Institute of Chartered Financial Analysts of India vs Council of The Institute of Chartered Accountants of India

B. Subhashan Reddy, J.

This writ appeal is directed against the order dated 21-11-1990 passed by a learned Single Judge of this court in W. P. No. 16332 of 1989.

The dispute arose because of the Notification dated 3-8-1989 issued by the 1st respondent herein in exercise of the powers conferred by clause (it) of Part 11 of Second Schedule to the Chartered Accountants Act, 1949 Income Tax Act. The Notification reads:

NOTIFICATION

(Chartered Accountants)

No. 1 -CA(7)/9/89: - In exercise of the powers conferred by clause (ii) of Part II of the Second Schedule to the Chartered Accountant Act, 1949, the Council of the Institute of Chartered Accountants of India hereby specifies that a member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he becomes a member of the Institute of Chartered Financial Analysts of India on or after 1-1-1990 or having already become a member of the said Institute earlier, does not surrender his membership before the said date.

Here, we ire riot concerned as to on what advice the said notification has been issued as it is within the domain of the 1st respondent to seek advice from whomsoever it wishes to consult, but only consider as to whether the said notification infringes the fundamental rights of the writ appellants guaranteed under articles 14 and 19 of the Constitution of India.

The learned Single Judge has brushed aside the contentions of the writ petitioners-appellants on the ground that the power vested in the lst respondent because of section 24A, that section 7 of the Act also aids to that power and proviso cannot control the main section 7 and that in any event, the same has to be read in consonance with the objective of section 24A. The learned Single Judge held that Chartered Accountants, Cost Accountants and Company Secretaries are authorised under their respective statutes to practise the respective professions, that article 51A(j) of the Constitution deals with the fundamental duty of every citizen of India to strive towards excellence in all spheres of individual and collective activity so that the nation constantly rises to higher levels of endeavour -and achievement, but the right that has been given under the above article to a citizen does not mean that he has to act in such a manner to mislead the public or use the designation which is akin to or similar which tends to mislead a member of the public into believing both designations, i.e., C.A. and C.F.A. to be similar and that the 1st respondent-Institute is within its competence to issue the impugned Notification and the subsequent caution. The learned Single Judge also held that the complexity of modern life, the existence of social, economic and political life and other diverse considerations have necessitated the creation of the Institute of Chartered Accountancy, Cost Accountancy and Company Secretary ship, that a reasonable classification is not only permitted, but is necessary, if society should progress and that since the notification deals equally with the members of chartered accountants, a well defined class, it is not obnoxious and it is not open to the charge of denial of equal protection.

The question relating to the Monopolies and Restrictive Trade Practices Act, 1969 (''the MRTP Act'') is in no way concerned with the impugned notification. The issue relating to monopoly under the MRTP Act is based on different consideration and since that issue is pending, that will be dealt with in accordance with the said law and what is relevant in this case for adjudication is whether there is power vested in the 1st respondent to issue the impugned notification and as to whether the said power has been properly exercised and whether the said notification violates the fundamental rights guaranteed under articles 14 and 19. We have to say that the scope of adjudication is also limited to the Chartered Accountants who are practising. According to the impugned notification, if the chartered accountants, who have acquired qualification after undergoing the course, want to retain their qualification of A.C.A. or F.C.A., they have to forego the degree of C.F.A., which is conferred by the 1st appellant or else they face the penal consequences u/s 24A. It may be relevant to extract section 7 as also section 24A, which read as follows :

7 Members to be known as Chartered Accountants.-Every member of the Institute in practice shall, and any other member may, use the designation of a Chartered Accountant and no member using such designation shall use any other description, whether in addition thereto or in substitution therefore:

Provided that nothing contained in this section shall be deemed to prohibit any such person from adding any other description or letters to his name. if entitled thereto, to indicate membership of such other institute of accountancy, whether in India or elsewhere. as may be recognised in this behalf by the Council, or any other qualification that lie may possess, or to prohibit a firm, all the partners of which are members of the institute and in practice, from being known by its firm name as Chartered Accountants.

24A. Penalty for using name of the Council, awarding degrees of chartered accountancy, etc.-(1) Save as otherwise provided in this Act, no person shall-

(i) use a name or the common seal which is identical with the name or the common seal of the institute or so nearly resembles it as to deceive or as is likely to deceive the public;

(ii) award any degree, diploma or certificate or bestow any, designation which indicates or purports to indicate the position or attainment of any qualification or competence similar to that of a member of the institute; or

(iii) seek to regulate in any manner whatsoever the profession of chartered accountants.

