the Council may,. wherever appropriate cause a special audit or take such other action as it considers necessary and shall furnish an action taken report thereon to the Central Government.”. .

18. Amendment of section 19. 

In section 19 of the principal Act,— 35

(i) for the word “Register”, wherever it occurs, the words “Register of members” shall be substituted;

(ii) for sub-section (1), the following sub-section shall be substituted, namely:—

“(1) The Council shall maintain a Register of members of the Institute in such manner as may be prescribed.”;

(iii) in sub-section (2), after clause (c), the following clause shall be inserted, namely:—

“(ca) whether any actionable information or complaint is pending or any penalty has been imposed against him under Chapter V, including details thereof, if any;”;

(iv) in sub-section (4),—

(a) the words “, which shall not exceed rupees five thousand” shall be omitted;

(b) the proviso shall be omitted.

19. Amendment of section 20.

In section 20 of the principal Act,—

(i) for the word “Register”, wherever it occurs, the words “Register of members” . shall be substituted;

(ii) in sub-section (3),—

(a) the words “, which shall not exceed rupees two thousand” shall be omitted;

(b) the proviso shall be omitted.

20. Insertion of new Chapter IVA.

After chapter IV of the principal Act, the following Chapter shall be inserted, namely:—

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