Kerala HC Says BCI Can Conduct A Full Fledged Inquiry On Affairs Of Advocates Welfare Fund Trust Committee With Respect to Pilferage of Rs.7 Crores [Read Judgment]

The Kerala HC on Tuesday declared that the BCI is empowered to make an enquiry into the entire affairs of the KERALA ADVOCATES WELFARE FUND TRUSTEE COMMITTEE with respect to the pilferage of Rs.7 Crores between 2007-2015.

"If a member of the (State) Bar Council or members of the Trustee Committee, who are members of the Bar Council, have committed any irregularity, misappropriation and misconduct, it would be only just and proper that, the enquiry is conducted by the Bar Council of India, which is an independent body, which alone would be in a position to conduct impartial enquiry against the members of the Council", said the Division Bench.

"It is also to bear in mind that the amount from the Welfare Fund is a solace to the Advocates and their family in the 'Hey day' in life and it shall be released as and when applied for it by the beneficiary. Therefore, if any fraudulent acts like the one at hand is permitted, it will cause fetter to the rights of the advocates", observed the Court, "hoping that a full-fledged enquiry would be made" by the BCI.

On 3rd of October, 2018 in the felicitation function of the Chief Justice of India, which was organised by the Supreme Court Bar Association (S.C.B.A.), the Attorney General for India Mr. K.K. Venugopal in his address to the audience raised the question of misappropriation of about Rs. 7 crores by the Trustees of Bar Council of Kerala. "The matter has drawn the attention of the highest Judiciary of the nation and also of the Sr. Advocates practicing in the Supreme Court. The issue was raised by not an ordinary man, but by the Hon'ble Attorney General for India who hails from the State of Kerala itself. Therefore with great pains, he made this issue public, knowing it full well that the Chairman and other Office-bearers of the Council, the Hon'ble Chief Justice of India and other Hon'ble Judges of Supreme Court were present in that function. The Council cannot overlook the seriousness of the issue and since it is the Lawyers' money, it cannot close its eyes only because of the fact that the local police is in the hands and gloves of some of the culprits who are close to the powerful people of the State of Kerala", explains the BCI in its October 6, 2018 resolution to constitute a 4-men committee, comprising of retired High Court judges, to enquire into the state of affairs.

The challenge to this action of the BCI was rejected by the Single Judge of the High Court, which was appealed against before the Chief Justice-led bench.

Observations of the Court

On a reading of section 7(1)(d) of the Advocates Act, 1961, it is clear that Bar Council of India is conferred with a duty to safeguard the rights, privileges and interests of the Advocates. As per clause (g) thereto, it is vested with powers of general supervision and control over the State Bar Councils. As per clause (m), it is vested with powers, coupled with a duty to do all other things necessary for discharging the functions conferred under section 7 of Act, 1961.

Section 12 of Act, 1961 deals with accounts and audit and every Bar Council is duty bound to maintain such books of accounts and other books in such form and in such manner as may be prescribed. Sub-section (2) thereunder stipulates that the accounts of Bar Council shall be audited by auditors duly qualified to act as auditors of companies under the Companies Act, 1956 at such times and in such manner as may be prescribed.

"Therefore, on a conjoint reading of the provisions contained under section 12 of Act, 1961, it is clear and evident that the Bar Council of Kerala was duty bound to conduct audit in terms of the provisions of the said Act and forward the same to the Bar Council of India on or before 31st day of December every year", said the court.

Section 15(2)(ga) empowers the Bar Council of India to constitute one or more funds for the purpose of giving financial assistance or giving legal aid or advice.

"Therefore, on a harmonious reading of the provisions of section 7 of Act, 1961 and the rules discussed above, it would be clear that the (Welfare) fund is constituted in accordance with the provisions of the Act, 1961. Therefore, whatever rules made by the Bar Council of Kerala is by virtue of the powers conferred under the Act, 1961, and whereby the supervisory powers of the Bar Council of India conferred under section 7 of Act, 1961 enables the Bar Council to conduct necessary enquiry if and when it receives any information or complaint with respect to the misappropriation of funds constituted as per the provisions of Act, 1961, (Kerala Advocates Welfare Fund) Act, 1980 and the Rules framed thereunder", noted the bench.

Further, the Court appreciated that section 46(a) is a very significant provision dealing with financial assistance to State Bar Council which states that the Bar Council of India may, if it satisfies with any State Bar Council, is in need of funds for the purpose of performing its functions under Act, 1961, give such financial assistance, as it deems fit, to that Bar Council by way of grant or otherwise. That apart section 48A of Act, 1961 empowers the Bar Council of India for revising any decision of the State Bar Councils or any committee constituted thereof. Section 49 of Act, 1961 confers power on the Bar Council of India to make rules for discharging its functions under the Act, and in particular such rules may prescribe, among other things, "the conditions subject to which an advocate shall have the right to practise and the circumstances under which a person shall be deemed to practise as an advocate in a court as provided under clause (ah). Sub-section 49(1)(f) specifies "the procedure to be followed by the disciplinary committee of a State Bar Council and by its own disciplinary committee".

"Therefore, on an appreciation of the said provisions also, it is clear and convincing that, the Bar Council of India is conferred with power coupled with duty for ensuring the functioning of the State Bar Council and the committees constituted effectively and properly, and ensuring that no manner of prejudice is caused to the welfare and well being of the advocates", the bench inferred.

