D.K. AGRAWAL versus COUNCIL OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA on 23 September 2021

[2021] 7 S.C.R. 1043

D.K. AGRAWAL

v.

COUNCIL OF THE INSTITUTE OF CHARTEREDACCOUNTANTS OF INDIA

(Civil Appeal No. 6337 of 2021)

SEPTEMBER 23, 2021

[S. ABDUL NAZEER AND KRISHNA MURARI, JJ.]

Chartered Accountants Act, 1949 – ss.9, 17, 21, 22-A –Complaints against appellant-Chartered Accountant received byrespondent-Institute – Council of the Institute prima facie opinedthat the appellant was guilty of professional and/or other misconduct– Case referred to Disciplinary Committee – Disciplinary Committeesubmitted its report to the Council also opining the appellant to beguilty of other misconduct – Report accepted by Council –Recommendations made to High Court for removal of the appellant’sname from the Register of the Members – Accepted by High Court –On appeal, held: Observations of the Disciplinary Committee cannotby any stretch of imagination be treated as findings – It is only theCouncil which is empowered to find out whether the member is guiltyof misconduct – Power exercised by the Council u/s.21 is quasi--judicial in nature – Recording of reasons is a principle of naturaljustice and every judicial/quasi--judicial order must be supportedby reasons to be recorded in writing – In the present case,recommendations of the Council show that it did not discuss thereport of the Disciplinary Committee, written statement and oralsubmissions of the appellant while coming to the conclusion that heis guilty of misconduct – Recommendations were made mechanically– High Court equally erred in accepting the said recommendations– Recommendations passed by the Council set aside – Orders of theHigh Court also set aside – Matters remitted back to the Councilfor fresh consideration – Chartered Accountants Regulations, 1964– Regulations 13-15 – Principles of Natural Justice.

Principles of Natural Justice – Recording of reasons –Necessity of – Discussed.

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AAllowing the appeals, the CourtHELD:1.1 The Institute of Chartered Accountants of Indiais a statutory body created by an Act of Parliament, the CharteredAccountants Act, 1949. In accordance with Section 9, themanagement of the affairs of the Insitute are vested in the CentralBCouncil. The Council performs its functions through threedifferent standing committees. The function of the Institute is toregulate the provisions of the Act and it is also empowered totake action against its members for any misconduct ascontemplated in the Act and relevant regulations framedthereunder. Section 21 of the Act prescribes the procedure to beCfollowed with regard to an inquiry relating to the misconduct ofthe members of the Institute. Section 22-A provides for filing ofan appeal by a member against imposition of penalty. Regulation13 of the Chartered Accountants Regulations, 1964 provides forthe procedure of an inquiry before the Disciplinary Committee.DThe report of the Disciplinary Committee will contain a statementof the allegations, the defence entered by the members, therecorded evidence and the conclusions expressed by theDisciplinary Committee. The conclusions of the DisciplinaryCommittee are tentative and the same are not recorded asfindings. It is only the Council which is empowered to find outEwhether the member is guilty of misconduct. If on receipt of thereport, the Council finds that the member is not guilty ofmisconduct, Section 21(2) requires that it shall record its findingaccordingly and direct that the proceedings shall be filed or thecomplaint shall be dismissed. On the other hand, if the CouncilFfinds that the member is guilty of misconduct, Section 21(3)requires it to record a finding accordingly and to proceed in themanner laid down in the succeeding sub--sections. The findingsby the Council constitute the determinative decision as to theguilt of the member and because it is determinative in character,

the Act requires it to be recorded. Thus, the Council has toGdetermine that a member is guilty of misconduct and the task ofrecording of the findings has been specifically assigned to theCouncil. Sub--section (4) of Section 21 mandates that where amember of the Institute has been guilty of professionalmisconduct specified in the First Schedule of the Act, the CouncilHshall afford to such member an opportunity of being heard before D.K. AGRAWAL v. COUNCIL OF THE INSTITUTE OF CHARTEREDACCOUNTANTS OF INDIA

any orders are passed against him. After recording a finding thata member is guilty of misconduct, the Act moves forward to thefinal stage of penalisation. [Paras 15-17][1052-D-G; 1055-D-E;1056-E-H; 1057-A]

Institute of Chartered Accountants of India v. L.K. Ratnaand Ors. (1986) 4 SCC 537 : [1986] 3 SCR 1049;Institute of Chartered Accountants of India v. PriceWaterhouse and Ors. (1997) 6 SCC 312 : [1997] 2Suppl. SCR 267 – relied on.

