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January 25, 2022

Delhi HC directs ICAI to frame policy mandating Chartered Accountants to disclose criminal cases against them

by Mahesh Mara in Income Tax

Delhi HC directs ICAI to frame policy mandating Chartered Accountants to disclose criminal cases against them

Fact and Issue of the case

The Petitioner- Mohit Bansal, is a qualified Chartered Accountant (hereinafter “CA”), enrolled with the Respondent No. 1 – Institute of Chartered Accountants of India (hereinafter, “ICAI”) since 25th January 2008. The ICAI issued a notice dated 25th June 2018, to show cause as to why action under Section 8 of the Chartered Accountants Act, 1949 (hereinafter, “Act”) should not be taken against the Petitioner in view of his conviction by the Delhi High Court under Sections 354 and 506-II of the Indian Penal Code 1860.

A detailed reply was filed by the Petitioner on 26th October 2018. Post this, on 14th September 2020, notice to appear for hearing was issued to the Petitioner. The prayer of the Petitioner is to quash this notice of hearing dated 14th September 2020, served upon him by the ICAI, and the entire proceedings under Section 8(v) read with Section 20(1)(d) of the Act initiated against him.

Observation of the court and Conclusion

This Court concludes as under:

a. There are, broadly, two categories of misconduct contemplated under the Act – ‘professional misconduct’ and ‘other misconduct’. These two types of misconduct are covered under Section 8 (vi) read with Section 22 and the Schedules to the Act.

b. However, a conviction for an offence involving ‘moral turpitude’ punishable with imprisonment- is a third and higher class of offence under Section 8(v) of the Act and is stipulated as a separate class of disabilities which bars a person’s name from being entered or borne in/continued in the register of the ICAI. This is a graver offence, in terms of the scheme of the Act, juxtaposed to what is contemplated under the third part of the Second Schedule or the fourth part of the First Schedule to the Act.

c. In the case of an offence involving ‘moral turpitude’, for which no pardon has been granted, by a strict interpretation of the Act, the matter need not even be referred to the Board of Discipline or to the Disciplinary Committee for an inquiry. In such cases dealing with conviction for offences involving ‘moral turpitude’ covered under Section 8(v) the same would straight away fall within the jurisdiction of the ICAI Council, and even an inquiry, as contemplated in Section 21, would not be strictly required. The ICAI Council, may however, for the purposes of complying with the Principles of Natural Justice, and for the purposes of fairness, still decide to provide a hearing to the person concerned.

d. A reading of Sections 20, 21 & 22 would show that the discretion vested in the Council and the Director (Discipline) are vast. Inquiry can be conducted in respect of professional or other misconduct as also under any other circumstances.

e. In the case of offences under Section 8(vi) read with Section 22 and the Schedules, the ICAI is the final authority empowered to accept the recommendation of the Board of Discipline, in the case of misconduct specified in the First Schedule, and of the Disciplinary Committee in cases of misconduct specified in the Second Schedule, or a combination of both the Schedules.

f. It is further clear that if a person has been convicted for an offence involving ‘moral turpitude’, such a person’s name cannot be entered into the register or cannot continue in the register, and has to be removed from the register, unless a pardon in respect thereof is granted.

g. Although, from a bare reading of sub-section 8(v), it may appear that the Central Government would have the power to remove the disability even in offences involving ‘moral turpitude’, in the opinion of this Court, in case of an offence or a conviction involving ‘moral turpitude’, such power being vested with the Central Government would be contrary to the spirit of the statute as also contrary to the settled judicial precedents, to the effect that `moral turpitude’ would be a complete disqualification. The use of the expression “entered in” contained in Section 8, also shows that offences committed prior to the person qualifying as a CA are also within the purview of the disabilities mentioned under Section 8 of the Act. The only condition upon which a person convicted can be entered into or can continue on the register of ICAI, would be if the person has been granted a pardon.

B. On the facts of the present case:

The Petitioner’s conviction would be attracted by the disability of ‘moral turpitude’ as contemplated under Section 8(v) of the Act. The ICAI shall award reasonable time for the Petitioner to file a fresh reply to the impugned notices, and for him to be heard by the ICAI in accordance with the principles of natural justice. Upon the said hearing being concluded, ICAI shall proceed in accordance with law.

C. Directions to ICAI:

As is evident from the facts of the present case, the Petitioner, despite a criminal case being pending at the time of his enrolment as a Chartered Account and thereafter his conviction, was enrolled and was permitted to practice as a CA. This Court has not been shown any policy or disclosure requirements that are asked for from candidates or CAs either at inception or thereafter. There is a clear need for the ICAI to create a framework wherein there is proper disclosure by candidates who apply to become Chartered Accountants, at the inception itself. There is also a need for a continuing disclosure, may be on an annual basis for members to inform the ICAI if there are any criminal cases / conviction etc., against them, so that the ICAI is not kept in the dark. The power, discretion and duty of ensuring the purity of the Register of Members is upon the ICAI. Thus, in the case of convictions, the factum of the said conviction and the offences qua which the applicant was convicted ought to be disclosed.

In the case of an FIR or a Criminal Complaint having been filed, there ought to be an obligation upon the applicant to keep the ICAI informed and updated, as to the progress in the said Complaint/Case. ICAI shall accordingly frame a policy and a mechanism, if not already in existence, for disclosure by members both at the inception as also on a periodic basis thereafter, of any criminal cases or convictions so that the spirit and intent of the statute is given effect to and the ICAI is not in the dark about the same until it is notified by some information or complaint.

This writ petition seeking quashing of the show cause notice and the proceedings emanating therefrom is, accordingly, dismissed. All pending applications are also disposed of. No order as to costs.

Read the full order from below


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