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Published on: February 9, 2024 at 11:35 IST
The Supreme Court resolved a challenge to Rule 9(3)(b) under the Chartered Accountants’ (Procedure of Investigation of Professional and Other Misconduct and Conduct of Cases) Rules, 2007.
This rule permits the Board of Discipline to refer a misconduct complaint to the Disciplinary Committee, even if the Director (Discipline) opines that the accused person or firm is not guilty, and advises further investigation.
The bench, comprising Justices PS Narasimha and Aravind Kumar, asserted that the contested rule aligns perfectly with the objectives of framing the ‘Misconduct’ chapter under the Chartered Accountants’ Act.
The case involved an appeal against a Delhi High Court order, which had dismissed a challenge to Rule 9(3)(b) as ultra vires of Section 21A(4) of the Chartered Accountants’ (Amendment) Act, 2006.
In brief, the appellant, a member of an audit firm, faced a complaint from a bank concerning suspicious transactions that went unnoticed during the audit.
The Director (Discipline) initially found the appellant not guilty, but the Board of Discipline disagreed and opted to refer the matter to the Disciplinary Committee for further action. Dissatisfied with this decision, the appellant approached the High Court, and subsequently, the Supreme Court.
The appellant argued that the Board exceeded its authority by referring the matter to the Disciplinary Committee, contending that the impugned rule lacked substantive basis in the Act.
The Court, after examining the records, agreed with the respondents’ argument that the appellant’s stance would grant the Director greater powers than the Board, effectively rendering the ‘prima facie’ opinion of the Director as final.
The Court emphasized the Act’s aim to prevent professional misconduct, upholding honesty, integrity, and professionalism in chartered accountancy. It concluded that the challenged rule fell within the scope of Section 29A(1) of the Act, granting the Central government authority to make rules for carrying out the Act’s purposes.
Case Title: NARESH CHANDRA AGRAWAL v. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND OTHERS,” with the citation 2024 LiveLaw (SC) 101.