1.2 As per sub- section (5) of Section 21, where the Councilhas found any member of the Institute to be guilty of misconductother than any such misconduct as is referred to in sub-section(4), it is required to forward the case to the High Court with itsrecommendations and, under sub-section (6) of Section 21, theHigh Court has to pass the orders in accordance with sub-section(6)(a) to (d) of Section 21 of the Act. Section 22-A provides forappeal by a member against imposition of penalty. The powerexercised by the Council under Section 21 is quasi--judicial innature. Perusal of the recommendations of the Council showsthat it did not discuss the report of the Disciplinary Committee,the written statement and the oral submissions of the appellantwhile coming to the conclusion that he is guilty of misconduct.However, the concluding portion of the recommendations of theCouncil made an incorrect statement that the Council hadconsidered all the materials on record and the written and oralsubmissions of the appellant. The observations of the DisciplinaryCommittee cannot by any stretch of imagination be treated asfindings. At best, they may be termed as the material which fallswithin the domain of consideration by the Council. The Councilhas failed to give its own independent findings. Therecommendations made by the Council are not supported byindependent reasons. The recommendations have been mademechanically by the Council. [Paras 20, 21][1059-C-G]

1.3 Recording of reasons is a principle of natural justiceand every judicial/quasi-judicial order must be supported byreasons to be recorded in writing. It ensures transparency andfairness in the decision-making process. The person who is

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Aadversely affected wants to know as to why his submissions havenot been accepted. Giving of reasons ensures that a hearing isnot rendered as a meaningless charade. Unless an adjudicatorybody is required to give reasons and make findings of factindicating the evidence upon which it relied, there is no way ofknowing whether the concerned body genuinely applied itself toBand evaluated the arguments and the evidence advanced at thehearing. Giving reasons is all the more necessary because it givessatisfaction to the party against whom a decision is taken. Justiceshould not only be done but should also be seen to be done. Anunreasoned decision may be just, but it may not appear to be soCto the person affected. A reasoned decision, on the other hand,will have the appearance of fairness and justice. [Para 22][1059-G-H; 1060-A-C]

M/s. Woolcombers of India Ltd. v. Woolcombers WorkersUnion and Ors. (1974) 3 SCC 318 : [1974] 1 SCRD504; State of West Bengal v. Atul Krishna Shaw andAnr. (1991) 1 Suppl. SCC 414 – relied on.

1.4 Where the Council has found any member of theInstitute to be guilty of misconduct, it is required under the Actto forward the matter to the High Court with its recommendationsEand the High Court has to pass final order either dismissing thecomplaint or penalizing the member of the Institute. The orderof the Council, imposing penalty upon the member, is alsoappealable by the members aggrieved before the High Court. Inthe circumstances, it is all the more necessary that therecommendation/order of the Council should contain reasons forFthe conclusion. The High Court has equally erred in acceptingthe recommendations of the Council without applying its own logicto this aspect of the matter. The Council has to reconsider thematter afresh after granting the appellant an opportunity of beingheard. The recommendations/order(s) passed by the Council ofGthe Institute of Chartered Accountants of India which were thesubject matter of the aforesaid two reference cases, are set aside.Consequently, the orders of the High Court impugned are alsoset aside. These matters are remitted back to the Council forfresh consideration and disposal in accordance with law and inthe light of the observations made above. [Paras 25-27][1061-F-HH; 1062-A-C]

D.K. AGRAWAL v. COUNCIL OF THE INSTITUTE OF CHARTEREDACCOUNTANTS OF INDIA

CIVIL APPELLATE JURISDICTION: Civil Appeal No.6337 of2021.

From the Judgment and Order dated 25.04.2017 of the High Courtof Judicature at Allahabad in Reference Against Misc. Acts No.1 of1999.

With

Civil Appeal Nos. 6340, 6339 And 6338 of 2021

Anubhav Kumar, Kanhaiya Priyadarshi, Advs. for the Appellant.

Pankaj Garg, Miling Garg, Ms. Nikita Jain Garg, Yaksh Garg,Suvidutt M. S., Advs. for the Respondent.

