Pradeep Kumar Lodha Vs. the Institute of Chartered Accountants of India and Others - Court Judgment

Excerpt:
- ordervisheshwar nath khare, c. j. 1. this appeal under section 22a of the chartered accountants act, 1949, (hereinafter referred to as the act) is directed againstthe decision taken at the 178th meeting of the council of the institute of the chartered accountants of india held on 6th, 7th and 8th dec. 1995, and communicated by its letter dated feb. 16, 1995, removing the name of the appellant from the register of the members for a period of one month.2. the appellant before us is a practicising chartered accountant and carrying on his profession under the name and style of kumar pradeep and company having his registered office at 62/1/a, netaji subhas road, calcutta. the appellant alleges that one shri shayam sunder gupta being satisfied with his professional work was anxious to propose his name for being appointed as auditor in some of the companies in which the said shyam sundar gupta held shares. it is further alleged that shyam sundar gupta approached the appellant to ascertain as to whether the appellant had any objection to his proposal and whether the appellant was eligible to be appointed as an auditor of public limited company in view of the limits laid down in section 224(1b) of the companies act 1956, to which the appellant told shri shyam sundar gupta that he had no objection to his proposal and since the appellant was an auditor of only two companies as against the limit of twenty companies, the appellant wrote to him that he had no objection for being appointed as an auditor to eighteen other companies. it is also alleged that the aforesaid shri shyam sundar gupta on his own sent proposals to several companies in his capacity as sharesholders thereto proposing the name of the appellant for being appointed as an auditor under section 224 read with section 225 of the companies act. it is stated that on receipt of the proposal of shri shyam sundar gupta, several companies wanted formal certificate from the appellant to that effect and on receipt of the aforesaid communication, the appellant sent necessary certificates in terms of the requirement of provisions of section 224 of the companies act. it appears that one of the companies made a complaint to the institute of chartered accountants of india enclosing therewith the letters written by the appellant. it further appears that the institute ofchartered accountants of india took cognizance of the complaint and found the letters sent by the appellant to shri shyam sundar gupta and to various companies being either directly or indirectly in violation of clause (6) of part i of the first schedule of the act read with section 21(4) and section 22 of the act. it was held by the council that in sum and substance the appellant by writing letters to shri shyam sundar gupta and to various companies had solicited clients for professional work. in such circumstances, the council forwarded the aforesaid complaint to the appellant calling for his reply to the said complaint dated aug. 28, 1989, made by messrs warren tea ltd.3. the appellant submitted his written statement wherein he denied having violated the provisions of clause (6) of part i of the first schedule of the act. subsequently, the complaint and the entire records, i.e. written statement filed by the appellant were considered by the council at its meeting held on sept. 3 and 16, 1990. the council in the said meeting was of the opinion that the appellant was guilty of professional and / or other misconduct and as such decided to cause an enquiry to be made in the matter by the disciplinary committee. the disciplinary committee after giving opportunity to the appellant submitted its report before the council on 12th january, 1993 with its opinion that the appellant was guilty of indirect solicitation of professional work under clause (6) of part i of the first schedule of the act read with section 21 and 22 of the act. the report of the disciplinary committee was sent to the parties who were asked to send their reply and also to appear before the council either personally or through a member of the institute duly authorised to make oral submission before the council. the appellant submitted a written reply before the council. the council in its meeting gave its finding that the appellant was guilty of professional misconduct and further the appellant will be proceeded under section 21(4) of the act. subsequently on august 21, 1995, the council issued a show cause notice in the matter of complaint made by v.k. goenka, vice-chairman and managingdirector, warren tea limited, calcutta, calling upon the appellant to appear before the council in the office of the institute. pursuant to the said notice, the appellant appeared and filed a written statement before the council. the council by the order impugned directed for the removal of the name of the appellant from the registrar of the members for a period of one month. it is in this way the appeal has come up before us.4. learned counsel appearing for the appellant has urged that the letters written by the appellant to shri shyam sundar gupta who happened to be the sharesholders of various companies in response to his queries were in fact in conformity with section 224 of the companies act and does not amount to solicitation of professional work and the view taken by the council is patently erroneous. in order to appreciate the argument of the learned counsel it is necessary to reproduce the letter dated 21st january, j989 written by the appellant to shri shyam sundar gupta.'to, shri shyam sundar gupta, 134, mahatma gandhi road, calcutta-700 007.dear sir, re : audit workwe would like to inform you that we are eligible for appointment as statutory auditor of any company and we hereby certify that the appointment if made, will be in accordance with the limits specified in sub-section (1b) of section 224 of the companies act, 1956.thanking you and assuring you of our best services at all times.for kumar pradeep & company,sd/- chartered accountants.'5. by this letter the appellant informed shri shyam sundar gupta that he is eligible for appointment as auditor and if appointed, his appointment will be in accordance with the limits specified in subs-section (1b) of section 224 of the companies act, 1956. theappellant, however, assured shri shyam sundar gupta of their best services at all times.6. sub-section (1) of section 224 of the companies act provide that every company shall at each annual general meeting appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting and shall, within seven days of the appointment, give intimation thereof to every auditor so appointed provided that before any appointment or reappointment of auditor is made, a written certificate is to be obtained by the company from the auditor or auditors proposed to be appointed to that effect that the appointment made or reappointment, if made, will be in accordance with the limit specified in sub-section (1b) of section 224 of the companies act. sub-section (1a) of section 224 of the companies act further provides that every auditor appointed under sub-section (1) shall within thirty days of the receipt from the company of the intimation of his appointment, inform the registrar in writing that he has accepted or refused to accept the appointment.6a. sub-section (1b) of section 224 further provides that no company shall appoint or reappoint any person or firm as its auditor who is holding appointment as auditor of the specified number of companies or more than the specified number of companies. explanation 1 of sub-section (1c) of section 224 of the companies act further lays down that for the purpose of sub-section (1b) and (1c) 'specified number' means twenty companies in the case of a person or firm holding appointment as auditor of a number of companies each of which has a paid up share capital of less than twenty five lakhs rupees and in any other case, twenty companies, out of which not more than ten shall be companies each of which has a paid up share capital of twenty five lakhs rupees or more.7. the provisions aforesaid noticed clearly show it is the company who is to appoint an auditor at its annual general meeting and after appointment, the requirement of furnishing the certificate in terms ofsub-section (1c) of section 224 arises. in the present case at no point of time, any company ever passed any resolution appointing' the appellant as their auditor and further the letter of the appellant to shri shyam sunder gupta was not in pursuance of any resolution of the company appointing the appellant as their auditor and as such it cannot be said that the letter written by the appellant to shri syam sundar gupta was within the four-corners of section 224(1c) of the companies act.8. it was then argued that in any event of the matter, the letter written by the appellant to shri shyam sundar gupta does not amount to solicitation of professional work and as such the petitioner cannot be held to be guilty of having violated the provisions of clause (6) of part i of the first schedule of the act read with section 21(4) of section 22 of the act.9. section 21 of the act lays down the procedure in respect of the enquiries relating to misconduct of members of the institute. section 22 defines professional misconduct. this section lays down that the expression 'professional misconduct' shall be deemed to include any act or omission specified in any of the schedules. clause (6) of part i of the first schedule of the act provides that a chartered accountant shall be deemed to be guilty of professional misconduct if he solicits clients or professional work either directly or indirectly by circular, advertisement, personal communication or interview or by any other means. the expression 'solicit' is not defined either in the act or in the regulation or in the schedule. it is well known rule of interpretation that if no definition is given in the act, one can legitimately take help of dictionaries for as certaining the meaning of the word used in the statute. the word 'solicit' in black's law dictionary means to appeal for something, to apply to for obtaining something; to ask earnestly, to ask for the purpose of receiving, to endeavour to obtain by asking or pleading, to make petition to, to plead for, to try to obtain. the term implies personal petition and importunity addressed to a particular individual to do some particular thing. in chambers dictionary the word'solicit' means, to urge, to seek after, require. in substance, anything asked for the purpose of receiving or offer to do the work with assurance of best services at all times amounts so soliciting work. the appellant's letter dated 21st january , 1989, to shri shyam sundar gupta clearly demonstate that his appointment, if made, will be in accordance with the limit specified in sub-section (1b) of section 224 of the companies act with the assurance of rendering best services at all times. we are, therefore, of the opinion that the letter written by the appellant to shri shyam sundar gupta amounted to offer to work amounting to soliciting professional work either directly or indirectly within the meaning of clause (6) of part 1 of the first schedule of the chartered accountants act and, therefore, it has been rightly adjudged at the meeting of the committee that the appellant had violated the aforesaid provision and was therefore guilty of committing professional misconduct.10. lastly it was urged that the appellant wrote the impunged letter to shri shyam sundar gupta at a time when he was a new entrant in the profession and did not know its consequences and if the penalty inflicted upon him be allowed to be maintained, it would reflect upon his professional career and such penalty awarded to him be set aside. the learned counsel on behalf of the appellant assured that in future the appellant shall maintain high traditions for chartered accountants and shall not commit such mistake much less any violation of the provisions of the act. since we are sitting in appeal against the disciplinary action taken by the council against the appellant had written the letter in the year 1989 and at that time the appellant had not acquired sufficientt seniority in the profession. it also further appears to us that the appellant wrote the letter to shri shyam sundar gupta bona fide without knowing its consequences. the proceedings have dragged on for nearly six or seven years and the appellant has already suffered a lot. we, therefore, without disturbing the finding of the council that the appellant is guilty of committing professional misconduct, modify the punishment awarded to him by substituting the same with a censure that he shallbe careful in future in observing the high tradition and best standards of the noble profession of chartered accountants.11. accordingly we order that this appeal is allowed in part. the order of the council communicated by its letter dated feb. 16, 1995, is modified to the extent indicated above.there will be no order as to costs.vinod kumar gupta, j. 12. i agree.13. appeal partly allowed.

