ICAI must provide reasons to a complainant when it closes case against a member

Kosha Doshi | Symbiosis Law School, Pune | 16th March 2020

Trideep Raj vs ICAI., W.P.(C)-9032/2018

Facts:

            The petitioner had registered a complaint with the Institute of Chartered Accountants of India (ICAI) against an Internal Auditor of a company called “First Leasing Company of India Limited‟ in which the petitioner had invested. Soon after, the complaint was closed and the final decision was communicated to the petitioner. The Reserve Bank of India (RBI) called upon the company to recast the Balance sheet along with the Profit and Loss Account. It was observed that the company had overstated assets as well as earnings. It was observed and alleged by the petitioner that the company had been falsifying its books and thereby portraying a positive net worth. The RBI issued a notice in the same regard for prohibition.

Without any summary or reasoning provided only the final verdict had been communicated to the petitioner by the Institute of Chartered Accountants of India (ICAI). The grievance of the petitioner was that Institute of Chartered Accountants of India (ICAI) had failed to convey or even record the reasons for the closure of the complaint.

            Institute of Chartered Accountants of India (ICAI) argued that under the Chartered Accountants Act, proceedings before the Disciplinary Committee (Director) and the Board of Discipline was between the institute and its members only. Not being a private dispute, the reasons were not conveyed and only the decision mattered, argued Institute of Chartered Accountants of India (ICAI). The complainant filed stating that record needed to be produced as it was his primary right under Right to Information Act, 2005.

Issue:

            Whether Acts/ Rules exempt the Director or Board of Discipline from recording reasons in prima facie opinion of members not guilty of misconduct?

Judgment:

            The High Court of Delhi stated that Institute of Chartered Accountants of India (ICAI) is under the obligation to provide reasons to the complainant even in cases when the Director of Board of Discipline has prima facie opinion of a member not being guilty of misconduct. The reasons do not need to be elaborate but at least need to be provided. The reasons given need not be wide enough for scope of interpretation of courts through judicial review under Article 13 of the Indian Constitution of India.

            Justice Navin Chalwa stated that where an enquiry is initiated by a complainant, he/she is entitled to receive a copy of the decision which contains the reasons for the particle closure. Duty to assign reasons and make it available to the complaint is one of the principles of natural justice and cannot be violated. Thereby it directed Institute of Chartered Accountants of India (ICAI) to communicate the reasons for closure to the complainant. The court further made a note that a complainant has a wider ambit of rights than a mere informant. The informant having no right to be represented during the investigation or hearing.

            The court made a statement that Acts/ Rules cannot exempt the Director or Board of Discipline from recording reasons in prima facie opinion of members not guilty of misconduct as it would violate the natural justice principle leading to grave injustice.