(2) any person contravening the provisions of sub-section (1) shall, without prejudice to any other proceedings which may be taken against him, be punishable with fine which may extend on first conviction to one thousand rupees, and on any, subsequent conviction with imprisonment which may extend to six months, or with fine which may, extend to five thousand rupees, or with both.

(3) Nothing contained in this sections hall apply to any University established by law or to anybody affiliated to the institute.

The 1st appellant is the Institute of Chartered Financial Analysts of India, while the other appellants 2 to 17 are its Members and also the Chartered Accountants. Mr. S. Ravi, the learned counsel appearing for the appellants, strenuously contended that the action of the 1st respondent is arbitrary and discriminatory, as, there is no nexus with the object to be achieved and that there is no rationale in the approach of the 1st respondent. He also contended that the impugned notification is violative of the fundamental right guaranteed under article 19(1)(g). On the other hand, Mr. K. Subrahmanya Reddy, the learned senior counsel, appearing for the respondents submitted that there is no arbitrariness in the issuance of the impugned notification, that there is a nexus for the object to be achieved, that the impugned notification is not irrational, and that the same is also not violative of article 19(1)(g), as the Chartered Accountants registered under the Act are not prevented from practising their profession, but the impugned notification is only in the nature of a regulation and not prohibition and as such, is not offensive of article 19(1)(g),

We shall now discuss some judicial precedents bearing on the adjudication of this case.

(i) It was held by a Division Bench of the Madras High Court in L.M. Sundaram v. Director of Legal Studies AIR 1981 Mad. 198 that article 19(6) acts as an exception to article 19(1)(g), that the Constitution itself provides that any law relating to the professional qualifications necessary for practising any profession or carrying on any occupation, trade or business will be valid and cannot be said to be in any way derogatory to the right of a citizen under article 19(1)(g) and that it is clear that the prescription made by the Bar Council of India in the rules framed by them regarding attendance in a regular course in a college or the prescription regarding a particular percentage of attendance at such lectures is law relating to the professional qualification necessary for practising the profession of an advocate and is, consequently, saved by article 19(6). It was further held that the Courts are not concerned with the wisdom of a particular body in laying down a particular prescription or standard, and Courts are only concerned with their competence to lay down such standards or make prescriptions and whether those prescriptions or standards affect the legal right of a citizen in any manner and that so long as the standards or prescriptions fall within the competence of the body, which the Parliament has chosen as the expert body to be entrusted with the right to lay down standards and make prescriptions, Courts are not concerned with the wisdom thereof, but are concerned only with their competency or constitutionality. It was also held that for the reasons already indicated, the rules of the Bar Council of India not only come within the competence of the Bar Council of India, but are also constitutional and they cannot be said to violate article 14 or article 19(1)(g).

(ii) A Division Bench of this High Court in Y G. Ramamurthy v. Chairman, Central Board of Excise and Customs 1984 Lab. IC 498 held that the right to practise as an Advocate is governed by the provisions of the statute, viz., the Advocates Act, 1961 and is not a fundamental right, and that it is a privilege conferred by the statute. It was also held that every person is not entitled to be admitted as an Advocate on the rolls of the Bar Council, that section 24 of the Advocates Act lays down the qualifications for enrolment as an advocate on a State Roll and that, therefore, the right to practise as an advocate is not an absolute right.

(iii) In Taracharan Mukherjee v. B. C. Das Gupta AIR 1954 Cal. 138 it was held that under article 19(1)(g), a citizen has been granted the right to practise any profession or to carry on any occupation, but this is not an absolute right and that under sub-article (6) of that article, the State is empowered to make any law imposing, in the interests of the general public, reasonable restriction on the exercise of a right and is not prevented from making any law relating to the professional or technical qualifications necessary for practising any profession or carrying on any occupation, trade or business. It was also held that the Government can prescribe the qualifications necessary for running a physical therapy establishment or working therein, that the physical therapeutics is a branch of medical science, that to practise it requires specialised knowledge, technical training and proper equipment, that the State cannot allow unqualified or inexperienced men to play with the life and limbs of other citizens in the same way as it must discourage quacks from practising medicine or unqualified men from practising as lawyers.