Judgment:
ORDER

Visheshwar Nath Khare, C. J.

1. This appeal under Section 22A of the Chartered Accountants Act, 1949, (hereinafter referred to as the Act) is directed againstthe decision taken at the 178th meeting of the Council of the Institute of The Chartered Accountants of India held on 6th, 7th and 8th Dec. 1995, and communicated by its letter dated Feb. 16, 1995, removing the name of the appellant from the Register of the members for a period of one month.

2. The appellant before us is a practicising Chartered Accountant and carrying on his profession under the name and style of Kumar Pradeep and Company having his registered office at 62/1/A, Netaji Subhas Road, Calcutta. The appellant alleges that one Shri Shayam Sunder Gupta being satisfied with his professional work was anxious to propose his name for being appointed as Auditor in some of the companies in which the said Shyam Sundar Gupta held shares. It is further alleged that Shyam Sundar Gupta approached the appellant to ascertain as to whether the appellant had any objection to his proposal and whether the appellant was eligible to be appointed as an Auditor of Public Limited Company in view of the limits laid down in Section 224(1B) of the Companies Act 1956, to which the appellant told Shri Shyam Sundar Gupta that he had no objection to his proposal and since the appellant was an Auditor of only two companies as against the limit of twenty companies, the appellant wrote to him that he had no objection for being appointed as an Auditor to eighteen other companies. It is also alleged that the aforesaid Shri Shyam Sundar Gupta on his own sent proposals to several companies in his capacity as sharesholders thereto proposing the name of the appellant for being appointed as an Auditor under Section 224 read with Section 225 of the Companies Act. It is stated that on receipt of the proposal of Shri Shyam Sundar Gupta, several companies wanted formal certificate from the appellant to that effect and on receipt of the aforesaid communication, the appellant sent necessary certificates in terms of the requirement of provisions of Section 224 of the Companies Act. It appears that one of the companies made a complaint to the Institute of Chartered Accountants of India enclosing therewith the letters written by the appellant. It further appears that the Institute ofChartered Accountants of India took cognizance of the complaint and found the letters sent by the appellant to Shri Shyam Sundar Gupta and to various companies being either directly or indirectly in violation of clause (6) of Part I of the First Schedule of the Act read with Section 21(4) and Section 22 of the Act. It was held by the Council that in sum and substance the appellant by writing letters to Shri Shyam Sundar Gupta and to various companies had solicited clients for professional work. In such circumstances, the Council forwarded the aforesaid complaint to the appellant calling for his reply to the said complaint dated Aug. 28, 1989, made by Messrs Warren Tea Ltd.

