S.A. Sundaram vs The President, Councile of The Institute of Chartered Accountants of India and Others

Mohan, J.—This writ petition is for a certiorarified mandamus to quash the communication dated June 29, 1982, addressed to the petitioner

by the Institute of Chartered Accountants of India which is as follows :

Your letter of June 24, 1982, addressed to the Assistant Secretary, madras has been forwarded to us for necessary action. The power of

registration of a firm name vests in the Council, under regln. 165 and such power implies the power to refuse to register a name not approved by it.

The Council has taken a decision that all firm names which have no relevance to the names of the partners should not be registered. We would,

therefore, advise you to suggest some other name in conformity with the proper name of the partners constituting the firm.

The further prayer is for a direction to the respondents to pass an order registering the firm name ""Ram and Ramesh"" as per the application of the

petitioner filed under regln. 165 of the Chartered Accountants Regulations.

The short facts leading to the writ petition are : The petitioner is a qualified chartered accountant. He holds a certificate of practice as such which

is as per the prescription contained in s. 6 of the Chartered Accountants Act, 1949 (hereinafter called ""the Act""). The Council of the Institute of

Chartered Accountants of India is incorporated under the Act, as per s. 9. The first respondent, the President, Council of the Institute of Chartered

Accountants of India, is the Chief Executive Authority of the Council. The petitioner proposed to form a partnership firm of chartered accountants

along with two other chartered accountants. On November 19, 1981, he approached the third respondent to register the firm as provided under

sub-reglns. (4) and (6) of regln. 165 of the Chartered Accountants Regulations, 1964. The proposed partners also held the certificate of practice.

They are M/s. C. Bhaskaran and H. Umar Faruk. The application for registration has to be processed through the third respondent. In the first

instance, the petitioner suggested the firm name as ""Ram and Co."" and requested for registration. The third respondent, by his letter dated

February 11, 1982, stated as follows :

Please refer to the particulars of your firm in your letter dated November 19, 1981. I am to invite your attention to sub-reglns. (4) and (6)(i) of

regln. 165 of the Chartered Accountants Regulations, 1964, and to say that you cannot practice under the firm name, M/s. Ram and Co., since

another firm under the same name is already registered with us. You are, therefore, requested to furnish afresh the particulars of your practice

under a changed name, in the enclosed Form No. 27 to enable us to take further action in the matter"".

Subsequently, the petitioner filed on February 6, 1982, another application proposing to register the name as ""Ram and Ramesh"", since the

petitioner was informed orally that the name suggested by him, namely, Ram and Co., had already been registered. On February 21, 1982, the

petitioner reminded the second respondent to register the firm under the Act. On March 1, 1982, he was visited with a reply that the firm name

Ram and Ramesh"" has no relevance to the name of any of the partners. The petitioner was asked to explain the spelling mistake with regard to his

name. As regards the spelling mistake, the petitioner replied that it was merely a typographical error and that his firm as ""Ram and Ramesh"" be

registered. There were three reminders. Finally, on April 19, 1982, the petitioner was served with an order which is as follows :

Kindly refer to your letter dated March 2, 1982, regarding the approval of your firm name, M/s. Ram and Ramesh.

In this connection, we have been informed by our Delhi office that you are not allowed to practise in the firm name, Ram and Ramesh, as there is

no relevance of ""Ramesh"" with the names of partners.

Under the circumstances, you are requested to suggest some other firm name in the enclosed From No. 27.

Immediately on receipt of this letter on April 22, 1982, the second respondent was requested by the petitioner to register the firm name as ""Ram

and Ramesh"". Inter alia, it was contended that nowhere in the Act, Regulations and statute it has been provided that the firm name should bear

relevance to the names of the partners. As the petitioner did not receive any reply, he sent a telegram on May 14, 1982, calling upon the first

respondent to reply to his letter dated April 22, 1982. On June 21, 1982, the third respondent replied as follows :

We invite your attention to our letter of even No. dated April 19, 1982, regarding the approval of your proposed firm name, M/s. Ram and

Ramesh. Shri Ashok Kumbhat, F.C.A. also contacted us to know what happened to the approval of your above firm name. We informed him that

the New Delhi office has rejected the firm name, since there was no relevance of the name ""Ramesh"" with the names of the partners.

You are requested to send a fresh Form No. 27 with some other suitable firm name in conformity with the names of the partners"".

On June 24, 1982, again a request was made calling upon the third respondent to register the firm name. On June 26, 1982, the third

respondents Nos. 1 and 2. Finally, on June 29, 1982, the petitioner was informed as under :

The power of registration of a firm name vests in the Council under regln. 165 and such power implies the power to refuse to register a name not

approved by it. The Council has taken a decision that all firm names which have no relevance to the names of the partners should not be registered.

