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Judgment
This Writ Petition was filed by the founder and Managing Partner of M/s Varadachary and Co., a partnership firm of Chartered Accountants seeking a direction to the 1st respondent i.e., Institute of Chartered Accountants of India, to take appropriate action against the R2 to R6 who are formerly the members of the partnership firm for professional misconduct u/s 21 and 22 of the Chartered Accountants Act. 1949 (hereinafter referred as ''the Act'') by contending that he filed a complaint before the 1st respondent to that effect on 1-7-1996.
The undisputed facts of this case are that this Chartered Accountants company was initially started as a proprietary concern by the petitioner herein in 1974 and subsequently the same constituted as a partnership firm on 1-7-1997. The R2 to R5 and some others including the son of the petitioner were admitted as members of the partnership firm from time to time and as on today there are altogether seven partners in the above firm and the same is a partnership at will.
For the purpose of this writ petition it is suffice to state that some disputes seemed to have arisen between the partners which culminated in sending a letter by R2 to R4 in the month of April, 1998 seeking amicable settlement of the disputes. When there was no response from petitioner''s group, R2 got a legal notice issued on 4-7-1995 to the effect that the firm / M/s Varadachary & Co., Chartered Accountants Hyderabad stands dissolve with effect from 10:00 am on 5-7-1995. Subsequently, some mediation seemed to have taken place at the instance of one Mr. N. Nageswara Rao, who is a well-wisher of all the partners of the firm, and a reconciliation meeting look place on 15-7-1999. The parties seemed to have entered into a memorandum of understanding (herein after referred as ''the understanding'') according to the R2 to R5. These respondents seemed to have drafted the minutes of the meeting and sent the same to the petitioner along with Annexures to be signed by him and the partners who intend to slay along with him. As per the understanding R2 to R5 agreed to retire from the firm from 1-10-1996 subject to the terms and conditions mentioned in the understanding. In this writ petition we are concerned with Clauses 12, 13 and 14. Under Clause-12 of the Understanding the Cliental of the firm are free to choose their auditors from within the two groups i.e., (1) R2 to R5 who has given their willingness to retire from the firm, (2) the petitioner and two others who intend to continue the firm, and the petitioner on his behalf and on behalf of the other two partners shall issue no objection letters or letters not seeking re-appointment if any of the clients opt to engage R2 to R5. Under Clause-13 on behalf of M/s Varadachary and Co., the petitioner has to give a letter not seeking re-appointment from the companies named in the annexure-1. Under Clause-14, for the financial year 1995-96 or for any earlier years if any of the companies agrees to engage the services of the R2 to R5, the audit shall be transferred to them and it shall be continued under the name of the M/s. Varadachary & Co., to avoid problems that are likely to arise under Companies Act regarding appointment of auditor in the middle of the year and on behalf of the firm the petitioner has to give the requisite letters. They prepared letters to be signed by the petitioner in the form of annexures and sent the same to the petitioner for signatures.
Now, it came to light that the petitioner refused to sign either the ''the understanding'' in acceptance of the terms and conditions mentioned therein or the annexures. In those circumstances R2 to R5 seemed to have given a paper publication confirming the dissolution of the firm with effect from 10:00 am on 5-7-1996 which was published in the newspapers on 21-7-1996, In the said paper notification it was made clear ''The said firm since dissolved should not carry on normal business except for the limited purpose of settlement of Accounts".
At this stage the petitioner approached this Court by filing the present writ petition contending that a complaint u/s 21 of the Act was sent under Certificate of posting on 1-7-1996 to the 1st respondent bringing to its notice the commissions and omissions committed by the R2 to R5 which can be described as professional mis-conduct as specified in 1st Schedule u/s 22 of ''the Act''.
From the arguments advanced at the bar the contention of the petitioner is that R2 to R5 formed another partnership firm of Chartered Accountants under the name and style ''CKS Associates'' which is shown as 6th respondents and the acts committed by them fall under Item-6 and 12 of the 1st Schedule which are extracted hereunder :
"A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he......
xxxxxxxxxxxxxxxx (6) solicits clients or professional work either directly or indirectly by circular, advertisement, personal communication or interview or by any other means ;
xxxxxxxxxxxxxxx 12. Accepts a position as auditor previously held by some other Chartered Accountant or a restricted state auditor in such conditions as to constitute undercutting;"
Heard the Counsel for the petitioner at length, in the normal course the writ petition would have been disposed of by giving a direction to the 1st respondent to conduct enquiry and dispose of the application within a specified time after following the procedure prescribed u/s 21 of the Act. But, the Counsel insisted for interim directions :
to prevent the R2 to R5 from functioning as professional Chartered Accountants vide, WPMP No.1 7738/96.
to direct the R2 to R6 not to interfere with the functioning of the petitioner''s firm, ignoring the legal notice issued by the 2nd respondent dated 4-7-1996.