3. The appellant submitted his written statement wherein he denied having violated the provisions of clause (6) of Part I of the First Schedule of the Act. Subsequently, the complaint and the entire records, i.e. written statement filed by the appellant were considered by the Council at its meeting held on Sept. 3 and 16, 1990. The Council in the said meeting was of the opinion that the appellant was guilty of professional and / or other misconduct and as such decided to cause an enquiry to be made in the matter by the disciplinary committee. The Disciplinary Committee after giving opportunity to the appellant submitted its report before the Council on 12th January, 1993 with its opinion that the appellant was guilty of indirect solicitation of professional work under clause (6) of Part I of the First Schedule of the Act read with Section 21 and 22 of the Act. The report of the Disciplinary Committee was sent to the parties who were asked to send their reply and also to appear before the Council either personally or through a member of the Institute duly authorised to make oral submission before the Council. The appellant submitted a written reply before the Council. The Council in its meeting gave its finding that the appellant was guilty of professional misconduct and further the appellant will be proceeded under Section 21(4) of the Act. Subsequently on August 21, 1995, the Council issued a show cause notice in the matter of complaint made by V.K. Goenka, Vice-Chairman and ManagingDirector, Warren Tea Limited, Calcutta, calling upon the appellant to appear before the Council in the office of the Institute. Pursuant to the said notice, the appellant appeared and filed a written statement before the Council. The Council by the order impugned directed for the removal of the name of the appellant from the Registrar of the Members for a period of one month. It is in this way the appeal has come up before us.

4. Learned Counsel appearing for the appellant has urged that the letters written by the appellant to Shri Shyam Sundar Gupta who happened to be the sharesholders of various companies in response to his queries were in fact in conformity with Section 224 of the Companies Act and does not amount to solicitation of professional work and the view taken by the Council is patently erroneous. In order to appreciate the argument of the learned Counsel it is necessary to reproduce the letter dated 21st January, J989 written by the appellant to Shri Shyam Sundar Gupta.

'To,

Shri Shyam Sundar Gupta,

134, Mahatma Gandhi Road,

Calcutta-700 007.

Dear Sir,

Re : Audit Work

We would like to inform you that we are eligible for appointment as statutory auditor of any company and we hereby certify that the appointment if made, will be in accordance with the limits specified in sub-section (1B) of Section 224 of the Companies Act, 1956.

Thanking you and assuring you of our best services at all times.

For Kumar Pradeep & Company,

Sd/-

Chartered Accountants.'

5. By this letter the appellant informed Shri Shyam Sundar Gupta that he is eligible for appointment as Auditor and if appointed, his appointment will be in accordance with the limits specified in subs-section (1B) of Section 224 of the Companies Act, 1956. Theappellant, however, assured Shri Shyam Sundar Gupta of their best services at all times.

6. Sub-section (1) of Section 224 of the Companies Act provide that every company shall at each annual general meeting appoint an Auditor or Auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting and shall, within seven days of the appointment, give intimation thereof to every Auditor so appointed provided that before any appointment or reappointment of Auditor is made, a written certificate is to be obtained by the company from the Auditor or Auditors proposed to be appointed to that effect that the appointment made or reappointment, if made, will be in accordance with the limit specified in sub-section (1B) of Section 224 of the Companies Act. Sub-section (1A) of Section 224 of the Companies Act further provides that every Auditor appointed under sub-section (1) shall within thirty days of the receipt from the company of the intimation of his appointment, inform the Registrar in writing that he has accepted or refused to accept the appointment.

6A. Sub-section (1B) of Section 224 further provides that no company shall appoint or reappoint any person or firm as its Auditor who is holding appointment as Auditor of the specified number of companies or more than the specified number of companies. Explanation 1 of sub-section (1C) of Section 224 of the Companies Act further lays down that for the purpose of sub-section (1B) and (1C) 'specified number' means twenty companies in the case of a person or firm holding appointment as auditor of a number of companies each of which has a paid up share capital of less than twenty five lakhs rupees and in any other case, twenty companies, out of which not more than ten shall be companies each of which has a paid up share capital of twenty five lakhs rupees or more.