We would, therefore, advise you to suggest some other name in conformity with the proper names of the partners constituting the firm.

On receipt of the reply, the petitioner issued a legal notice on August 4, 1982, questioning the correctness of the decision taken, by the Council.

The second respondent came forward with a different stand in that it was stated that the name ""Ram and Ramesh"" was likely to create confusion

and mislead the public, since there is already a firm of chartered accountants by the name ""Ram and Co."". It is, under these circumstances, the

present writ petition has come to be preferred.

The contentions of the petitioner, who appears as a party in person, are as follows. The rejection of the application of the petitioner under regln.

165 of the Chartered Accountants Regulations, 1964, is untenable. Nowhere in the Act or in the Regulations, is it said that the names of firms

should bear relevance to the names of partners. Even assuming there is such a restriction, it is violative of art. 19(1)(g) of the Constitution. The

respondents being a statutory body, their powers and rights are completely controlled by the provisions of the Act and the Regulations. The power

conferred with regard to registration is not an unfettered one. Even under the general law of partnership or under the Partnership Act or under the

Chartered Accountants Act or the Regulations, there is no such restriction that the firm name should have relevance to the names of the partners.

The last of the stand taken by the respondents, viz., that the use of the word ""Ram"" is likely to confuse, ignores the registration of several firms

having ""Ram"" in their names.

The learned counsel for the respondents submits that it is only because of the guidelines as evidenced by the minutes of the 68th meeting of the

general purpose committee of the Institute held on May 15, 1982, that the request of the petitioner has been turned down. This is fully authorised

under regln. 165. May attention is also drawn to s. 20 of the Companies Act, 1956, and the guidelines prescribed therein cls. (11), (13) and (17).

Under these circumstances, it is urged, there is nothing wrong in prescribing such a guideline. There is no question of violation of fundamental right,

since the petitioner is well allowed to practise in some other name.

In order to appreciated the rival contentions which are urged on behalf of the parties, it is necessary for me to provide the legal background. The

Chartered Accountants Act, 1949, is an Act to make provision for the regulation of the profession of chartered accountants. Section 6, which

relates to certificate of practice, states :

(1) No member of the Institute shall be entitled to practise whether in India or elsewhere unless he has obtained from the Council a certificate of

practice :

Provided that nothing contained in this sub-section shall apply to any person who, immediately before the commencement of this Act, has been in

practice as a registered accountant or a holder of a restricted certificate until one month has elapsed from the date of the first meeting of the

council.

(2) Every such member shall pay such annual fee for his certificate as may be prescribed, and such fee shall be payable on or before the 1st day of

April, in each year"".

Section 7 says that members of the Institute in practice may use the designation of chartered accountants. Section 9 is as follows :

Constitution of the Council of the Institute. - (1) There shall be a Council of the Institute for the management of the affairs of the Institute and for

discharging the functions assigned to it under this Act.

(2) The Council shall be composed of the following persons, namely :--

(a) not more than twenty-four persons elected by members of the Institute from amongst the follows of the Institute chosen in such manner and

from such regional, constitutions as may be specified in this behalf by the Central Government by notification in the Official Gazette : and

(b) Six persons nominated by the Central Government"".

The functions of the Council are set out in section 15 which are :

(1) The duty of carrying out the provisions of this Act shall be vested in the Council.

(2) In particular, and without prejudice to the generality of the foregoing power, the duties of the Council shall include -

(a) the examination of a candidate for enrollment and the prescribing of fees therefore :

(b) the regulation of the engagement and training of articled and audit clerks :

(c) the prescribing of qualifications for entry in the Register ;

(d) the recognition of foreign qualifications and training for purposes of enrollment;

(e) the granting or refusal of certificates of practice under this Act;

(f) the maintenance and publication of a register of persons qualified to practise as chartered accountants;

(g) the levy and collection of fees from members, examines and other persons ;

(h) the removal of names from the Register and the restoration to the Register of names which have been removal ;

(i) the regulation and maintenance of the status and standard of professional qualifications of members of this Institute;

(j) the carrying out, by financial assistance to persons other than members of the Council or in any other manner, of research in accountancy ;

(k) the maintenance of a library and publication of books and periodicals relating to accountancy ; and

(l) the exercise of disciplinary powers conferred by this Act"".

The power to make regulations is contained in ss. 30(1) and (2), and sub-s. (4) is relevant for our purpose.

Now, I go on to the Regulations, which are called ""The Chartered Accountants Regulations, 1964"". Regulation 165 deals with register of

offices and firms. That may be extracted in full, because very much turns upon the same.

