'ICAI Should Give Reasons For Its Decisions' : Supreme Court Sets Aside Recommendation To De-Register CA

Setting aside a recommendation made by the Council for Institute of Chartered Accountants of India to de-register a Chartered Account, the Supreme Court observed that the powers of the Council are quasi judicial in nature.

The court said that every judicial/quasi-­judicial order must be supported by reasons to be recorded in writing. 

"An unreasoned decision may be just, but it may not appear to be so to the person affected. A reasoned decision, on the other hand, will have the appearance of fairness and justice.", the bench of Justices S. Abdul Nazeer and Krishna Murari observed while holding that the Council should have given its own findings in the matter since he observations of the Disciplinary Committee cannot be treated as findings.

The court was considering an appeal against an Allahabad High Court order which had confirmed the reference made by Council for Institute of Chartered Accountants of India for removal of the name of a Chartered Accountant from the register of the membership for two years. The allegation against the said CA was that he had interpolated assessees' copies of challans to show higher figures and claimed the higher amount from them. The Council had referred the case to the Disciplinary Committee which reported that he was guilty of other misconduct under Section 22 read with Section 21 of the Chartered Accountants Act, 1949. Following this report, the Council made the above recommendation to the High Court. The High Court, on consideration of the reference, confirmed the Resolution of the Council.

In appeal, the court held that the Council was required to independently consider the explanation submitted by the member and the evidence adduced in the inquiry before the Disciplinary Committee. The conclusions of the Disciplinary Committee are tentative and the same are not recorded as findings, the court said. The bench, further observed:

21. Needless to say that, the power exercised by the Council under Section 21 is quasi ­judicial in nature. Perusal of the recommendations of the Council shows that it did not discuss the report of the Disciplinary Committee, the written statement and the oral submissions of the appellant while coming to the conclusion that he is guilty of misconduct. However, the concluding portion of the recommendations of the Council made an incorrect statement that the Council had considered all the materials on record and the written and oral submissions of the appellant. The observations of the Disciplinary Committee cannot by any stretch of imagination be treated as findings. At best, they may be termed as the material which falls within the domain of consideration by the Council. The Council has failed to give its own independent findings. The recommendations made by the Council are not supported by independent reasons. The recommendations, in our opinion, have been made mechanically by the Council.

In this context, the court further observed:

22. Recording of reasons is a principle of natural justice and every judicial/quasi­ judicial order must be supported by reasons to be recorded in writing. It ensures transparency and fairness in the decision­-making process. The person who is adversely affected wants to know as to why his submissions have not been accepted. Giving of reasons ensures that a hearing is not rendered as a meaningless charade. Unless an adjudicatory body is required to give reasons and make findings of fact indicating the evidence upon which it relied, there is no way of knowing whether the concerned body genuinely applied itself to and evaluated the arguments and the evidence advanced at the hearing. Giving reasons is all the more necessary because it gives satisfaction to the party against whom a decision is taken. It is a well­ known principle that justice should not only be done but should also be seen to be done. An unreasoned decision may be just, but it may not appear to be so to the person affected. A reasoned decision, on the other hand, will have the appearance of fairness and justice.

Since in this case the recommendation/order of the Council did not contain reasons for the conclusion, the court set it aside and remitted the matter back to it for fresh consideration.

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