The following Order of the Court was passed

O R D E R

S. ABDUL NAZEER, J.

1. Leave granted.

Civil Appeal No. 6337 of 2021 (Arising out of SLP (Civil)No. 24350 of 2017, and Civil Appeal No. 6338 of 2021 (Arisingout of SLP (Civil) No.5652 of 2018)

2. The appellant-D.K. Agrawal is a chartered accountant havinghis Office as M/s, Dinesh K. Agrawal & Co., Chartered Accountants,46-A, Madhav Kunj, Pratap Nagar, Agra. Information was received bythe Institute of Chartered Accountants of India (for short, “the Institute”)from the Office of the Inspecting Assistant Commissioner of the IncomeTax alleging that the appellant had deposited in local treasury unit ofIncome-tax Department at Agra a total sum of Rs.2514/- being the lastdigit of amount, outstanding against the assessees. The Office of theInspecting Assistant Commissioner of the Income Tax further allegedthat the appellant had interpolated assessees’ copies of challans to showhigher figures and claimed the higher amount from them. The saidinformation was conveyed to the appellant vide Institute’s letter dated

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A14.02.1980 and he was requested to send his written statement inresponse. The appellant submitted his duly verified written statementdated 18.10.1980. At its 96[th] meeting held on 20/21.07.1981, the Councilof the Institute (for short, “the Council”)was of the prima facie opinionthat the appellant was guilty of professional and/or other misconductand accordingly referred the case to the Disciplinary CommitteeBconstituted under the Chartered Accountants Act, 1949 (for short, “theAct”).

3. The Disciplinary Committee held various meetings between05.10.1981 and 21/22.02.1989 for the purpose of enquiry. After hearingthe parties, recording the evidence of the witnesses and on perusal ofCthe documents which were produced before the Disciplinary Committee,the Disciplinary Committee submitted its report on 12.09.1989 to theCouncil. The Disciplinary Committee was of the view that the appellanthad involved himself in respect of two parties, namely, M/s. UnitedPulverisers and M/s. Bharat Gas Agencies, for depositing money only toDthe extent of last digit and claiming from them full amount as indicated inthe information and that the appellant was guilty of other misconductunder Section 22 read with Section 21 of the Act. A copy of the report ofthe Disciplinary Committee was forwarded to the appellant vide Institute’sletter dated 20.08.1990 and he was requested to send his writtenrepresentation, if any, and also if he so desired, to appear before theECouncil on 14.09.1990 either in person and/or through a member of theInstitute duly authorized him and to make his oral submissions. Theappellant submitted his representation dated 05.09.1990. However, atthe request of the appellant, that his counsel has expressed his difficultiesto appear before the Council, the consideration of the report wasFpostponed by the Council. Thereafter, the appellant was informed videInstitute’s letter dated 12.11.1990 that the report of the DisciplinaryCommittee would be considered by the Council at its meeting to the heldfrom 6[th] to 8[th] December, 1990 and if he so wished, he might appealbefore the Council either in person and/or through a member of the Institute duly authorized by him on 07.12.1990. The consideration of theGreport by the Council was adjourned at an oral request of the appellantand his authorized representative made at the time of meeting on theground of preoccupation of the appellant’s authorized representative.By his letter dated 19.01.1991, the appellant requested that the report ofDisciplinary Committee might not be placed before the Council in MarchH1991 which was scheduled to be held at Bangalore. His request was acceded to. The appellant was further informed vide Institute’s letterdated 8[th] July, 1993 that the report of the Disciplinary Committee wouldbe considered by the Council at its meeting scheduled to the held from5[th] to 7[th] August, 1993. The appellant appeared before the Council on06.08.1993 and made his oral submissions that his counsel was out ofDelhi and in his absence, it was not possible for him to proceed with thecase. He again requested for postponement of the hearing. This processwent on till the month of September 1994. On 02.09.1994 the appellantappeared before the Council and made his oral submissions. The Councilpassed the following orders:

“On consideration of the report of the Disciplinary Committee,written representations and the oral submissions made by therespondent-D.K. Agrawal before the Council on 2[nd] September,1994, the Council accepted the Report of the DisciplinaryCommittee and found that the respondent was guilty of “othermisconduct” under Section 22 read with Section 21 of theChartered Accountants Act, 1949.

The Council also decided to recommend to the High Court thatthe name of the respondent be removed from the Register ofMembers for a period of two years.”

4. The respondent-Institute, after the lapse of about five years ofthe report of the Disciplinary Committee, made a reference bearingReference No.1 of 1999 before the High Court of Judicature at Allahabadfor removal of the name of the appellant from the register of themembership for two years. The High Court, on consideration of thereference, confirmed the Resolution of the Council that the appellantwas guilty of “other misconduct” warranting appropriate punishmentand, therefore, ordered the removal of the name of the appellant fromthe membership of the respondent-Institute for a period of five years.

5. The appellant filed a review petition before the High Court forreview of the aforesaid order. The said review petition was also dismissedby the High Court. The appellant has challenged the aforesaid two ordersin these appeals.

