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Council Of The Institute Of Chartered Accountants Of India, New Delhi v. Mani S. Abraham
Factual and Procedural Background
A complaint alleging professional misconduct was made by the State Bank of Travancore against Mani Abraham & Associates, specifically targeting M.S. Abraham (the respondent), before the Council of the Institute of Chartered Accountants of India. The allegation was that the respondent disclosed confidential information acquired during statutory branch audits for the years ending 31-12-1985 and 31-12-1986 without the complainant's consent, to high-level officials including the Prime Minister and the Governor of the Reserve Bank of India. The Disciplinary Committee found the respondent guilty of professional misconduct under Clause (1) of Part I of the Second Schedule to the Chartered Accountants Act, 1949, but noted that the respondent was in a disturbed state of mind and acted without mens rea. The Council concurred with the findings and recommended initiation of proceedings before the Court, but also suggested filing the proceedings considering the circumstances.
Legal Issues Presented
- Whether the respondent committed professional misconduct by disclosing confidential information obtained during the course of audit without consent, in violation of the Chartered Accountants Act, 1949.
- What course of action the Court should adopt upon the Council’s finding of professional misconduct in light of the respondent’s disturbed mental state and absence of mala fides.
Arguments of the Parties
Institute's Arguments
- The Institute submitted that after finding professional misconduct, the decision on the appropriate course of action is within the Court’s discretion.
Respondent's Arguments
- The respondent’s counsel argued that due to the respondent’s disturbed mental state and lack of mens rea, no further action should be taken.
- It was contended that the respondent is hardly engaged in professional work and that even a reprimand would be unduly harsh.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Pandurang Dattatraya Khandekar v. The Bar Council of Maharashtra, AIR 1984 SC 110 | Professional misconduct defined as acts done otherwise than with utmost good faith are unprofessional. | Supported the principle that breach of professional trust amounts to professional misconduct. |
| In re A Solicitor Ex parte The Law Society (1912) 1 KB 302 | Definition of “infamous conduct in a professional respect” as conduct disgraceful or dishonourable to professional brethren. | Adopted to establish the standard for professional misconduct. |
| Allinson v. General Council of Medical Education & Registration (1894) 1 QB 750 | Definition of “infamous conduct” applied to medical professionals, extended analogously to other professions. | Used to clarify the nature of professional misconduct. |
| George Frier Grahame v. Attorney General, Fiji AIR 1936 PC 224 | Approved the definition of professional misconduct as disgraceful or dishonourable conduct. | Followed by this Court to reinforce the standard of professional conduct. |
| P. An. Advocate, AIR 1963 SC 1313 | Followed the established definition of professional misconduct from earlier cases. | Reinforced the principle that breach of trust and dishonourable conduct constitute misconduct. |
Court's Reasoning and Analysis
The Court examined the provisions of the Chartered Accountants Act, 1949, especially Sections 21 and 22, which prescribe the procedure and define professional misconduct. The Court noted that the respondent was found guilty of misconduct involving unauthorized disclosure of confidential information obtained during professional engagement. The Court emphasized the importance of trust and confidentiality in the profession, referencing Sections 126 and 129 of the Indian Evidence Act, 1872, which protect professional communications. The Court relied on established precedents to define professional misconduct as conduct that is dishonest, unethical, or disgraceful to the profession. Despite the finding of misconduct, the Court took into account the respondent’s disturbed mental condition, the absence of mala fide intention, and the considerable lapse of time since the incident. Considering these factors and the Council’s recommendation, the Court exercised its discretion to file the proceeding without further punitive action.
Holding and Implications
The Court’s final decision is to file the proceedings against the respondent without imposing any reprimand or removal from membership. This decision reflects a balance between upholding professional standards and acknowledging mitigating circumstances such as the respondent’s mental state and the passage of time. The direct effect is that no formal punishment is imposed on the respondent, and no new precedent altering the interpretation of professional misconduct or disciplinary procedure is established.
