Controller of Insurance vs B. Mukherjee

Chakravartti, C.J.—This is a rather distressing case-distressing because although, on the facts found and reported by the Council of the Institute of Chartered Accountants the respondent has been guilty of grossly improper conduct, if not dishonestly improper conduct, if not dishonestly, it must nevertheless be held that the steps taken to bring him to suitable punishment have gone to waste. Even assuming that the respondent has been guilty of every act of omission found against him, it appears to be clear that the proceedings held against him under the Chartered Accountants Act have been entirely misconceived.

The respondent was a Registered Accountant and is now a Chartered Accountant in the Indian sense of the term. It appears that in September, 1950 he was appointed liquidator by the Superintendent now Controller of Insurance, in respect of three provident Societies directed to be wound up by an order of this Court. The respondent was not the first liquidator to be appointed. He was appointed after the appointment of one Mr. S. N. Banerjee had been cancelled. Soon after his appointment, the respondent obtained from the societies a return of the deposits made to them u/s 73 of the Insurance Act. Those deposits appear to have consisted mainly in securities. It would appear that after receiving the deposits from the provident societies the respondent thought that all that he was required to do as liquidator had been accomplished and he was simply to sit in his office without paying any heed to any enquiries that might be made of him by the appointing authority. According to the statement of the case, he gave no evidence of making any progress with the work of liquidation and repeated enquiries made by the Superintendent of Insurance failed to elicit any reply. The respondent however showed some activity in regard to one matter. He made a payment to Sri S. K. Mandal, Solicitor to the Central Government by a cheque in respect of the taxed costs in the provident societies. That cheque was dishonoured. When informed of this incident the Assistant Controller of Insurance, presumably not feeling too happy about the respondent functioning as a liquidator asked him to furnish a complete list of all the assets of the three societies which had come into his possession, together with certificates from the bankers with whom he was keeping the assets in deposit. That requisition was met in the usual way, that is to say, with complete silence. By then the patience of the Controller of Insurance appears to have been exhausted and acting in exercise of the powers u/s 90(2) of the Insurance Act, he cancelled the respondent''s appointment and appointed a new liquidator in one Mr. N. N. Das. Then followed a chapter of successive letters from Mr. Das to which also the respondent did not deem fit to give any reply. He was at last contacted over the telephone and this time he had to make some reply. The reply made by him was that he would be returning the assets within a short time. The short time, in fact, proved to be very long and indeed interminable, because the respondent did not, in fact, return any of the assets, although Mr. Das appears to have continued the pressure. The only response which the respondent ever made was that in January, 1953, he sent to Mr. Das securities of the face value of Rs.10,000/- on account of one of the provident societies and of the value of Rs.350 on account of another. Not to speak of returning the other assets and securities, the respondent did not even formally make over charge to his successor. As the Controller of Insurance could no longer credit the respondent with honesty, he lodged an information with the Commissioner of Police, Calcutta, in April, 1953. What happened to that information does not appear. Thereafter, the Controller appears to have decided to take action under the Chartered Accountants Act and in pursuance of that decision, he sent a complaint to the Secretary of the Council of the Institute of Chartered Accountants on the 20th May, 1953.

On receipt of the complaint, the Secretary of the Council issued the usual notice, even then the silence of the respondent was not broken. He filed no written statement and failed to take any ste4ps in the proceeding in any other way. In those circumstances, the Disciplinary Committee of the Institute had to proceed in his absence and examined Mr. Das at one of the sittings. Other and further notices were then issued to the respondent, requiring him to attend on dates fixed from time to time but the respondent failed to appear on a plea of illness. At last, at the meeting of the Committee held on the 29th of August, 1953, a learned Counsel appeared on behalf of the respondent, but besides watching the proceedings, he seems to have taken no part in them. He however promised that his client would file a written statement after he had been supplied with a copy of the disposition of Mr. Das. That copy was in due course supplied but the respondent did not yet file any written statement. In those circumstances, the Disciplinary Committee concluded the proceedings and reported their finding to the Council. That finding was expressed in the following words:

"In the circumstances set forth above we find him guilty of gross negligence in the conduct of his professional duties in not handing over charge of the assets and books of the companies mentioned above to the newly appointed liquidator".