Civil Appeal No. 6340 of 2021 (Arising out of SLP (Civil)No.8118 of 2018) and Civil Appeal No. 6339 of 2021 (Arising outof SLP (Civil) No.5733 of 2018)

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A6. These two appeals have also been filed by the aforesaid D.K.Agrawal. In these cases, the respondent-Institute received a complaintdated 07.02.1986 from Shri A.K. Swahney, the then Inspecting AssistantCommissioner of Income-tax, (Assessment), Agra, alleging that: (i) theappellant had been found to be indulging in acts which were unbecomingof a professional holding the position of Chartered Accountant and wasBguilty of professional misconduct; (ii) by his unethical practice, theappellant had duped the exchequer and deprived it of a large chunk ofmoney by way of evading taxes; (iii) by his corrupt practices, the appellanthad also lured the personnel of Income-tax Department by giving themillegal gratification.C

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7. A copy of the complaint was forwarded by the Institute to theappellant on 30.05.1986 asking him to submit his written statement by20.06.1986. In these cases as well, several rounds of correspondencetook place between the respondent-Institute and the appellant. The matterwas referred to the Disciplinary Committee for the purpose of an inquiryDto be held on 07.03.1988. The appellant submitted several paper booksbefore the Disciplinary Committee. Again, in these cases as well, theappellant went on taking time on one pretext or another before theDisciplinary Committee. The Disciplinary Committee on perusal of thedocuments produced before it, upon recording the evidence of thewitnesses and after hearing the submission made by the complainantEand the appellant, submitted its report to the Council on 12.09.1989. TheDisciplinary Committee was of the opinion that the appellant was guiltyof “other misconduct” under Section 21 read with Section 22 of the Act.A copy of the report of the Disciplinary Committee was forwarded tothe appellant as also to the complainant vide Institute’s letter datedF08.08.1991 and they were informed that the report would be consideredby the Council at one of its forthcoming meeting and that they wererequired to send their written representations, if any, and also if they sodesired, to appear before the Council either in person and/or through amember of the Institute duly authorized by them at the time of theconsideration of the report.G

8. The report of the Disciplinary Committee was fixed forconsideration by the Council at its meeting scheduled to the held from5[th] to 7[th] August, 1993. At the request of the appellant, the matter wasadjourned. The appellant went on taking time for hearing. Finally, onconsideration of the report of the Disciplinary Committee and the written H

representations of the appellant, the Council accepted the report of theDisciplinary Committee and found that the appellant guilty of “othermisconduct” under Section 21 read with Section 22 of the Act insofar asthe first two charges were concerned and he was also found guilty ofprofessional misconduct under Clause 10 of Part I of first schedule tothe Act in respect of the third charge. The council decided to recommendto the High Court that the name of the appellant be removed from theRegister of the Members for a period of five years. Accordingly, interms of Section 21(5) of the Act, the disciplinary case was forwardedto the High Court to pass necessary orders in accordance with Section21(6) of the Act.

9. The High Court, by its order dated 28.09.2016 in ReferenceNo. 2 of 1999 accepted the Resolution of the Council and directed removalof the appellant’s name from the Register of the Membership permanently.

10. Feeling aggrieved by the aforesaid order of the High Court,the appellant filed a review application which was dismissed by the HighCourt. The appellant has challenged the validity and correctness of theaforesaid Judgments and orders of the High Court in these appeals.

11. The learned counsel appearing for the appellant has mainlycontended that the conclusion reached by the Council was on the basisof conjectures and surmises. In fact, the appellant has filed his writtensubmissions objecting to the report of the Disciplinary Committee. Theappellant has presented his case before the Council. However, withoutindependently considering any of the materials placed before it, includingthe written and the oral submissions made by the appellant, the Councilunilaterally accepted the report of the Disciplinary Committee and foundthat that appellant was guilty of “other misconduct”. The Council hadfailed to appreciate the materials produced by the appellant, the appellant’swritten submissions and his oral submissions made before it. In thisconnection, he has drawn our attention to the report of the Council andalso Section 21 of the Act.

12. Apart from the above, it was also argued that the opinionformed by the Council was not guided by the doctrine of benefit ofdoubt. The Council was under an obligation to record a finding that theguilt of the appellant was beyond reasonable doubt which, it was argued,is not so in the instant case. It was further argued that the High Courtought to have accepted the submissions of the appellant and set aside AB

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Athe recommendations, considering the fact that the recommendation ofthe Council was violative of the principles of natural justice. He has alsoattacked the report of the Disciplinary Committee which, according tohim, was made with a pre-determined mind and that it is perverse andcontrary to the materials placed on record.

B13. On the other hand, learned counsel appearing for therespondent-Institute has submitted that taking into consideration thematerials on record and also the written statements and submissions ofthe appellant, the Council had come to the conclusion that the appellantwas guilty of misconduct. The High Court has very rightly confirmedthe recommendations of the Council and has allowed the referencesCaccordingly. There is no error in the report of the Disciplinary Committeeor in the order of the Council. Therefore, the appellant cannot find faultwith the judgment of the High Court. He prays for dismissal of theappeals.