(iv) In H.A.K. Rao v. C.A. Institute AIR 1967 SC 1257 a 5-Judge Bench of the Supreme Court held that the notification issued by the President of the Institute of Chartered Accountants of India in exercise of powers conferred by clause (ii) of Part II of the Second Schedule, declaring the issuing of manifestoes or circulars, canvassing votes by visiting places of business or residences of the voters or in any other manner and organising parties to entertain voters as misconduct, was completely valid. It was further held that the Institute is a statutory body having perpetual succession and a common seal, that it is governed by the Act and the Chartered Accountants Regulations, 1949, that the Central Council of the Institute shall be composed of not more than 24 members elected by the members of the Institute from among the fellows thereof and 6 persons nominated by the Central Government, that there are Regional Councils which function in their respective regions subject to the control, supervision and direction of the Central Council or any of its committees, that the Elections to the Councils are held once in three years, that, therefore, the Act, through its provisions, regulates the profession of chartered accountants, that it establishes an Institute of Chartered Accountants and provides for the constitution of a Council for carrying out the objects of the Act, that the Central Council, inter alia, has the power to admit the members to the Institute, to take disciplinary action, and to regulate and maintain the status and standard of the professional qualifications of the members of the Institute, that the profession of Chartered Accountant is a respectable one and the duties of Chartered Accountants are onerous and responsible, that they are all educated and qualified men and on their efficiency and integrity depends the stability of many of the institutions in the country, that it cannot, therefore, be gainsaid that the candidates seeking to become members of the said Council, which regulates the conduct of Chartered Accountants, shall necessarily be persons of high integrity and above criticism. It was also held that the Regulations enumerated different heads for disciplinary action in connection with the conduct of an election, but they did not, either expressly or by necessary implication, prohibit the Council from adding additional heads of disciplinary action, that while the Regulations provide for disciplinary action for undue influence and for canvassing for votes, etc., within a distance of 200 meters from a polling booth, the notification placed other acts and omissions under different heads of misconduct, and that there is no inherent conflict between undue influence and canvassing of votes by visiting the places of business or the residence of the voters. It was further held that the rights of the Chartered Accountants are defined by the statutes. It was also held that the notification was issued in the best interests of the purity of the elections and ultimately in the interests of the profession itself and was upheld as being not inconsistent with either the Provisions of the Act or the Regulations made thereunder. It was further held that the notification does not and indeed cannot amend the definition of ''undue influence'', that the said Act, though it does not amount to an undue influence, is constituted of a different head of professional misconduct, which the Council is authorised to do under clause (it) of Part 11 of Second Schedule to the Act and that from this perspective no conflict between the two arises.

(v) Similar question arose in Haniraj L. Chulani v. Bar Council of Maharashtra & Goa H 1996 (4) SC 162 in which an active medical practitioner with LL.B. degree was refused enrolment as an advocate on the question whether there was justification for the State Bar Council for refusing enrolment of the said doctor as an advocate under the provisions of the Advocates Act. As lie did not want to give-up the medical practice, but wants to simultaneously practise in ) any the Supreme Court after referring to the provisions contained in sections 24(1)(e), 28(2)(a) and 49 of the Advocates Act read with rules 2, 9 and 47 of Bar Council of India Rules and also on the touchstone of articles 14, 19(1)(g), 19(6) and 21 of the Constitution, held that even though a person with LL.B. degree is normally entitled for enrolment as an advocate; but, if he cannot practise the profession on account of being busy with other avocation, the Bar Council is entitled to refuse the enrolment.

The above stated legal principles and particular in the case of Haniraj L. Chidani (supra) are clearly applicable to the instant case. In the instant case too, what is sought to be prevented is membership of a Chartered Accountant, who is governed by the Chartered Accountants Act, from being a member of the 1st appellant-institution and should a Chartered Accountant not like this imposition, he may be free to resign from being a Chartered Accountant and then can be free to choose to be a member of any other institution including that of the 1st respondent. But, so long as lie continues to be the Chartered Accountant under the Act, his degree and practice can be regulated only under the provisions of the said Act. The authorities under the Act also found that the degree of C.F.A. affixed is causing confusion and gullible public may be misguided and in order to steer. clear of such confusion and in larger public interest, the authorities thought that the Chartered Accountants registered under the Act and by the Council of the Institute of Chartered Accountants of India should not acquire the C.F.A. and if already acquired, shed the said membership. Having regard to the reasons stated in the impugned notification as also the reasoning given by the learned Single Judge, it cannot be said that there is no nexus for the object to be achieved and that the impugned notification is irrational. Fundamental right to practise a profession guaranteed under article 19(1)(g) can always be hedged with restrictions; but the said restrictions should be reasonable restrictions in the instant case, having regard to the facts and circumstances discussed and legal principles applied, it cannot be said that the restrictions imposed are unreasonable so as to negate the fundamental rights of the Chartered Accountants to practise their profession.

In the circumstances, we do not find any merits in this writ appeal and the same is, accordingly, dismissed. No costs.