ICAI is under an obligation to provide reasons to a complaint in case it arrives at prime facie conclusion that its member is not guilty of any misconduct, says Delhi HC

Man alleged to have ‘Khalistani Links’ granted default bail by Delhi HC

The petitioner prayed the following to the Bench of Delhi High Court for relief which contained an issuance a writ of mandamus or any other writ which will direct the Respondent to act in judicious manner on the Complaint no. 230/2014. The complaint was made against the Internal Auditor of a Company in which he had invested but it was closed by ICAI and its decision was communicated to the petitioner. The grievance of the Petitioner was that ICAI didn’t record and convey the reasons for closing the complaint which was filed against the Internal Auditor of a Company. An allegation was made by the Complainant to this matter that by a letter dated 4th September 2014 that RBI observed an inspection to the Company which revealed that the company has been recording its books accounts in a wrong manner and other financial statements for several years, which showed positive worth. The Counsel for petitioner placed reliance on the Judgment dated 21st May 2015 of the Kerala High Court, T.O. Aleyas v. The Institute of Chartered Accountants of India & Ors. WP (C) Nos. 29211-12/201, submits that the respondent was obliged to record and convey the reasons for closing the complaint against the Internal Auditor. Further, the submission of Respondent to the bench “it is not the case of the respondent that reasons are not required to be recorded, but that reasons/prima facie opinion is not required to be communicated to the complainant upon closure of the complaint; on a challenge being made to the said decision, the record can be produced before the Court where such challenge is made and in any case, even the complainant can obtain the same under the Right to Information Act, 2005”. The ICAI argued that proceedings before the Disciplinary Committee and the Board of Discipline under the Chartered Accountants Act were principally between the Institute and its Members.

The bench considered the submission made by both the parties and noticed the provisions of the Chartered Accountants Act and the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, in which, the complainant has a wider right as compare to informant who had no right to be represented during the investigation or hearing and the ICAI also had no obligation to inform the Informant. The Court took the note of Rule 9(3) the Director (Discipline) is of the prima facie opinion that the member of the firm is not guilty of any misconduct, he shall place the matter before the Board of Discipline and the Board of Discipline, if it agrees with such opinion of the Director (Discipline), shall pass the “order” for closure. Moreover, the Rule 14(1) prescribes the Board of Discipline shall follow the summary disposal procedure for dealing with all cases before it and Rules 7(2) (c) of the Rules provides that where the inquiry is initiated only on an Information, the Institute will be under no obligation to inform the sender of the progress made in respect of the information received, including the final orders. 

Therefore, the Court opined that where an inquiry is initiated on a complaint, the Complainant is entitled to receive a copy of the order closing such inquiry against the member, along with the reasons for the closure, The Rules having themselves created this right in favour of the Complainant, it cannot be accepted that the Complainant would only be supplied with the “Information” of the closure of the complaint.”

The order of the Court, “Even otherwise, the duty to assign reasons is one of the essential concomitants of the principles of natural justice. It is not the case of the respondent that the Act or the Rules exempt the Director (Discipline) or the Board of Discipline from recording reasons for the prima facie opinion of the member being not guilty of any misconduct.”

Key-Features:

(i) ICAI was represented by Vibhooti Malhotra & Petitioner was supported by Advocates Anu Sura, Sameer Jain, and Anant Gupta from PSL Advocates & Solicitors.

(ii) Accordingly, the bench gave directions to ICAI, communicating the reason for its decision to the petitioner.

(iii) The order was passed by Single Judge Bench of Justice Navin Chawla.

(iv) It was held by the bench that there is an obligation of ICAI to provide adequate reasons to the complainant in case it arrives at prima facie conclusion that its members aren’t guilty of any misconduct. 

(v) The Petitioner had made a Complaint with the ICAI against the Internal Auditor of a company in which he had invested.

Edited by J. Madonna Jephi

Approved & Published – Sakshi Raje

End-Notes:

  • Trideep Raj Bhandari vs. Institute of Chartered Accounts of India, W.P. (C) 9032/2018
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