14. We have carefully considered the submission of the learnedDcounsel for the parties and also perused the materials placed on record.

15. The Institute of Chartered Accountants of India is a statutorybody created by an Act of Parliament that is the Chartered AccountantsAct, 1949. In accordance with Section 9 of the Act, the management ofthe affairs of the Institute are vested in the Central Council. The CouncilEperforms its function through three different standing committeesconstituted under Section 17 of the Act and various other committees.One of the standing committees of the Institute is the DisciplinaryCommittee. The function of the Institute is to regulate the provisions ofthe Act and it is also empowered to take action against its members forFany misconduct as contemplated in the Act and relevant regulationsframed thereunder. Section 21 of the Act prescribes the procedure to befollowed with regard to an inquiry relating to the misconduct of themembers of the Institute. Section 22-A provides for filing of an appealby a member against imposition of penalty. The Act was amended on08.08.2006 by Act 9 of 2006. However, since the alleged misconductGrelates to the year 1978, we are concerned with the unamended Sections21 and 22-A which are as under:

“21. Procedure in inquiries relating to misconduct of membersof Institute:

“(1) Where on receipt of information by, or of a complaintmade to it, the Council if prima facie of opinion that an memberof the Institute has been guilty of any professional or othermisconduct, the Council shall refer the case to the DisciplinaryCommittee, and the Disciplinary Committee shall thereuponhold such inquiry and in such manner as may be prescribed,and shall report the result of its inquiry to the Council.

(2) If on receipt of such report the Council finds that themember of the Institute is not guilty of any professional orother misconduct, it shall record its finding accordingly anddirect that the proceedings shall be filed or the complaintshall be dismissed, as the case may be.

(3) If on receipt of such report the Council finds that themember of the Institute is guilty of any professional or othermisconduct, it shall record a finding accordingly and shallproceed in the manner laid down in the succeeding sub-sections.

(4) Where the finding is that a member of the Institute hasbeen guilty of a professional misconduct specified in the FirstSchedule, the Council shall afford to the member anopportunity of being heard before orders are passed againsthim on the case, and may thereafter make any of the followingorders, namely :

(a) reprimand the member;

(b) remove the name of the member from the Register for suchperiod, not exceeding five years, as the Council thinks fit:

Provided that where it appears to the Council that the case isone in which the name of the member ought to be removedfrom the Register for a period exceeding five years orpermanently, it shall not make any order referred to in Clause(a) or Clause (b), but shall forward the case to the High Courtwith its recommendations thereon.

(5) Where the misconduct in respect of which the Council hasfound any member of the Institute guilty is misconduct otherthan any such misconduct as is referred to in Sub-section (4),it shall forward the case to the High Court with itsrecommendations thereon A

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(6) On receipt of any case under sub-section (4) or sub-section(5), the High Court shall fix a date for the hearing of thecase and shall cause notice of the date so fixed to be given tothe member of the Institute concerned, the Council and to theCentral Government, and shall afford such member, theCouncil and the Central Government an opportunity of beingheard, and may thereafter make any of the following orders,namely:

(a) direct that the proceedings be filed, or dismiss thecomplaint, as the case may be; (b) reprimand the member;

(c) remove him from membership of the Institute eitherpermanently or for such period as the High Court thinks fit;(d) refer the case to the Council for further inquiry and report.

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(8) For the purposes of any inquiry under this section, theCouncil and the Disciplinary Committee shall have the samepowers as are vested in a civil Court under the Code of CivilProcedure, 1908, in respect of the following matters, namely:

(a) summoning and enforcing the attendance of any personand examining him on oath; (b) the discovery and production of any document; and

(c) receiving evidence on affidavit.”

“22-A. Appeals :- (1) Any member of the Institute aggrieved byany order of the Council imposing on him any of the penaltiesreferred to in sub-section (4) of section 21, may, within thirty daysof the date on which the order is communicated to him, prefer anappeal to the High Court:

PROVIDED that the High Court may entertain any suchappeal after the expiry of the said period of thirty days, if it issatisfied that the member was prevented by sufficient cause fromfiling the appeal in time.

