Introduction:
Members of our profession are being increasingly subjected to disciplinary cases for misconduct. The complainants are often not aware of the grave consequences on the member concerned; or sometimes they knowingly do so to harass the CA with an ulterior motive to exert pressure on a rival party. CA being a soft target is often victimised. Our Council is realising this; but is helpless due to the system.
It is observed that many a time, an altogether stranger to the dispute files a case and makes the life of our member miserable.
Consequences of a complaint:
For items specified in First Schedule to our CA Act, the prescribed punishments are any one or more of – (a) reprimand, (b) fine upto Rs. 1 lakh and (c) suspension of membership for a period up to 3 months.
For items in Second Schedule, any one or more of – (a) reprimand, (b) Fine upto Rs. 5 lakhs and (c) suspension for any length of time, including forever.
However, it is to be noted that the process of disposal of complaint is likely to cause more stress than these prescribed consequences.
Firstly, it takes at least 3 years from initiation of complaint to its disposal (if not contested in appeal). One has to carry the sword hanging on one’s head. It is a great mental agony. It involves expenditure – on paper work, counsel’s fees, traveling (at times to Delhi) to the place of hearing and so on. Most importantly, if one is held prima facie guilty, one is deprived of bank audits, Government audits ( C & AG), etc. This is a great monetary loss.
After all, it is a stigma on one’s professional career.
Locus Standi: For information of the readers, I wish to clarify the distinction between the items of First and Second Schedule. First Schedule contains offences within the members’ community while Second Schedule contains items affecting the outsiders. The latter is considered more serious.
The proceedings are considered as quasi criminal proceedings. Any person can file a complaint. If complaint is not validly made, the Disciplinary Directorate can initiate suo moto action based on ‘information’.
I have come across many cases where the complainant was strictly not concerned with the type of misconduct alleged. Particularly, in First Schedule, the items affect the rights of other members.
For example:
In one case, a company did not appoint its first auditor in the board meeting. (Section 224 (5) of Companies Act, 1956) It was advised to appoint auditor in EGM – section 224 (5)(b). They issued appointment letter which unfortunately did not mention them to be the first auditors. It was implied and understood. Auditors filed form 23 B to ROC. Later on there was a dispute between two groups of management. The Indian group, both the directors being CAs, fabricated the records so as to ‘create’ one more auditor before the EGM! They closed the accounts out of the way – contrary to a different accounting year stated in articles, and filed a frivolous complaint that the auditors (innocent, appointed in EGM) did not communicate with previous auditor! And the alleged ‘previous auditor’ did not even turn up during the proceedings. Complainants admitted that they had manipulated the records. The proceedings stretched over a period of 5 years and a very senior, reputed firm was the victim.
In the second case, there was a change-over in management. The old management, proved to be unscrupulous, created an ‘auditor’ in similar manner and filed similar complaint. The new auditor (genuine) communicated with previous auditor on record (he who signed last audit, and who according to the new management was the previous auditor). The innocent new auditor had no clue whatsoever to indicate the existence of any such ‘previous auditor’.
The third case is more serious. There was a split in management. Two brothers who were directors separated from each other. The outgoing auditor supplied information to an outside lawyer. He was staying in Rajasthan while the company had all its operations in Mumbai. The outsider was not a shareholder, director, employee, supplier, customer and had no connection with the company at all! He filed a case of negligence (Schedule 2) against the auditor ‘claiming himself to be a responsible citizen’ of our country. He found a few minor arithmetic errors in stock valuation sheets which contained hundreds of items (in 12 sheets). Those were human, inadvertent errors, having no material impact. Again the proceedings stretched over 5 years!
During the hearing, he never appeared and it transpired that he was a professional blackmailer.
Conclusion:
Unfortunately, the normal principle of a complainant coming with clean hands is not followed in disciplinary proceedings. Council claims to be concerned (rightly so) only with the members’ conduct and not that of an outsider. Therefore, complaints even from a criminal who is behind bars are entertained. So also, for First Schedule cases, like previous auditors communication, non-payment of undisputed fees, solicitors, advertisement, sharing with non-members, charging fees on percentage basis, etc. a stranger is no way concerned. When previous auditor is not complaining, how is a stranger concerned? This results in lot of burden on Disciplinary Directorate and on the respective committees of the Council as well.
It is suggested that locus standi, materiality and the like concepts be given due weightage in the proceedings.