7. The provisions aforesaid noticed clearly show it is the company who is to appoint an auditor at its annual general meeting and after appointment, the requirement of furnishing the certificate in terms ofsub-section (1C) of Section 224 arises. In the present case at no point of time, any company ever passed any resolution appointing' the appellant as their auditor and further the letter of the appellant to Shri Shyam Sunder Gupta was not in pursuance of any resolution of the company appointing the appellant as their auditor and as such it cannot be said that the letter written by the appellant to Shri Syam Sundar Gupta was within the four-corners of Section 224(1C) of the Companies Act.

8. It was then argued that in any event of the matter, the letter written by the appellant to Shri Shyam Sundar Gupta does not amount to solicitation of professional work and as such the petitioner cannot be held to be guilty of having violated the provisions of clause (6) of Part I of the First Schedule of the Act read with Section 21(4) of Section 22 of the Act.

9. Section 21 of the Act lays down the procedure in respect of the enquiries relating to misconduct of members of the Institute. Section 22 defines professional misconduct. This section lays down that the expression 'professional misconduct' shall be deemed to include any act or omission specified in any of the Schedules. Clause (6) of Part I of the First Schedule of the Act provides that a Chartered Accountant shall be deemed to be guilty of professional misconduct if he solicits clients or professional work either directly or indirectly by circular, advertisement, personal communication or interview or by any other means. The expression 'solicit' is not defined either in the Act or in the Regulation or in the Schedule. It is well known rule of interpretation that if no definition is given in the Act, one can legitimately take help of dictionaries for as certaining the meaning of the word used in the Statute. The word 'solicit' in Black's Law Dictionary means to appeal for something, to apply to for obtaining something; to ask earnestly, to ask for the purpose of receiving, to endeavour to obtain by asking or pleading, to make petition to, to plead for, to try to obtain. The term implies personal petition and importunity addressed to a particular individual to do some particular thing. In Chambers dictionary the word'solicit' means, to urge, to seek after, require. In substance, anything asked for the purpose of receiving or offer to do the work with assurance of best services at all times amounts so soliciting work. The appellant's letter dated 21st January , 1989, to Shri Shyam Sundar Gupta clearly demonstate that his appointment, if made, will be in accordance with the limit specified in sub-section (1B) of Section 224 of the Companies Act with the assurance of rendering best services at all times. We are, therefore, of the opinion that the letter written by the appellant to Shri Shyam Sundar Gupta amounted to offer to work amounting to soliciting professional work either directly or indirectly within the meaning of clause (6) of Part 1 of the First Schedule of the Chartered Accountants Act and, therefore, it has been rightly adjudged at the meeting of the committee that the appellant had violated the aforesaid provision and was therefore guilty of committing professional misconduct.

10. Lastly it was urged that the appellant wrote the impunged letter to Shri Shyam Sundar Gupta at a time when he was a new entrant in the profession and did not know its consequences and if the penalty inflicted upon him be allowed to be maintained, it would reflect upon his professional career and such penalty awarded to him be set aside. The learned Counsel on behalf of the appellant assured that in future the appellant shall maintain high traditions for Chartered Accountants and shall not commit such mistake much less any violation of the provisions of the Act. Since we are sitting in appeal against the disciplinary action taken by the Council against the appellant had written the letter in the year 1989 and at that time the appellant had not acquired sufficientt seniority in the profession. It also further appears to us that the appellant wrote the letter to Shri Shyam Sundar Gupta bona fide without knowing its consequences. The proceedings have dragged on for nearly six or seven years and the appellant has already suffered a lot. We, therefore, without disturbing the finding of the Council that the appellant is guilty of committing professional misconduct, modify the punishment awarded to him by substituting the same with a censure that he shallbe careful in future in observing the high tradition and best standards of the noble profession of Chartered Accountants.

11. Accordingly we order that this appeal is allowed in part. The order of the Council communicated by its letter dated Feb. 16, 1995, is modified to the extent indicated above.

There will be no order as to costs.

Vinod Kumar Gupta, J.

12. I agree.

13. Appeal partly allowed.