"The above said findings made by us would be further justified on making reference to certain other provisions of Act, 1980 and Rules, 1981 also. Now coming to the provisions of Act, 1980, section 3 makes it clear that, the Government shall constitute a fund called "Advocates' Welfare Fund"...On a reading of section 4, it is clear that the Trustee Committee includes the members of Bar Council nominated by it, the Treasurer of the Bar Council and the Secretary of Bar Council, who shall be the Secretary of the Trustee Committee ex-officio, which would go to show that the Trustee Committee constituted as per Act, 1980 is not an independent committee detached from the State Bar Council. So much so the State Bar Council has got intrinsic and vital control in the management and regulation of the Trustee Committee. Section 5 deals with disqualifications and removal of nominated members of Trustee Committee for various reasons, and sub-section 1(d) thereto states that if the members of Trustee Committee is a defaulter to the fund (in case he is a member of the Fund) or has committed breach of trust, he shall be removed", the Court proceeded to reflect.

The bench acknowledged that as per section 5(2) of Act, 1980, the Government is vested with powers to remove any member who is or has become disqualified under sub-section (1) from membership of the Trustee Committee. Section 9 deals with the functions of the Trustee Committee, and sub-section 2(a) thereunder makes it clear that amounts and assets are held belonging to the Fund in trust. Likewise sub-section 2(c) enables the trustee committee to receive application from the members of the Fund, their nominees or legal representatives, as the case may be, for payment out of the Fund, conduct such enquiry as it deems necessary for the disposal of such applications and dispose of the applications within five months from the date of receipt thereof. Section 10 deals with funds borrowing and investment, and sub-section (5) thereto deals with accounts of the Trustee Committee as certified by the auditor, together with the audit report thereon, shall be forwarded to the Bar Council by the Trustee Committee and the Bar Council may issue such directions as it deems fit to the Trustee Committee in respect thereof. Sub-section (6) makes it clear that the Trustee Committee shall comply with the directions issued by the Bar Council under sub-section (5). Section 11 deals with powers and duties of the Secretary of the Trustee Committee, who is the Secretary of the Bar Council, and who is Chief Executive Authority of the Trustee Committee responsible for carrying out its decisions and who is also vested with powers to operate bank account of the Trustee Committee jointly with the Treasurer, who is the Treasurer of the State Bar Council and to maintain registers and verify periodically the accounts and registers of the Bar Association regarding stamps and the Secretary is also duty bound to carry out all such directions by the Trustee Committee and Bar Council.

Moreover, the Court recognised that section 12 of Act, 1980 makes it clear that the Bar Council shall pay to the Welfare Fund annually an amount equal to twenty percent of the enrolment fees realised by it- "Therefore, the audit of the Bar Council has got an intrinsic and indispensable relationship with the Fund managed by the State Bar Council also". Section 17 is a protective provisions which restricts alienation, detachment etc., of interest of member in the Fund. Sub-section (1) thereto stipulates that the interest of any member in the Fund or the right of a member or his nominee or legal heirs to receive any amount from the Fund, shall not be assigned, alienated, or charged and shall not be liable to attachment under any decree or order of any Court, Tribunal or other authority and as per sub-section (2) thereunder, no creditors shall be entitled to proceed against the Fund or interest therein of any member or his nominee or legal heirs. Section 21 deals with appeal against decisions of Trustee Committee and such appeals shall lie to the Bar Council. That apart section 22 deals with printing and distribution of stamps by the Bar Council, which empowers the Bar Council to cause to print and distribute Welfare Fund stamps of the value of fifteen rupees and twenty five rupees with the Bar Council emblem and its value inscribed thereon and the size of the stamp and colour shall be in accordance with the decision of the Bar Council from time to time and custody of the stamps shall also be with the Bar Council. The Bar Council is vested with control and distribution and sale of stamps through Bar Associations or through the outlet set up by the Bar Council for the purpose. In accordance with the stipulations contained under section 22, the Bar Council and the Bar Associations shall keep proper accounts of the stamps in such form and in such manner as may be prescribed. The Bar Association are also liable to purchase stamps from the Bar Council after paying the value thereof less ten percent of such value towards incidental expenses.

Finally, the Court appreciated the Rules, 1981 made for the purpose of regulating the procedure to be followed to carry out the functions of the Trustee Committee constituted as per Act, 1980. Rule 8 deals with functions of the Trustee Committee. Sub-section (3) thereto stipulates that the Trustee Committee shall send to the Bar Council and Government quarterly and annual reports showing the receipts to and disbursements from the Fund and other particulars and on such other occasions as may be required by the Bar Council.

"It is significant to note that the Bar Council of India and Kerala are to make any voluntary donation or contribution to the Fund, if situation warrants and therefore, the Fund is to be managed by the Trustee Committee as such as a trustee of the lawyer fraternity and to their utmost confidence", articulated the bench.

"The provisions discussed above would make it clear that the contention that the Trustee Committee constituted as per Act, 1980 is carrying out its functions without any control of the State Bar Council cannot be countenanced. Therefore, on a harmonious and conjoint reading of the provisions of Act, 1961 and Act, 1980, it is clear that the Bar Council of India is having power for controlling the members of the State Bar Council and in turn certain of the members of the Trustee Committee since the Trustee Committee includes members of the State Bar Council, nominated by the State Bar Council, and that apart the Treasurer and the Secretary of the State Bar Council are the Treasurer and Secretary of the Trustee Committee", decided the Court.

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