The report of the Disciplinary Committee was considered by the Council at its eleventh meeting and the Council came to its own finding. That finding which has been forwarded to this Court is in these words:

"Shri B. Mukherjee was guilty of misconduct in his professional duties in not handing over charge of the assets and the books of the Societies mentioned in the complaint to the newly appointed liquidator. The Council is of the opinion that his acts and omissions complained of were more serious than what could be described as gross negligence".

It will be noticed that the first part of the Council''s finding is in substance in the same words as the finding of the Disciplinary Committee with only this difference that for the words "gross negligence" the word "misconduct" has been substituted. The only possible meaning of the Council''s finding is that it agreed with the Disciplinary Committee as regards the actual acts and omissions done or committed by the respondent, but whereas the Committee thought that the conduct of the respondent amounted to gross negligence the Council was of opinion that it amounted to misconduct. That such was the meaning of the Council appears clearly from the second part of the finding which I have already read.

The finding of the Council has been forward to the High Court under the provisions of Section 21(1) of the Chartered Accountants Act. We have considered the finding and have heard Mr. Ghose on behalf of the Institute of Chartered Accountant.

I may add here that before us, Mr. R. Chaudhuri the learned Counsel, who had appeared on behalf of the respondent before the Disciplinary Committee on the 29th of August, 1953, appeared but it was only to ask for an adjournment on the ground of his client''s illness. We did not feel inclined to grant the prayer and proceeded with the hearing.

It does not take one long to see that the finding at by the Council and forwarded to this Court is incorrect, if not wholly meaningless. It speaks of the respondent having been guilty of misconduct in his professional duties. The misconduct, if any, has occurred in the course of the discharge by the respondent of his duties as a liquidator or his failure to discharge them. Those duties had no concern whatever with the respondent''s duties as a Chartered Accountant. Indeed the expression "professional duties" seems to be singularly inappropriate to the duties performed or required to be performed by a liquidator. No one is and no one can be a liquidator by profession and there can be no profession of liquidator. Nor can it be said that the respondent was appointed liquidator by reason of his being a Chartered Accountant and therefore the duties required to be performed by him as liquidator could also be regarded as duties required to be performed as a Chartered Accountant. Anybody could be appointed liquidator u/s 90(1) of the Insurance Act. In order to qualify for appointment under that section it is not required of the appointee that he should be a Chartered Accountant. I am, therefore, entirely unable to understand what the Council meant by saying that by not handing over the charge of the assets and the books of the Provident Societies to his successor, the respondent had been guilty of "misconduct in his professional duties".

This is sufficient to dispose of this Reference. Mr. Ghose, however, argued that disciplinary action could be taken under the Act against a Chartered Accountant not only for misconduct committed in a professional capacity, but for other forms of misconduct as well. I shall presently examine that contention, but it seems to me that even assuming it is correct, the Institute cannot expect this Court to take action in the present case on the footing that the respondent has been guilty of misconduct otherwise than in his professional capacity because that is not the finding which the Council arrived at and which it has reported to this Court.

Be that as it may, in view of the rather elaborate argument addressed to us. I consider it right that the position should be examined. The Chartered Accountants Act is an Act passed, as the preamble shows, to make provision for the regulation of the profession of Accountant \\s. It is primarily, if not exclusively an Act dealing with the rights and duties of Chartered Accountants in respect of the exercise of their profession. It does not seem to regulate the general moral conduct of the members of the profession, at least not directly and expressly. It does take notice of the fact that the members of the profession may be guilty of conduct which would disqualify them to remain members or which would deserve punishment, but it seems to be fairly clear that the improper conduct which the Act has in contemplation is conduct in respect of the exercise of the profession and not conduct in general. That appears to be implicit in the provisions of Section 21 of the Act, which lays down the procedure for an enquiry relating to the misconduct of members of the Institute. An enquiry is to be initiated in two cases. The first is where a complaint has been received from a private party and "the Council is of opinion that any member of the Institute has been guilty of conduct which, if proved, will render him unfit to be a member of the Institute." The second is where a complaint has been received against a member from or on behalf of the Central Government. In such case, the Council is not required to form an opinion before causing an enquiry to be held. I may remark in passing that the expression is of opinion that any member of the Institute has been guilty of conduct which, if proved, will render him unfit to be a member of the Institute, appears to be meaningless and almost ridiculous, because if the conduct remains to be proved it is impossible to see how the Council or anybody else in the world can be of opinion that the member concerned has been guilty of it. What was intended to be said perhaps is, ''is of opinion that there is against any member of the Institute an allegation of conduct which if proved, will render him unfit, etc.''.

