A.K. Sikri, J.
1. Institute of Chartered Accountants of India (hereinafter referred to as the Institute, for short) has made this reference under Section 21(5) of the Chartered Accountants Act, 1949 (hereinafter referred to as the Act, for short) in respect of Shri Mahesh Taneja, FCA with the prayer that this Court may pass necessary orders in accordance with Section 21(6) of the Act.
2. Facts giving rise to the making of the reference are as follows:-
A complaint dated 27th February, 1991 was filed by Mrs. Sushma Shourie in which the allegations were made to the following effect :
(1) the respondent had failed to appear before the Income Tax Officer in response to the notice under Section 143(2) and 142(1) of the Income Tax Act for the Assessment Years 1988-89. Resultantly, assessment was made ex-parte under Section 144, at a total income of Rs. 2,57,361/- as against declared income of Rs. 41,170/-.
(2) The respondent even failed to appear before the Commissioner of Income Tax (Appeals) filed against the afore-mentioned Order, resulting in dismissal of the appeal.
(3) The respondent falsely conveyed to the complainant that the stay of the demand applied for had been granted whereas the fact was that the complainant was served with a demand notice for the payment failing which recovery proceedings would be initiated.
(4) The complainant asked the respondent to file appeal against the aforesaid order before the Tribunal for which necessary fee was paid to him. The respondent prepared the appeal, got it signed from the complainant and informed the complainant that the appeal had been filed. However, later on it transpired that no such appeal was filed. This fact was even admitted by the respondent. Even the fee was not refunded.
(5) Despite repeated requests, visits to his house as well as office, telephone messages and telegrams sent for the purpose of collecting income-tax records for the subsequent years and an Explanationn of the basis of the return filed by him for the assessment year 1988-89 and despite the respondent's repeated assurances for about a year, the respondent had not done the needful till date.
(6) The payment of Rs. 11,530/- through various cheques were made to the respondent by the complainant and the respondent assured her that the payment to the Income-Tax Department would be made from the above sums after calculating the due amounts. The Complainant was distressed tos receive a notice from the Income-tax Department that as the amount due for the assessment year 1989-90 had not been paid and she was required to pay the same. The notice had also been handed over to the respondent but despite his repeated assurances, no receipts had been shown or whether the amounts were deposited with the Income-tax Department and even if paid, the dates were not intimated.
(7) False assurances, gross negligence and lapses on the part of the respondent had resulted in the attachment of the complainant's property and bank Account as well as a heavy demand of additional tax which might increase due to levy of penalties and the same is beyond her capacity to pay even after liquidating her total assets.
3. On receiving this complaint by the Institute, a copy thereof was sent to the respondent wherein he was requested to submit his written statement. The above request was followed by three reminders but the written statement was not filed. In accordance with the provisions contained in Regulation 12(11) of the Act, the papers containing the complaint only were considered by the Institute as reply was not filed by the respondent. The Institute was of prima facie opinion that the respondent was guilty of professional and other misconduct and accordingly referred the case to the Disciplinary Committee for enquiry.
4. At the meeting of the Disciplinary Committee held on 4th June, 1993 the respondent appeared and was asked the reason for not submitting written statement for consideration of the Institute. The respondent replied that he did not know the procedure and the time granted for the purpose was very short. The Council pointed out to him that four letters dated 2nd April, 1991, 30th April, 1991, 30th July, 1991 and 24th October, 1991 were sent to him. However, the Council granted him ten days time to file the written submissions on his request and the matter was adjourned. On the next date of hearing on 15th July, 1993 neither the respondent appeared nor was represented through counsel. Even written submission was not filed and no request for adjournment was made on his behalf. The matter was adjourned to 18th August, 1993 and on this date the respondent as well as the witnesses were present. On this date enquiry was completed. However, at the respondent's request he was again given ten days time to file written submission and documents in support thereto. After perusing the written submission filed by the respondent the Disciplinary Committee came to the conclusion that the respondent had been grossly negligent in the conduct of professional duties as charged by the complainant and found him guilty of professional misconduct under Clause (7) of the Part I of Second Schedule to the Act within the meaning of Section 21 and 22 of the Act.
5. On receiving the report of the Disciplinary Committee, the complainant as well as the respondent filed their respective written representations for perusal of the Council. At the time of considering the report, both the complainant and the respondent appeared in person before the Council and made their submissions. On consideration of the report of the Disciplinary Committee and the oral submissions made by the parties the Council in its meeting held on 6th December, 1994 accepted the report of the Disciplinary Committee and found the respondent guilty of professional misconduct within the meaning of Sections 21 and 22 read with Clause 7 of Part I of Second Schedule of the Act. The Council recommended to this Court that the name of the respondent be removed from register of Members for a period of one month.
6. Notice of this reference was directed to be served upon respondent No. 1 for 31st October, 2001. The respondent was duly served. However, he did not appear on 31st October, 2001. The matter was adjourned for 12th December, 2001 and on this date also the respondent No. 1 failed to appear. In these circumstances, the submissions of learned counsel for the petitioner-Institute were heard.
