Council of Institute of Chartered Accountants vs A. Krishnamurthi, Chartered Accountant

Rajamannar, C.J.—This is a reference u/s 21, Chartered Accountants Act, 1949, respecting the conduct of a Chartered Accountant, Mr.

A. Krishnamurthi, one of the partners of a firm of Chartered Accountants, Messrs. Rowe and Pal. It arises out of a complaint filed by the

Government of Madras in the following circumstances:

Messrs. Rowe and Pal were appointed by the Government as Inspectors to Investigate the affairs of two Companies, viz., Sandur Tobacco

Company Ltd. and the Sandur Plantations Ltd., Sandur, and to report thereon. It is common ground that after entering on their office as

Inspectors, one of the partners, namely, the respondent entered into a private arrangement with the Directors and Managing Agents of the

company, to bring about a compromise between different groups of creditors and the companies, for which services a separate remuneration was

fixed. Admittedly, neither the respondent nor the firm obtained the permission of the Government to undertake this work. It is not suggested that

the Government was even informed of this.

The Inspectors duly sent up a report. The Government fixed a sum of Rs. 2,500 as remuneration for their work and made a demand on the

Companies to pay the same. It was only then it was discovered that a sum of Rs. 1,500 had been paid already by the companies to Mr.

Krishnamurthi and it was alleged by Mr. Krishnamurthi that a sum of Rs. 1,000, out of this was for his service in connection with the compromise

sought to be effected between the creditors and the companies.

The Government thereupon filed a complaint requesting for an inquiry by the Council of the Institute of Chartered Accountants of India into their

conduct for having undertaken a private work on behalf of the companies, whose unsatisfactory condition they were asked to investigate without

the knowledge of the Government. The Government also made a further charge that when the investigation was in progress the Inspectors had

entered into some surreptitious agreement with the Managing Agents of the two companies for the purpose of sending up a favourable report

regarding the conduct of the Directors and Managing Agents of the companies.

The Council thereupon, after notice to the respondent conducted an enquiry into the two charges. On the first charge, they held that the respondent

should not have undertaken the private work of trying to effect a compromise between the creditors and the companies without the knowledge of

the Government. In their opinion, the conduct of the respondent, to say the least, was indiscreet on his part. The Council found the respondent

guilty of misconduct, but they held that it was not of such magnitude as to render him unfit to be a member of the Institute. The Council further held

that the second charge had not been proved and therefore failed.

As regards the second charge, the finding of the Council is the only one which could be arrived at on the evidence, and we accept it.

As regards the first charge, we agree with the Council that the respondent must be held guilty of misconduct within the meaning of that term in

Section 22 of the Act. It was most improper on the part of the respondent to have accepted a private engagement with the Directors and

Managing Agents of the Companies into whose very conduct they had been appointed by the Government to investigate. The respondent

maintained that this work did not conflict with his duty as Inspector. Even assuming that it did not, in our opinion, it was the duty of the respondent

to have informed the Government and obtained its permission before he accepted the work.

We do not think it necessary in the circumstances that anything further should be done in this matter.