Hence, I proposed to dispose of the writ petition on merits. With regard to the formation of 6th respondent firm, except stating that such a firm was floated by the R2 to R5, the petitioner did not place any documentary evidence to show that such a partnership firm was formed by the R2 to R5 during the subsistence of the partnership firm or after dissolution of the M/s Varadachary & Co., The petitioner also failed to place any material to prove that R2 to R5 tried to solicit the work in the name of 6th respondent company either before or after the dissolution of the firm. Hence, it is highly difficult to believe the version of the petitioner that the 6th respondent company was floated by the R2 to R5.
Secondly, M/s Varadachary & Co., being a partnership firm at will can be dissolved at the instance of any of the partners. In this case, the R2 got a legal notice sent to the petitioner on 4-7-1996. When he did not respond to the efforts made by R2 to R5 to settle the disputes amicably, stating that the partnership is dissolved with effect from 10:00 am on 5-7-1996. At that stage, it seemed some mediation talks have taken place and the parties arrived at some understanding which were reduced to writing by R2 to R5 and sent the same to the petitioner for his signatures along with the letters to be executed by the petitioner to give effect to Clause-12, 13 and 14 of ''the Understanding''. When he refused to sign them the R2 got a paper notification issued on 21-7-1996 to the effect that the firm was dissolved with effect from 10:00 AM and on 5-7-1996. From this it is evident that the firm M/s Varadachari & Co., is dissolved with effect from 10:00 am of 5-7-1996 and the parties are at liberty to act in a manner beneficial to them in carrying on their profession. Accordingly, even if the R2 to R5 floated this company after dissolution of the firm, the same cannot be termed as professional misconduct, more so when they have not solicited the work as contemplated under Clause-6 of Schedule-I or accepted the position of an auditor to a client previously held by some other Chartered Accountant. But, the Counsel for the petitioner strenuously contended that the action of R2 to R5 falls under professional misconduct by placing reliance on annexure-I ''the Understanding'' which is to the following effect :
"Corporate Clients of M/s Varadachary & Co., Chartered Accountants, in respect of whom Sri M.S. Varadachary is required to give a letter not seeking re-appointment as Auditors as per Clause 13 of the Memorandum of ''the Undertaking'' entered into on July 15,1998."
Admittedly, this annexure was sent along with ''the Undertaking'' to be signed by the petitioner and other two partners intended to remain with him to give effect io Clause-13 of the Undertaking''arrived at, according to the respondents, to be communicated to the clients specified therein after giving effect to ''the Undertaking''.
Firstly, the Annexure-I cannot be read in isolation, it has to be read along with ''the Undertaking'' arrived at between the parties according to the respondents. If the petitioner disputes the terms and conditions of the Undertaking'', it is always open to him not to sign ''the Undertaking'' as well as the annexure therein. Further, M/s Varadachary & Co., being a partnership firm at will, the petitioner cannot claim that he can retain the entire cliental for himself to the exclusion of other partners as the clientele belongs to the entire partnership firm. They will be at liberty to engage their own auditors and the petitioner cannot compel them to continue with him. If a client wants to change his auditor, what ever may be the reasons, the previous auditor engaged by the client cannot refuse to give consent. If he refuses to give consent to the client to engage another auditor it amounts to professional misconduct. Further, from this annexure it cannot be said that the respondents are trying to solicit the work from the clientele mentioned therein. What all this annexure says that M/s Varadachary & Co., can not seek re-appointment as Auditors from the clientele mentioned therein.
Viewed from any angle, I am unable to accept the contention of the petition that R2 to R5 indulged in any professional misconduct as contended by the petitioner. When once the partnership is dissolved, all the partners are expected to settle the matters amicably to the satisfaction of all. From the conduct of the petitioner it is seen that he is not prepared for an amicable settlement. Though he happened to be the founder of the company the same was converted as a partnership company way back in 1977 and he cannot claim that all the clientele engaged the company as their auditors only because of his efforts and the other partners are claiming a share in the earnings of the company. If there is no agreement between the partners with regard to the sharing of its assets and liabilities, in this case the clientele also the parties can approach the Civil Court for adjudication of their dispute, but, this Court cannot adjudicate the dispute in exercise of its supervisory jurisdiction under Article 226 of the Constitution of India, as it is purely a civil dispute between two groups of private individuals.
If the petitioner still feels that any of the acts of the R2 to R5 can be termed as professional misconduct, it is always open to him to approach the 1st respondent for taking action against them in accordance with law for the alleged professional misconduct. If any such complaint is filed, the 1st respondent may dispose of the same without being influenced by any of the observations made in this order.
With the above observations the writ petition is dismissed.