7. Chapter V of the Act deals with 'misconduct'. Section 21 deals with procedure in inquiries relating to misconduct of members of Institute. Section 21 of the Act, so far as relevant reads as follows:
'21. Procedure in inquiries relating to misconduct of members of Institute:
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(4) Where the finding is that a member of the Institute has been guilty of a professional misconduct specified in the First Schedule, the Council shall afford to the member an opportunity of being heard before orders are passed against him on the case, and may thereafter make any of the following orders, namely:
(a) reprimand the member;
(b) remove the name of the member from the Register for such period, not exceeding five years, as the Council thinks fit:
Provided that where it appears to the Council that the case is one in which the name of the member ought to be removed from the Register for a period exceeding five years or permanently, it shall not make any order referred to in Clause (a) or Clause (b), but shall forward the case to the High Court with its recommendation thereon.
(5) Where the misconduct in respect of which the Council has found any member of the Institute guilty is misconduct other than any such misconduct as is referred to in Sub-section (4) it shall forward the case to the High Court with its recommendations thereon.
8. We are concerned with Sub-section (4) and (5). This appears to be a case which is covered by Sub-section (5), as the Council has found the respondent to be guilty of misconduct of a category other than those referred to in Sub-section (4). On reference the High Court has power under Sub-section (6) to pass any of the following orders:
(a) direct that the proceedings be filed, or dismiss the complaint, as the case may be:
(b) reprimand the member ;
(c) remove him from membership of the Institute either permanently or for such period as the High Court thinks fit;
(d) refer the case to the Council for further inquiry and report.
9. From a perusal of the record placed before us including the report of the Disciplinary Committee as well as the recommendation of the Council we are satisfied that proper opportunity in consonance with the principles of natural justice and the provisions of the Act and the Rules there under was given to the respondent to defend the charges leveled against him. The report of the Disciplinary Committee further shows that the findings are arrived on the basis of documents on record and the evidence of the witnesses. The Disciplinary Committee came to the conclusion that the respondent was grossly negligent inasmuch as he failed to discharge his duties as Chartered Accountant. Para 17 of the report reads as under:-
'On perusal of the documents on record and those produced at the time of hearing, and the evidence of the witnesses, the Committee is of the opinion that the Respondent was grossly negligent in as muchas he failed to discharge his duties as a Chartered Accountant. Having been engaged to represent the Complainant, before the tax authorities his non-appearance on various dates before the assessing officer as well as the Commissioner of Income-tax (Appeals), was an act of sheer carelessness. The non-appearance of the Respondent resulted in ex-parte orders which created considerable problems for the Complainant and she had to undergo lot of harassment. The conduct of the Respondent in not keeping a tract of the appeal papers shows his carelessness. The Respondent had acted in most irresponsible manner and had thus put the complainant to financial loss, mental stress and strain.
The Council considered the aforesaid report along with the representations of the complainant as well as the respondent and also gave them personal hearing. It decided to accept the report of the Disciplinary Committee and found that the respondent was guilty of professional misconduct within the meaning of Sections 21 and 22 read with Clause (7) of Part I of the Second Schedule of the Act and on that basis it decided to recommend this Court that the name of the respondent be removed from the register of Members for a period of one month.
Dealing with similar case of professional misconduct of another Chartered Accountant, this Court in its decision dated 4th September, 2000 in Chartered Accountant Reference No. 1/98 entitled Council of Institute of Chartered Accountants of India v. A.P. Gupta made the following pertinent observation :-
'Professional misconduct' has been defined in Section 22 of the Act. Intendment and object of the Act is to maintain standard of the profession at a high level, and consequentially a code of conduct has been prescribed. Misconduct implies failure to act honestly and reasonably either according to the ordinary and natural standard, or, according to the standard of a particular profession. Chartered Accountants' profession occupies a place of pride amongst various professions of the world. That makes observance of professional duties and propriety more imperative. When conduct of a member of the profession is contrary to honesty, or opposed to good morals, or is unethical, it is misconduct warranting consequences indicated in the Statute. An auditor holds a position of trust. An auditor holds a position of trust. Any breach of the confidence is a stigma not only on the individual concerned, but also is likely to have effect on credibility of the profession as whole. That is why the anxiety of the legislature to punish the erring individual. It is to be noted that by breach of trust by a person entrusted with property or dominion over it, action under criminal law can be taken. As observed by the Apex Court in the context of professional misconduct of an Advocate, that an act which is done otherwise than with utmost good faith is unprofessional. (See Pandurang Dattatraya Khandekar v. The Bar Council of Maharashtra, Bombay, : AIR1984SC110 ). The test of what constitutes 'grossly improper conduct in the discharge of professional duties' has been laid down in many cases. In the case of in re: A Solicitor Ex parte the Law Society (1912) 1 KB 302, Darling, J. adopted the definition of 'infamous conduct in a professional respect', on the part of a medical man in Allison v. General Council of Medical Education & Registration (1894) 1 QB 750, applied to professional misconduct on the part of Solicitor, and observed:
'If it is shown that a medical man, in the pursuit of his profession, has done some thing with regard to it which would be reasonably regarded as disgraceful or dishonourable by his professional brethren of good repute and competency, then it is open to the General Medical Council to Say that he has been guilty of 'infamous conduct in a professional respect'.
10. The Privy Council approved of the definition in George Frier Grahame v. Attorney General, Fiji, and this Court in the matter of P. An Advocate : 1963CriLJ341 has followed the same.'
11. Keeping in view the nature of misconduct proved against the respondent we are of the opinion that the penalty recommended by the Institute is not unreasonable. We accept the recommendation of the Institute to remove the name of the respondent from register of Members for a period of one month and order accordingly.
12. Reference Application stands disposed of.