Register of offices and firms. - (1) A Chartered Accountant in practice or a firm of such chartered accountants shall within three months of

the commencement of practice or the formation of the firm supply to the Council in the appropriate From particulars regarding his office or the firm,

as the case may be.

(2) The Council shall maintain a register of offices and firms and shall register therein the particulars referred to in sub- regulation(1).

(3) Every time there is a change in the particulars referred to in sub-regulation (1), the member of the firm, as the case may be, shall within sixty

days communicate it to the Council.

(4) The Council may, at its discretion, refuse to register a trade or a firm name if that name is already used by a chartered accountant in practice or

a firm of such chartered accountants and has been entered in the register of offices and firms.

(5) Whether the same trade or firm name has been registered in the past, in the register of offices and firms, in the case of two or more members of

firms, the Council may direct the member or the firm, as the case may be, other than one whose name was registered first in the register of offices

and firms, to alter the name in such manner as the Council may consider proper and inform the Council of such alteration within six months of the

issue of the direction.

(6) (i) No member shall practise under a trade or firm name which has been refused registration under sub-regulation(4).

(ii) No member shall practise under a trade or firm name in respect of which a direction has been issued under sub-regulation (5), after the expiry

of six months from the date of issue of the direction.

(7) Nothing contained in this Regulation shall apply to firms of chartered accountants in practice with identical names, if at least one of the partners

of the firm is common"".

By a reading of this, it is clear that nowhere the regulation requires that the names of the firm must have some relevance to the names of the

partners. Be that so. The Code of Conduct which is in furtherance of the First and Second Schedules to the Chartered Accountants Act of 1949

states as follows :

Clause 6(j) - Adopting descriptive trade names which have no relationship with the names of any person. Members should restrict the use of trade

firm names to proper names and not adopt any name which smack of publicity"".

In the purported exercise of this power, the following resolution came to be passed at the 68th meeting of the general purpose committee of

the Institute held on May 15, 1982 :

Item No. 5 : Consideration of the question of laying down guidelines regarding use of trade/firm names.

The Committee considered in detail the question of laying down guidelines to regulate the use of firm or trade names. Under the Code of Conduct,

the adoption of descriptive trade names which have no relationship with the name of the person was not permitted and members were enjoined to

restrict the use of trade or firm names to proper names and not adopt any name which might smack of publicity. The Committee noted that

amendments had already been suggested to sub- reglns. (4) and (7) of regln. 165 to vest authority in the Council to refuse registration of a trade or

firm name under circumstances specified in the draft amendment. Pending the introduction of changes in the regulation through these amendments, it

was decided that for approval of name under regln. 165, such name should be the name of the individual connected with the firm in the past or a

name acquired by payment of goodwill or otherwise. In all other cases, requests for allotment of trade or firm name should be refused"".

A reading of the above suggests that the name which is proposed to be registered should be the name of the individual or individuals carrying

on the profession in that name or of an individual connected with the firm in the past or a name acquired by payment of goodwill or otherwise. The

attack against this is that it is violative of the fundamental right guaranteed under art. 19(1)(g). That article reads as follows :

All citizens shall have the right - (g) to practise any profession, or to carry on any occupation, trade or business"".

It is true, that the article does not confer an absolute power since reasonable restrictions concerning this are found in clause (6). For may part I

am unable to bring it under clause (6) since the guidelines are not law and, secondly, they have no relationship with the professional or technical

qualifications necessary for practicing any profession or carrying on any trade or business. Deep rooted religious sentiments of our countrymen or

the political fancies in this country are too well known. Supposing a firm of chartered accountants devoutly wishes to name its firm as ""Lakshmi and

Co."" since she is the Goddess of wealth, as the Hindu mythology would have it, can the respondent say ""You have nothing to do with Lakshmi, All

the partners are males. They do not have even the name indirectly. Therefore, I would refuse to register"". Or again, having regard to the political

leanings, if one fond of the name of a political leader wants to name a firm of chartered accountants after the name of a leader of his choice, can the

respondents refuse on the ground that the name has no relevance to the names of the partners.

In my considered view, the answer to the above questions is ""no"". I have already set out the legal background. Not one of the provisions even

indirectly confers such a power on the respondents. Of course, I can understand, in order to maintain the purity or the nobility of the profession, if

undesirable names are avoided. But to say, as is purported to be said in the resolution dated May 15, 1982, that the name of the individual must be

borne on the name of the firm is something which I am totally unable to appreciate. It is no consolation to say that the petitioner could carry on the

profession in some other name. For aught one knows, he may have a fancy for a certain name- he may name after his father, mother, revered guru

or anyone whose name he considers carries an aura. It is not the function of the respondents to say ""Don''t choose that name"". Therefore, I

conclude that the refusal here is highly unreasonable and cannot bear a moment''s scrutiny.