The language used in Section 21 is simply conduct although it is said that it is such conduct as, if proved, will render the member concerned unfit to be a member of the Institute. In that way alone is it connected with the profession? This language by itself does not exclude misconduct which is not misconduct in respect of the exercise of the profession, but that qualification is imported by the definition of misconduct, as given in Section 22 and the Schedule to the Act. Section 22 seeks to define the expression ''conduct'' which, if proved, will render a person unfit to be a member of the Institute and it is said that it shall be deemed to include any act or omission specified in the Schedule. The schedule is, if I may say so, a very populous one, because it contains items numbered by letters of the alphabet from (a) to (v). A reference to the items would show that each one of them is concerned with the exercise of the profession of a Chartered Accountant and not one of them has any reference to anything done outside the profession. It is true that the schedule is not exclusive, because Section 22 says that conduct which, if proved, will render a person unfit to be a member o the Institute shall only be deemed to include any act or omission specified in the Schedule. There may, therefore, be other acts or omissions, but such acts or omissions, it would appear, must also be acts or omissions in respect of the exercise of the profession, because the residuary item, item (v), is expressed in the following language:

(v). "is guilty of such other Act or omission in his professional capacity as may be specified by the Council in this behalf by notification in the ''Gazette of India''".

It is thus clear that the Legislature while contemplating that there might be other forms of misconduct outside those specifically enumerated in the Schedule which would bring a Chartered Accountant within the disciplinary jurisdiction of the Institute laid stress at the same time that the acts or omissions not specifically enumerated must also be acts or omissions in the professional capacity of the member concerned. There seems to be no room for contending that misconduct not connected with the exercise of the profession is also within the ambit of the Act, provided it involves moral turpitude or appears to render a person unworthy to remain a member of a responsible profession.

Mr. Ghose, who appeared on behalf of the Institute, relied on the closing words of Section 22 and to a certain extent on my observations on those words in the case of In Re: J.K. Ghosh, . I do not think that either the language of Section 22 or anything said in the case cited lends any countenance to the contention that misconduct not connected with the exercise of the profession of a Chartered Accountant, is also within the contemplation of the Act. All that Section 22 says by the closing words is that the definition of misconduct, given in the Section will not prevent the Council from enquiring into the conduct of any member of the Institute under any other circumstances. It is certainly true that Section 22 authorizes an enquiry in circumstances other than circumstances of misconduct as defined in Section 22 read with the Schedule but it seems to me that the other misconduct must also be misconduct connected with the exercise of the profession. What the closing words really mean is that the Council is not limited to misconduct of the maximum gravity which would render a person unfit to remain a member of the Institute, but may make an enquiry even when misconduct of a less culpable type is alleged. As I explained in the case cited unless such an interpretation was adopted the Act would have to be construed as providing against no misconduct less than misconduct which would justify removal from the profession and no penalty less than such removal. All that the general words of Section 22 can properly be said to comprise of is only misconduct and consequent penalty of a less grave character. They seem to me to have no room for even misconduct which is outside the exercise of the profession altogether. Any doubt felt on that point is completely dispelled by the language of the residuary item in the Schedule which I have already read.

It may, however, be said, though it was not, that the residuary clause of the Schedule only provides for other unspecified kinds of conduct which if proved will render a person unfit to be a member of the Institute while the closing words of Section 22 contemplate circumstances other than such conduct. The limitations contained in the residuary clause cannot, therefore, control the closing words of Section 22. Assuming that is so what can be the other circumstances contemplated? The contrast is between conduct which will disqualify a person altogether for exercising the profession and circumstances other than such conduct. A connection with exercise of the profession seems to be implicit in the second alternative and it cannot mean misconduct in general. Te plain meaning is that the first alternative contemplates professional misconduct of the maximum gravity while the second contemplates such misconduct in less serious forms.