(2) The High Court may, on its own motion or otherwise, aftercalling for the records of any case, revise any order made by the

Council under sub-section (2) or sub-section (4) of section 21 andmay- (a)confirm, modify or set aside the order; (b) impose any penalty or set aside, reduce, confirm, or enhancethe penalty imposed by the order;

(c) remit the case to the council for such further inquiry as theHigh Court considers proper in the circumstances of the case;or (d)pass such other order as the High Court thinks fit:

PROVIDED that no order of the Council shall bemodified or set aside unless the Council has been given anopportunity of being heard and no order imposing or enhancinga penalty shall be passed unless the person concerned has alsobeen given an opportunity of being heard.”

16. Regulation 13 of the Chartered Accountants Regulations, 1964(for short “Regulation”) provides for the procedure of an inquiry beforethe Disciplinary Committee. Regulations 14 and 15 which are relevantfor the purpose of this case are as under:

“14. Report of the Disciplinary Committee

(1) The Disciplinary committee shall submit its report to theCouncil.

(2) The Council shall consider the report of the DisciplinaryCommittee and if, in its opinion, a further enquiry is necessary,shall cause such further enquiry to be made whereupon a furtherreport shall be submitted by the Disciplinary Committee.

(3) The Council shall, on the consideration of the report and thefurther report, if any, record its findings.

(4) If the finding is that there is no case for passing one of theorders specified in clauses (a) or (b) of sub-section (4) of section,the complainant and the respondent shall be informed accordingly.

15. Procedure in a hearing before the Council.

(1) If the Council, in view of its findings, is of opinion that there isa case for passing one of the orders specified in clauses (a) or (b)of sub-section (4) of Section 21, is shall—

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(a) furnish to the respondent a copy of the report of theDisciplinary Committee and a copy of its findings: and A

(b) give him a notice indicating the order proposed to be passedagainst him and calling upon him to appear before it on aspecified date or if he does not wish to be heard in person, toBsend within a specified time, such representation in writing ashe may wish to make against the proposed order.

(2) The scope of the hearing or of the representation in writing, asthe case may be, shall be restricted to the order proposed to bepassed.

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(3) The Council shall, after hearing the respondent, if he appearsin person, or after considering the representation, if any, made byhim, pass such orders as it may think fit.

(4) The orders passed by the Council shall be communicated tothe complainant and the respondent.”D

17. It is clear from the above provisions that the report of theDisciplinary Committee will contain a statement of the allegations, thedefence entered by the members, the recorded evidence and theconclusions expressed by the Disciplinary Committee. The conclusionsof the Disciplinary Committee are tentative and the same are not recordedEas findings. It is only the Council which is empowered to find out whetherthe member is guilty of misconduct. If on receipt of the report, the Councilfinds that the member is not guilty of misconduct, Section 21(2) requiresthat it shall record its finding accordingly and direct that the proceedingsshall be filed or the complaint shall be dismissed. On the other hand, ifFthe Council finds that the member is guilty of misconduct, Section 21(3)requires it to record a finding accordingly and to proceed in the mannerlaid down in the succeeding sub-sections. The findings by the Councilconstitute the determinative decision as to the guilt of the member andbecause it is determinative in character, the Act requires it to be recorded.Thus, the Council has to determine that a member is guilty of misconductGand the task of recording of the findings has been specifically assignedto the Council. Sub-section (4) of Section 21 mandates that where amember of the Institute has been guilty of professional misconductspecified in the First Schedule of the Act, the Council shall afford tosuch member an opportunity of being heard before any orders are passedagainst him. After recording a finding that a member is guilty ofH

misconduct, the Act moves forward to the final stage of penalisation.The recording of the finding by the Council is the jurisdictional springboardfor the penalty proceedings which follow.

18. In Institute of Chartered Accountants of India v. L.K. Ratnaand Ors.[1] this Court considered the duties of the Council as under :

“12. Now when it enters upon the task of finding whether themember is guilty of misconduct, the Council considers the reportsubmitted by the Disciplinary Committee. The report constitutesthe material to be considered by the Council. The Council willtake into regard the allegations against the member, his case indefence, the recorded evidence and the conclusions expressedby the Disciplinary Committee. Although the member hasparticipated in the inquiry, he has had no opportunity to demonstratethe fallibility of the conclusions of the Disciplinary Committee. Itis material which falls within the domain of consideration by theCouncil. It should also be open to the member, we think, to pointout to the Council any error in the procedure adopted by theDisciplinary Committee which could have resulted in vitiating theinquiry. Section 21(8) arms the Council with power to record oraland documentary evidence, and it is precisely to take account ofthat eventuality and to repair the error that this power seems tohave been conferred. It cannot, therefore, be denied that eventhough the member has participated in the inquiry before theDisciplinary Committee, there is a range of consideration by theCouncil on which he has not been heard. He is clearly entitled toan opportunity of hearing before the Council finds him guilty ofmisconduct.

