Professional misconduct: Section 22, read with clause 7 of part 1 of Second Schedule, of the Chartered Accountants Act, 1949: In order to attract clause 7 of part 1 of Second Schedule, act or omission must be in connection with duties cast upon a chartered accountant in such capacity which no person other than a chartered accountant can perform:

12 Taxman.com 476 (Cal.) The institute (ICAI) received a complaint against the respondent, a chartered accountant that the respondent, while holding position of auditor of a company, agreed to act as an arbitrator/mediator in transaction of shares of the said company which constituted professional misconduct and further, he did not even perform duties imposed upon him under the agreement. The council held the respondent guilty of professional misconduct falling within the meaning of clause 7 of part 1 of the Second Schedule to the Act and recommended to the Court that the name of the respondent should be removed from the register of members for a period of three months.

The Calcutta High Court held as under:

“(i) A plain reading of the provisions contained in sections 21 and 22 and the Schedules annexed thereto indicates that for the purpose of the Act, the expression ‘professional misconduct’ includes an act or omission specified in the Schedules. In the instant case, the council had found the respondent guilty under clause 7 of part 1 of the Second Schedule, i.e., grossly negligent in the conduct of his professional duties.

(ii) In order to hold the respondent guilty under the aforesaid charge, it must be established that the alleged act or omission on the part of the respondent related to his professional duty as a chartered accountant. In the instant case, he was made an arbitrator or mediator by the parties and the duty cast upon him as such arbitrator could be done by any person and it is not necessary that only a chartered accountant can do such duties.

(iii) It was true that the respondent was an auditor of the company with which the parties were connected and for acting as such auditor, the parties had confidence in him and that was probably the reason for making him the arbitrator. In such circumstances, even if the contention of the council was accepted that he did not act fairly as such arbitrator, such betrayal of confidence reposed in him did not come within the purview of professional misconduct. The duties conferred upon the respondent, by virtue of the agreement between the parties, were not the duties of a chartered accountant and, thus, by no stretch of imagination, the alleged act or omission could be brought within the purview of the clause 7 of part 1 of the Second Schedule.

(iv) In order to attract the aforesaid clause, the act or omission must be in connection with the duties cast upon a chartered accountant in such capacity which no person other than a chartered accountant can perform.

(v) Thus, the respondent was not at all guilty of any professional misconduct as charged under clause 7 of part 1 of the Second Schedule and, consequently, no action was called for against the respondent.”