Gujarat High Court Orders Fresh Consideration in Chartered Accountant Misconduct Case

ICAI Council's Recommendation Set Aside Due to Non-Application of Mind, Matter Remitted for Re-Evaluation

In a significant development, the Gujarat High Court has set aside the recommendation of the Institute of Chartered Accountants of India (ICAI) to remove S.N. Valera, a Chartered Accountant, from the Register of Members for five years. The case, linked to the infamous Madhavpura Mercantile Cooperative Bank (MMCB) scam of 2001, highlights crucial procedural lapses by the ICAI Council.

The Division Bench, comprising Justices A.S. Supehia and Pranav Trivedi, emphasized the mandatory requirement for the ICAI Council to independently record findings when dealing with disciplinary committee reports. The judgment criticized the Council for merely reproducing the findings of the disciplinary committee without addressing the representations and oral submissions made by the respondent, which the court deemed a "non-application of mind" and a failure to meet procedural mandates.

The case dates back to 2006 when allegations surfaced against Valera for not disclosing serious financial irregularities during his audit of MMCB for the fiscal year 1999-2000. The ICAI's disciplinary committee initially found Valera guilty of eight out of sixteen charges. However, the Gujarat High Court pointed out that the Council's subsequent report was a mere cut-paste job from the disciplinary committee's findings, lacking any independent reasoning.

The High Court's decision underscores the importance of reasoned decision-making by quasi-judicial bodies like the ICAI Council. It mandates a thorough evaluation of evidence and arguments, asserting that justice must not only be done but also be seen to be done. The court has remitted the matter back to the ICAI Council for fresh consideration, directing a resolution within three months.

This ruling is a reminder of the judiciary's role in ensuring procedural fairness and transparency in professional disciplinary actions. It also sets a precedent for the necessity of independent evaluation by regulatory bodies, reinforcing the principles of natural justice.

Bottom Line:

The Council of Institute of Chartered Accountants of India must independently record findings when considering disciplinary committee reports under Section 21(3) of the Chartered Accountants Act, 1949. Mere reproduction of the disciplinary committee report without addressing representations or oral submissions from the respondent amounts to non-application of mind and fails procedural requirements.

Statutory provision(s): Chartered Accountants Act, 1949 Sections 21(3), 21(5), Regulation 16

Council of Institute of Chartered Accountants of India v. S.N. Valera, FCA M/s. S.N. Valera and Co., (Gujarat)(DB) : Law Finder Doc Id # 2810962