13. At this point it is necessary to advert to the fundamentalcharacter of the power conferred on the Council. The Council isempowered to find a member guilty of misconduct. The penaltywhich follows is so harsh that it may result in his removal fromthe Register of Members for a substantial number of years. Theremoval of his name from the Register deprives him of the rightto a certificate of practice. As is clear from Section 6(1) of theAct, he cannot practice without such certificate. In thecircumstances there is every reason to presume in favour of anopportunity to the member of being heard by the Council before it 11986 4 SCC 537

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SUPREME COURT REPORTS

Aproceeds to pronounce upon his guilt. As we have seen, the findingby the Council operates with finality in the proceeding, and itconstitutes the foundation for the penalty imposed by the Councilon him. We consider it significant that the power to find and recordwhether a member is guilty of misconduct has been specificallyentrusted by the Act to the entire Council itself and not to a fewBof its members who constitute the Disciplinary Committee. It isthe character and complexion of the proceeding considered inconjunction with the structure of power constituted by the Actwhich leads us to the conclusion that the member is entitledto ahearing by the Council before it can find him guilty. Upon theCapproach which has found favour with us, we find no relevancein James Edward Jeffs v. New Zealand Dairy Production andMarketing Board – (1967) 1 AC 551 cited on behalf of theappellant. The Court made observations there of a general natureand indicated the circumstances when evidence could be recordedand submissions of the parties heard by a person other than theDdecision-making authority. Those observations can have no playin a power structure such as the one before us.”

19. Similarly, in Institute of Chartered Accountants of India v.Price Waterhouse and Ors.[2] it was held by this Court that theDisciplinary Committee is a fact-finding body which is subordinate toEthe Council as a fact-finding Authority. After analysing Section 21 andRegulation 15, this Court held that the Council is required to independentlyconsider the explanation submitted by the member and the evidenceadduced in the inquiry before the Disciplinary Committee and the reportof the Committee. It was held thus:F“

“14.…A combined reading of relevant provisions in Section21 and Regulation 16 does indicate that the recording of afinding of guilt or non-guilt by the Council is mandatory totake further action or to dismiss the complaint or for furtherprocess. The Council is required to consider independentlyGthe explanation submitted by the member and the evidenceadduced in the enquiry before the Disciplinary Committee andthe report of the Disciplinary Committee. It provides an in-built mechanism under which the Council itself is required toexamine the case of professional or other misconduct of a H2 (1997) 6 SCC 312

member of the Institute or associate member, taking the aid ofthe report submitted by the Disciplinary Committee, theevidence adduced before the Committee and the explanationoffered by the delinquent member. Entire material constitutesthe record of the proceeding before the Council to reach afinding whether or not the delinquent member committedprofessional or other misconduct. Otherwise, the primacyaccorded to the report of the Disciplinary Committee attainsfinality, denuding the Council of the power of discipline overthe members of the Institute; that would render deleteriouseffect on the maintenance of discipline among the membersor associate members of the Institute.”

20. It is also necessary to notice yet another aspect. As per sub-section (5) of Section 21, where the Council has found any member ofthe Institute to be guilty of misconduct other than any such misconductas is referred to in sub-section (4), it is required to forward the case tothe High Court with its recommendations and, under sub-section (6) ofSection 21, the High Court has to pass the orders in accordance withsub-section (6)(a) to (d) of Section 21 of the Act. Section 22-A providesfor appeal by a member against imposition of penalty.

21. Needless to say that, the power exercised by the Councilunder Section 21 is quasi-judicial in nature. Perusal of therecommendations of the Council shows that it did not discuss the reportof the Disciplinary Committee, the written statement and the oralsubmissions of the appellant while coming to the conclusion that he isguilty of misconduct. However, the concluding portion of therecommendations of the Council made an incorrect statement that theCouncil had considered all the materials on record and the written andoral submissions of the appellant. The observations of the DisciplinaryCommittee cannot by any stretch of imagination be treated as findings.At best, they may be termed as the material which falls within the domainof consideration by the Council. The Council has failed to give its ownindependent findings. The recommendations made by the Council arenot supported by independent reasons. The recommendations, in ouropinion, have been made mechanically by the Council.

22. Recording of reasons is a principle of natural justice and everyjudicial/quasi-judicial order must be supported by reasons to be recordedin writing. It ensures transparency and fairness in the decision-making A

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Aprocess. The person who is adversely affected wants to know as towhy his submissions have not been accepted. Giving of reasons ensuresthat a hearing is not rendered as a meaningless charade. Unless anadjudicatory body is required to give reasons and make findings of factindicating the evidence upon which it relied, there is no way of knowingwhether the concerned body genuinely applied itself to and evaluatedBthe arguments and the evidence advanced at the hearing. Giving reasonsis all the more necessary because it gives satisfaction to the party againstwhom a decision is taken. It is a well-known principle that justice shouldnot only be done but should also be seen to be done. An unreasoneddecision may be just, but it may not appear to be so to the person affected.CA reasoned decision, on the other hand, will have the appearance offairness and justice.