Then again, the respondents have been taking prevaricating stands. Firstly, it was objected to when the petitioner wanted to register his name

as ""Ram and Co."", saying this is not conforming to the name of the partner and later on when he suggested ""Ram and Ramesh"", it was stated that

the word ""Ram"" is likely to confuse. This amounts to overlooking the fact that there were several other firms for which certificates of practice have

been issued even though they bear the same word ""Ram"". They are set out in para. 3 of the affidavit which is as follows :

Ram Associates

Ram and Co.

Ram and Durai

Ram and Kumar

Ram Raj and Co.

Ram and Narain

Ram and Raman

Ram and Sampath.

This again exhibits arbitrariness on the part of the respondents.

Lastly, it requires to be mentioned that the resolution providing the guideline came to be passed only on May 15, 1982. How then, even as

early as on April 19, 1982, was the following letter extracted ?

Kindly refer to your letter dated March 2, 1982, regarding the approval of your firm name M/s. Ram and Ramesh.

In this connection, we have been informed by our Delhi office that you are not allowed to practise in the firm name `Ram and Ramesh'' as there is

no relevance of ""Ramesh"" with the names of partners.

Under the circumstances, you are requested to suggest some other firm name in the enclosed Form No. 27.

It cannot be pretended for a moment that the Institute of Chartered Accountants had nothing to do since that letter says that they had been

informed by Delhi office. This only exhibits again how callous they were in dealing with this matter. Whatever it be, there has been a foreclosure of

mind long before the impugned guidelines came to be issued, is very evident from the letter extracted above.

Lastly, for the sake of completion, I may refer to s. 20 of the Companies Act. That section reads as follows :

Companies not to be registered with undesirable names - (1) No company shall be registered by a name which, in the opinion of the Central

Government, is undesirable.

(2) Without prejudice to the generality of the foregoing power, a name which is identical with, or too nearly resembles, the name by which a

company in existence has been previously registered, may be deemed to be undesirable by the Central Government within the meaning of sub-

section (1).

Of course, as I said, if the names are undesirable, that is entirely a different matter; or again, if it is likely to confuse, that also is ground on

which registration could be refused. But under no circumstances can it be said, as is contended on behalf of the respondents, that the name of the

firm must have relevance to the name of the partner. Even the guidelines, framed u/s 20 of the Companies Act, do not give room for such an

argument. Guidelines 11, 13 and 17 are as under 1

(11) If it is different from the name/names of the existing company/companies only to the extent of having the name of a place within brackets

before the word `limited''; for example, Indian Press (Delhi) Limited, should not be allowed in view of the existence of the company named Indian

Press Limited.

(13) If a name is identical with, or too nearly resembles, the name by which a company in existence has been previously registered. A few

illustrations of closely resembling names are given below for guidance. The names as proposed in column 1 should not (normally) be made

available in view of the companies in existence as shown in column 2. However, if a proposed company is to be under the same management or in

the same group and likes to have a closely resembling name to the existing companies under the same management or group with a view to have

advantage of the goodwill attached to the management or group name, such a name may be allowed.

Even in the case of unregistered companies or firms which have built up a reputation over a considerable period,. the principle (that if a name is

identical with or too closely resemble the name by which a company has been previously registered and is in existence, is should not be allowed)

should be observed as far as practicable. In view of the difficulty in checking up whether a proposed name is identical with or too nearly resembles

the name of an unregistered company or a firm of repute, it should at least be ensured that a proposed name is not allowed if it is identical with or

too nearly resembles the name of a firm within the knowledge of the Registrar. The cases of foreign companies of repute should also be similarly

treated even if there are no branches of such companies in India.

(17) If it includes a proper name which is not a name or surname of a director, such name should not be allowed except for valid reasons. For

example, for sentimental reasons, sometimes the names of relatives such as wife, son and daughter of the director may have to be allowed,

provided one other word suggested makes the name quite distinguishable.

The last of the guidelines, namely, guideline No. 17, extracted above is reasonable, while the guideline that is sought to be enforced against the

petitioner does not give room even for such a sentimental reason as stated in guideline No. 17 framed under s. 20, clause (2). For all these

reasons, I have not the slightest hesitation in allowing the writ petition which is accordingly allowed. The petitioner will be entitled to his costs in

view of the callous manner in which his right has been dealt with by the respondents. The costs of the petitioner is fixed at Rs. 500.