ICAI Need To Create Framework For Proper Disclosure Of Criminal Antecedents By CA Aspirants: Delhi High Court

The Delhi High Court has observed that there is a clear need for the Institute of Chartered Accountants of India to create a framework wherein there is proper disclosure by candidates who apply to become Chartered Accountants, at the inception itself.

Justice Pratibha M Singh said that there is also a need for a continuing disclosure, may be on an annual basis for members to inform the ICAI if there are any criminal cases or conviction against them, so that the ICAI is not kept in the dark.

"The power, discretion and duty of ensuring the purity of the Register of Members is upon the ICAI. Thus, in the case of convictions, the factum of the said conviction and the offences qua which the applicant was convicted ought to be disclosed," the Court said.

It added:

"In the case of an FIR or a Criminal Complaint having been filed, there ought to be an obligation upon the applicant to keep the ICAI informed and updated, as to the progress in the said Complaint/Case. ICAI shall accordingly frame a policy and a mechanism, if not already in existence, for disclosure by members both at the inception as also on a periodic basis thereafter, of any criminal cases or convictions so that the spirit and intent of the statute is given effect to and the ICAI is not in the dark about the same until it is notified by some information or complaint."

The Court was dealing with a plea filed by a qualified Chartered Accountant enrolled with the Institute of Chartered Accountants of India since 25th January 2008.

The ICAI had issued a notice dated 25th June 2018, to show cause as to why action under sec. 8 of the Chartered Accountants Act, 1949 should not be taken against the Petitioner in view of his conviction by the Delhi High Court under sec. 354 and 506-II of the IPC. The petitioner was again sent notice to appear for hearing on 14th September 2020.

The plea therefore sought quashing of the notice of hearing dated 14th September 2020, served upon the petitioner by the ICAI, and the entire proceedings under sec. 8(v) read with sec. 20(1)(d) of the Act initiated against him.

The Court analyzed the legislative scheme of the Chartered Accountants Act, 1949, Disqualification of Chartered Accountants and the Applicability of the provisions to the facts of the case.

The Court interpreted the CA Act and said that there are three types of disabilities provided therein; Conviction for an offence involving 'moral turpitude', Conviction for an offence committed in professional capacity which is not technical in nature and Person held guilty of 'professional' or 'other misconduct' post an inquiry by the Disciplinary Committee, as per sec. 21 of the Act.

Furthermore, the Court analyzed the following from the legislative scheme:

- There are, broadly, two categories of misconduct contemplated under the Act – 'professional misconduct' and 'other misconduct'. These two types of misconduct are covered under Section 8 (vi) read with Section 22 and the Schedules to the Act.

- However, a conviction for an offence involving 'moral turpitude' punishable with imprisonment- is a third and higher class of offence under Section 8(v) of the Act and is stipulated as a separate class of disabilities which bars a person's name from being entered or borne in/continued in the register of the ICAI. This is a graver offence, in terms of the scheme of the Act, juxtaposed to what is contemplated under the third part of the Second Schedule or the fourth part of the First Schedule to the Act.

- In the case of an offence involving 'moral turpitude', for which no pardon has been granted, by a strict interpretation of the Act, the matter need not even be referred to the Board of Discipline or to the Disciplinary Committee for an inquiry. In such cases dealing with conviction for offences involving moral turpitude' covered under Section 8(v) the same would straight away fall within the jurisdiction of the ICAI Council, and even an inquiry, as contemplated in Section 21, would not be strictly required. The ICAI Council, may however, for the purposes of complying with the Principles of Natural Justice, and for the purposes of fairness, still decide to provide a hearing to the person concerned.

- A reading of Sections 20, 21 & 22 would show that the discretion vested in the Council and the Director (Discipline) are vast. Inquiry can be conducted in respect of professional or other misconduct as also under any other circumstances.

- In the case of offences under Section 8(vi) read with Section 22 and the Schedules, the ICAI is the final authority empowered to accept the recommendation of the Board of Discipline, in the case of misconduct specified in the First Schedule, and of the Disciplinary Committee in cases of misconduct specified in the Second Schedule, or a combination of both the Schedules.

- It is further clear that if a person has been convicted for an offence involving 'moral turpitude', such a person's name cannot be entered into the register or cannot continue in the register, and has to be removed from the register, unless a pardon in respect thereof is granted.

- Although, from a bare reading of sub-section 8(v), it may appear that the Central Government would have the power to remove the disability even in offences involving 'moral turpitude', in the opinion of this Court, in case of an offence or a conviction involving 'moral turpitude', such power being vested with the Central Government would be contrary to the spirit of the statute as also contrary to the settled judicial precedents, to the effect that `moral turpitude' would be a complete disqualification.

- The use of the expression "entered in" contained in Section 8, also shows that offences committed prior to the person qualifying as a CA are also within the purview of the disabilities mentioned under Section 8 of the Act. The only condition upon which a person convicted can be entered into or can continue on the register of ICAI, would be if the person has been granted a pardon.

The Court observed that in cases where a person is convicted of an offence involving moral turpitude, the discretion of the employer is narrow. It also said that the employer may only examine the nature of the offence for which the person is convicted and the treatment to be accorded.

The Court also referred to various judgements dealing with the provisions for appointments or disqualifications for conviction of an offence relating to 'moral turpitude' in the context of Advocates, Police Forces, Director or Managing Director, Bank Listed employees etc. and observed thus:

"The conclusion on the basis of the above judgments would be that if a person is convicted of an offence involving moral turpitude, the discretion of the employer is narrow. The employer may only examine the nature of the offence for which the person is convicted and the treatment to be accorded."

Dealing with the facts of the case, the Court dealt with the question as to whether in the case of a conviction for an offence involving 'moral turpitude', should the said person be barred forever from practicing as Chartered Accountant?

The Court observed that there are certain professions and services which are considered to be those that require a very high standard of integrity, include that of Doctors, Lawyers and Chartered Accountants.

"A higher standard is also expected in case of appointments to public offices. Even in the case of Managing Directors or Directors in companies' similar disqualifications exist," the Court said.

It added:

"Accordingly, under such circumstances, the question as to whether the Petitioner can be held to be suffering from the disability under Section 8(v). The answer is a clear yes, although the consequences of the same could be far reaching, not only on the Petitioner but also his family."

The Court therefore said that in the case of offences involving 'moral turpitude' under sec. 8(v) of the Act and persons who may have been convicted of such offences and sentenced for imprisonment, the disability would be squarely attracted.

However, the Court the Court added that there is a clear need to modify the Manual for members and for the ICAI to bring in a framework which includes disclosure requirements for every candidate who seeks to become a Chartered Accountant, right at the inception itself.

"There should also be a requirement of disclosure on a periodic basis, annually for members to inform the ICAI if there are any criminal cases/conviction etc., against them," the Court said.

It added:

"Thus, in the case of convictions, the factum of the said conviction and the offences qua which the applicant was convicted ought to be disclosed, and in the case of an FIR or a Criminal Complaint having been filed, there ought to be an obligation upon the applicant to keep the ICAI informed and updated, at least on an annual basis, as to the progress in the said Complaint/Case."

On the facts of the case, the Court held that ICAI shall award reasonable time for the Petitioner to file a fresh reply to the impugned notices, and for him to be heard by the ICAI in accordance with the principles of natural justice.

Title: MOHIT BANSAL v. INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA & ANR.

Citation: 2022 LiveLaw (Del) 34

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