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New Delhi, Feb 12: Supreme Court of India in a case titled Naresh Chandra Agrawal v. The Institute Of Chartered Accountants Of India And Others [Civil Appeal No.4672 Of 2012] rejected a challenge to a rule within 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 complaint for misconduct to the Disciplinary Committee, even if the Director (Discipline) believes the accused person or firm is not guilty and advises further investigation.
The Bench of Justices PS Narasimha and Aravind Kumar stated, “…we have not the slightest hesitation to conclude that the impugned rule is completely in sync with the object and purpose of framing the Chapter on ‘Misconduct’ under the Act.”
The case involved an appeal against a Delhi High Court ruling that dismissed the challenge to Rule 9(3)(b) of the 2007 Rules as ultra vires of Section 21A(4) of the Chartered Accountants’ (Amendment) Act, 2006 [“Act”].
It is to mention here that the appellant, a member of an audit firm, was involved in auditing work for a bank. Some suspicious transactions occurred in the bank’s branch, but they were not flagged by the audit firm.
The complainant bank registered a complaint with the Director (Discipline), who initially found the appellant not guilty of any misconduct.
However, the Board of Discipline disagreed and decided to refer the matter to the Disciplinary Committee. The appellant challenged this action, arguing that the Board had overstepped its authority.
The Court agreed with the respondents, stating that accepting the appellant’s argument would give the Director greater powers than the Board.
It noted that the Act aims to prevent professional misconduct and uphold honesty, integrity, and professionalism in chartered accountancy practice. Thus, the impugned Rule fell within the scope of the Act.
Furthermore, the Court stated that even if Rule 9(3) couldn’t be saved under a specific section, it fell within the general delegation of power under Section 29A(1) of the Act.
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