23. In M/s. Woolcombers of India Ltd. v. Woolcombers WorkersUnion and Ors.[3], while dealing with an award of an Industrial Tribunal,this Court found that the award stated only the conclusions and did notDproviding the supporting reasons. The matter was remitted back to theTribunal to record fresh findings and it was observed that providing reasonsin support of the conclusion is essential. The reasoning has beenenumerated below:

“5. …The giving of reasons in support of their conclusions byEjudicial and quasi-judicial authorities when exercising initialjurisdiction is essential for various reasons. First, it is calculated toprevent unconscious unfairness or arbitrariness in reaching theconclusions. The very search for reasons will put the authority onthe alert and minimise the chances of unconscious infiltration ofpersonal bias or unfairness in the conclusion. The authority willFadduce reasons which will be regarded as fair and legitimate by areasonable man and will discard irrelevant or extraneousconsiderations. Second, it is a well-known principle that justiceshould not only be done but should also appear to be done.Unreasoned conclusions may be just but they may not appear toGbe just to those who read them. Reasons conclusions, on the otherhand, will have also the appearance of justice. Third, it should beremembered that an appeal generally lies from the decisions ofjudicial and quasi-judicial authorities to this Court by special leavegranted under Article 136. A judgment which does not disclose the reasons, will be of little assistance to the Court. The Court willhave to wade through the entire record and find for itself whetherthe decision in appeal is right or wrong. In many cases thisinvestment of time and industry will be saved if reasons are givenin support of the conclusions. So it is necessary to emphasise thatjudicial and quasi-judicial authorities should always give reasonsin support of their conclusions.”

24. Further, this Court in State of West Bengal v. Atul KrishnaShaw and Anr.[4] has held that failure to give reasons does not instillpublic confidence in the correctness of the decisions rendered by theadjudicatory bodies. It was held thus:

“7. ……it is indisputably true that it is a quasi-judicial proceeding.If the appellate authority had appreciated the evidence on recordand recorded the findings of fact, those findings are binding onthis Court or the High Court. By process of judicial review, wecannot appreciate the evidence and record our own findings offact. If the findings are based on no evidence or based onconjectures or surmises and no reasonable man would, on givenfacts and circumstances, come to the conclusion reached by theappellate authority on the basis of the evidence on record, certainlythis Court would oversee whether the findings recorded by theappellate authority is based on no evidence or beset with surmisesor conjectures. Giving of reasons is an essential element ofadministration of justice. A right to reason is, therefore, anindispensable part of sound system of judicial review. Reasoneddecision is not only for the purpose of showing that the citizen isreceiving justice, but also a valid discipline for the Tribunal itself.Therefore, statement of reasons is one of the essentials of justice.”

25. As noticed above, where the Council has found any memberof the Institute to be guilty of misconduct, it is required under the Act toforward the matter to the High Court with its recommendations and theHigh Court has to pass final order either dismissing the complaint orpenalizing the member of the Institute. The order of the Council, imposingpenalty upon the member, is also appealable by the members aggrievedbefore the High Court. In the circumstances, it is all the more necessarythat the recommendation/order of the Council should contain reasonsfor the conclusion.

4 (1991) Supp (1) SCC 414

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4 (1991) Supp (1) SCC 414

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A26. We are of the view that the High Court has equally erred inaccepting the recommendations of the Council without applying its ownlogic to this aspect of the matter. We are also of the view that the Councilhas to reconsider the matter afresh after granting the appellant anopportunity of being heard. Having regard to the above, we do notpropose to consider the other contentions of the parties.B

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27. Resultantly, the recommendations/order(s) passed by theCouncil of the Institute of Chartered Accountants of India which werethe subject matter of the aforesaid two reference cases, are set aside.Consequently, the orders of the High Court impugned herein are also setaside. The appeals are accordingly allowed. These matters are remittedCback to the Council for fresh consideration and disposal in accordancewith law and in the light of the observations made above. The Council isdirected to consider and dispose of the matter(s) as expeditiously aspossible but not later than three months from the date of receipt of acopy of this order. All the contentions of the parties are left open. HavingDregard to the facts and circumstances of the cases, both the parties aredirected to bear their respective costs.

28. Pending applications, if any, shall also stand disposed of.

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Divya Pandey

Appeals allowed.

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