Mr. Ghose relied upon two other provisions, one in the Act itself and another in the Rules. I do not see that the he can derive any assistance from either of them. The first provision to which he referred was clauses (iii) and (iv) of sub-section (2) of Section 2 of the Act. Those are some of the clauses of sub-section (2) of Section 2 which explain when a member of the Institute shall be deemed to be in practice. In other words, they give a definition of a practising Chartered Accountant. Clause (iii) speaks of rendering professional service or assistance in or about matters of principle or detail relating to accounting procedure or the recording presentation or certification of financial facts or data. Clause (iv) speaks of rendering such other services as in the opinion of the Council are or may be rendered by a Chartered Accountant. I cannot see how Mr. Ghose could contend that these clauses show that duties performed by a Chartered Accountant as a liquidator are also duties performed in his professional capacity as a Chartered Accountant. All that these clauses amount to is to say that when a Chartered Accountant is not performing what are regarded the ordinary duties of a Chartered Accountant but is performing the duties mentioned in either of the clauses he will still be deemed to be in practice. The other provision referred to by Mr. Ghose is contained in Rule 78 of the Regulations framed framed partly by the Central Government as a part of the first Regulations and partly by the Council in exercise of their power to frame subsequent Rules. Rule 78 says that a Chartered Accountant may act as liquidator, trustee, executor, arbitrator, receiver, adviser, or as representative for costing financial and taxation matters, etc, without prejudice to the discretion vested in the Council in this behalf. This part of the Regulation appears to have been framed by the Central Government. It only means that it will be permissible to a Chartered Accountant to accept an engagement as a liquidator or a trustee or in any or other of the several capacities mentioned. There is nothing in this Rule to indicate that duties in connection with the various offices in the approved list when performed will be performed in the professional capacity of Chartered Accountants. The Rule only means that certain forms of activities are not considered objectionable and that is clearly indicated by the opening words of the Rule which are without prejudice to the discretion vested in the Council in this behalf. Those words can only mean that for the time being the various offices or capacities mentioned in the Rule are being declared unobjectionable but the Council retains the discretion to withdraw anyone of them from the approved list or perhaps also to add to them. I am entirely unable to see how anything in Rule 78 warrants Mr. Ghose''s contention that a Chartered Accountant when acting as a liquidator acts in his professional capacity or in exercise of the profession of a Chartered Accountant.

If a Chartered Accountant functioning as a liquidator does not exercise his profession of accountancy any misconduct of which he may be guilty in the capacity of a liquidator cannot be misconduct in respect of his professional duties. If not, such misconduct cannot come within the mischief of the Act for reasons which I have already explained. It is thus clear that even if we were to disregard the description given by the Council to the misconduct of the respondent and take it as misconduct but not misconduct in connection with professional duties, we could not take any action under the Chartered Accountants Act. The simple reason is that such misconduct does not seem to be within the contemplation of the Act at all. The same view appears to have been taken by the Bombay High Court in the case In re., G. M. Oka, (1952) 22 CC, 168.

It is certainly not a very comfortable position that the Act should make no provision for taking Disciplinary action against Chartered Accountants in respect of misconduct committed otherwise than in the exercise of their profession, however gross such misconduct may be. But if there is a lacuna in the Act, we cannot make good the omission. The Court has been able to annex misconduct committed otherwise than in the exercise of the profession. In the case of the Legal Practitioners Act. It has been able to do so, because the residuary clause in Section 13 is "for any other reasonable clause". That clause is not circumscribed by a reference to professional capacity as the residuary item in the schedule to the Chartered Accountants Act is. In my view, the language of item (v) of the Schedule to the Chartered Accountants Act excludes the construction which has enabled the Court to hold in the case of the Legal Practitioners Act that misconduct even though it may not be misconduct connected with the exercise of the profession, is within the mischief of the residuary clause of Section 13. The circumstances contemplated by the expression "other circumstances" cannot be dissociated from the exercise of the profession.

For the reasons, I have given this Reference must be rejected and it must be held that no action under the Chartered Accountants Act can be taken against the respondent in the circumstances found and reported by the Council.

The Reference is disposed of in the aforesaid manner. There will be no order of costs.

Lahiri, J. - I agree.

Solicitors : K. K. Khetry for the Accountant;

S. K. Mondal for the Institute.