The Council of the Institute of Chartered Accountants of India, New Delhi vs Mani S. Abraham

Pasayat, C.J.—This is a reference u/s 21 of the Chartered Accountants Act, 1949 (in short the Act). Brief facts necessary for disposal of the same are as follows : Alleging misconduct on the part of M/s Mani Abraham & Associates (hereinafter referred to as the "Auditors") a complaint was made by the State Bank of Travancore (hereinafter referred to as the complainant), before the council of the Institute of Chartered Accountants of India, in short the Institute. Allegation was that there was disclosure of information acquired in the course of professional engagement, without consent of the complainant to third parties. In response to Institute''s query, auditors replied that M. Section Abraham (hereinafter referred to as ''respondent'') was answerable. This according to the complainant was misconduct in terms of Clause (1) of Part I of the Second Schedule to the Act. It was alleged that the auditors were appointed as statutory branch auditors of the Thiruvalla Branch of State Bank of Travancore for the years ending on 31-12-1985, and 31-12-1986. During the course of audit, the respondent had access to certain documents. Communications were made to several persons including the Prime Minister of India, Minister for Finance and Banking and Governor of Reserve Bank of India, Bombay about some alleged irregularities committed by the complainant during course of banking transactions. Basis of the complaint before the Prime Minister, Finance Minister and the Governor of Reserve Bank of India was the information which came to be known to the respondent during the course of audit. The Disciplinary Committee of the Institute examined the matter and reported that the respondent had contravened Clause(1) of Part I of the Second Schedule of the Act, and therefore was guilty of professional misconduct under Clause (1) of Part I of Second Schedule read with Section 21 and 22 of the Act. The report of the Disciplinary Committee was placed before the Council of the Institute which concurred with the findings. At the same time, however, it was found that the respondent was in a disturbed state of mind and no mala fides were involved. In other words it concluded that no mens rea was involved. The council recommended to this Court to initiate proceedings against the respondent, but in the peculiar circumstances of the case to file the proceeding.

Learned counsel appearing for the Institute submitted that after having come to a finding about professional misconduct, the course to be adopted is left to the discretion of the Court.

Learned counsel appearing for the respondent submitted that in view of the factual conclusions arrived at by the Disciplinary Committee as well as the Council, this is a fit case where no further action should be taken against the respondent. It is submitted that due to disturbed state of mind, hardly any professional work is being done by him, and even a stigma of reprimand would be harsh.

Chapter V of the Act deals with "misconduct". Section 21 deals with procedure in inquiries relating to misconduct of members of Institute. Section 21 of the Act, so far as relevant reads as follows :

"21. Procedure in inquiries relating to misconduct of members of Institute :--

xx xx xx xx xx xx (4) Where the finding is that a member of the Institute has been guilty of a professional misconduct specified in the First Schedule, the Council shall afford to the member an opportunity of being heard before orders are passed against him on the case, and may thereafter make any of the following orders, namely :--

(a) reprimand the member ;

(b) remove the name of the member from the Register for such period, not exceeding five years, as the Council thinks fit :

Provided that where it appears to the Council that the case is one in which the name of the member ought to be removed from the Register for a period exceeding five years or permanently, it shall not make any order referred to in Clause (a) or Clause (b), but shall forward the case to the High Court with its recommendation thereon.

(5) Where the misconduct in respect of which the Council has found any member of the Institute guilty is misconduct other than any such misconduct as is referred to in Sub-section (4), it shall forward the case to the High Court with its recommendations thereon."

We are concerned with Sub-section (4) and (5). This appears to be a case which is covered by Sub-section (5), as the Council has found the respondent to be guilty of misconduct of a category other than those referred to in Sub-section (4). On reference the High Court has power under Sub-section (6) to pass any of the following orders :

"(a) direct that the proceeding be filled, or dismiss the complaint, as the case may be :

(b) reprimand the member :

(c) remove him from membership of the Institute either permanently or for such period as the High Court thinks fit ;

(d) refer the case to the Council for further inquiry and report."

"Professional misconduct" has been defined in Section 22 of the Act. Intendment and object of the Act is to maintain standard of the profession at a high level, and consequentially a code of conduct has been prescribed. Misconduct implies failure to act honestly and reasonably either according to the ordinary and natural standard, or, according to the standard of a particular profession. Chartered Accountants'' profession occupies a place of pride amongst various professions of the world. That makes observance of professional duties and propriety more imperative. When conduct of a member of the profession is contrary to honesty, or opposed to good morals, or is unethical. It is misconduct warranting consequences indicated in the Statute. An auditor holds a position of trust. That is why disclosure of information has been made a ground for imputing misconduct. By betrayal of the trust, the conduct becomes one which is unbecoming of the professional. Sections 126 and 129 of the Indian Evidence Act, 1872 (in short the Evidence Act) throws beacon light on the importance of professional communications. As observed in Mc. Kelvery''s Evidence (page 236), at common law, in very early times, a privilege was recognised as to matter between an attorney and his client, and this privilege has continued in the strictest form to the present day. The privileges mentioned in Section 126 and 129 are designed to secure the clients'' confidence in the secrecy of his communication. Any breach of the confidence is a stigma not only on the Individual concerned, but also is likely to have effect on credibility of the profession as a whole. That is why the anxiety of the legislature to punish the erring individual. It is to be noted that by breach of trust by a person entrusted with property or dominion over it, action under criminal law can be taken. When considered in that background, disclosure of information which would not have otherwise come within his knowledge, but for his professional appointment, without consent of his chief is an act of grave professional misconduct. As ob served by the Apex Court in the context of professional misconduct of an Advocate, that an act which is done otherwise than with utmost good faith is unprofessional. (See Pandurang Dattatraya Khandekar v. The Bar Council of Maharashtra, Bombay AIR 1984 SC 110. (Para.6)

The test of what constitutes "grossly improper conduct in the discharge of professional duties" has been laid down in many cases. In the case of in re A Solicitor Ex parte the Law Society (1912) 1 KB 302, Darling, J. adopted the definition of "infamous conduct in a professional respect", on the part of a medical man in Allinson v. General Council of Medical Education & Registration (1894)1 QB 750, applied to professional misconduct on the part of Solicitor, and observed ;

"If it is shown that a medical man, in the pursuit of his profession, has done some thing with regard to it which would be reasonably regarded as disgraceful or dishonourable by his professional brethren of good repute and competency, then it is open to the General Medical Council to say that he has been guilty of "infamous conduct in a professional respect".

The Privy Council approved of the definition in AIR 1936 224 (Privy Council) and this Court in the matter of P. An. Advocate In The Matter of P. An Advocate, has followed the same."

Normally in a case of this nature, where professional misconduct of the nature involved has been concluded, a reprimand would have been proper and appropriate. But in view of the fact that the whole episode took place nearly eight years back, and in view of the physical state of mind of the respondent and his present lack of professional work, we think it proper to file the proceedings, as recommended by the Council.

The reference is accordingly answered. Order accordingly.