Pasayat, C.J:— This is a reference under Sec. 21 of the Chartered Accountants Act, 1949 (in short the Act). Brief facts necessary for disposal of the same are as follows: Alleging misconduct on the part of Mani Abraham & Associates (hereinafter referred to as the “Auditors”) a complaint was made by the State Bank of Travancore (hereinafter referred to as the complainant), before the council of the Institute of Chartered Accountants of India, in short the Institute. Allegation was that there was disclosure of information acquired in the course of professional engagement, without consent of the complainant to third parties. In response to Institute's query, auditors replied that M.S Abraham (hereinafter referred to as ‘respondent’) was answerable. This according to the complainant was misconduct in terms of Clause (1) of Part I of the Second Schedule to the Act. It was alleged that the auditors were appointed as statutory branch auditors of the Thiruvalla Branch of State Bank of Travancore for the years ending on 31-12-1985, and 31-12-1986. During the course of audit, the respondent had access to certain documents. Communications were made to several persons including the Prime Minister of India, Minister for Finance and Banking and Governor of Reserve Bank of India, Bombay about some alleged irregularities committed by the complainant during course of banking transactions. Basis of the complaint before the Prime Minister, Finance Minister and the Governor of Reserve Bank of India was the information which came to be known to the respondent during the course of audit. The Disciplinary Committee of the Institute examined the matter and reported that the respondent had contravened clause (1) of Part I of the Second Schedule of the Act, and therefore was guilty of professional misconduct under clause (1) of Part I of Second Schedule read with Sec. 21 and 22 of the Act. The report of the Disciplinary Committee was placed before the Council of the Institute which concurred with the findings. At the same time, however, it was found that the respondent was in a disturbed state of mind and no mala fides were involved. In other words it concluded that no mens rea was involved. The council recommended to this Court to initiate proceedings against the respondent, but in the peculiar circumstances of the case to file the proceeding.
2. Learned counsel appearing for the Institute submitted that after having come to a finding about professional misconduct, the course to be adopted is left to the discretion of the Court.
3. Learned counsel appearing for the respondent submitted that in view of the factual conclusions arrived at by the Disciplinary Committee as well as the Council, this is a fit case where no further action should be taken against the respondent. It is submitted that due to disturbed state of mind, hardly any professional work is being done by him, and even a stigma of reprimand would be harsh.
4. Chapter V of the Act deals with “misconduct”. Sec. 21 deals with procedure in inquiries relating to misconduct of members of Institute. Sec. 21 of the Act, so far as relevant reads as follows:
“21. Procedure in inquiries relating to misconduct of members of Institute:—
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(4) Where the finding is that a member of the Institute has been guilty of a professional misconduct specified in the First Schedule, the Council shall afford to the member an opportunity of being heard be-Fore orders are passed against him on the case, and may thereafter make any of the following orders, namely:—
(a) reprimand the member;
(b) remove the name of the member from the Register for such period, not exceeding five years, as the Council thinks fit:
Provided that where it appears to the Council that the case is one in which the name of the member ought to be removed from the Register for a period exceeding five years or permanently, it shall not make any order referred to in clause (a) or clause (b), but shall forward the case to the High Court with its recommendation thereon.
(5) Where the misconduct in respect of which the Council has found any member of the Institute guilty is misconduct other than any such misconduct as is referred to in sub sec. (4), it shall forward the case to the High Court with its recommendations thereon.”
5. We are concerned with sub-sec. (4) and (5). This appears to be a case which is covered by sub-sec. (5), as the Council has found the respondent to be guilty of misconduct of a category other than those referred to in sub-sec. (4). On reference the High Court has power under sub-sec. (6) to pass any of the following orders:
“(a) direct that the proceeding be filled, or dismiss the complaint, as the case may be;
(b) reprimand the member;
(c) remove him from membership of the Institute either permanently or for such period as the High Court thinks fit;
(d) refer the case to the Council for further inquiry and report.”
6. “Professional misconduct” has been defined in Sec. 22 of the Act. Intendment and object of the Act is to maintain standard of the profession at a high level, and consequentially a code of conduct has been prescribed. Misconduct implies failure to act honestly and reasonably either according to the ordinary and natural standard, or, according to the standard of a particular profession. Chartered Accountants' profession occupies a place of pride amongst various professions of the world. That makes observance of professional duties and propriety more imperative. When conduct of a member of the profession is contrary to honesty, or opposed to good morals, or is unethical, it is misconduct warranting consequences indicated in the Statute. An auditor holds a position of trust. That is why disclosure of information has been made a ground for imputing misconduct. By betrayal of the trust, the conduct becomes one which is unbecoming of the professional. Secs. 126 and 129 of the Indian Evidence Act, 1872 (in short the Evidence Act) throws beacon light on the importance of professional communications. As observed in Mc. Kelvery's Evidence (page 236), at common law, in very early times, a privilege was recognised as to matter between an attorney and his client, and this privilege has continued in the strictest form to the present day. The privileges mentioned in Sec. 126 and 129 are designed to secure the clients' confidence in the secrecy of his communication. Any breach of the confidence is a stigma not only on the individual concerned, but also is likely to have effect on credibility of the profession as a whole. That is why the anxiety of the legislature to punish the erring individual. It is to be noted that by breach of trust by a person entrusted with property or dominion over it, action under criminal law can be taken. When considered in that background, disclosure of information which would not have otherwise come within his knowledge, but for his professional appointment, without consent of his chief is an act of grave professional misconduct. As observed by the Apex Court in the context of professional misconduct of an Advocate, that an act which is done otherwise than with utmost good faith is unprofessional. (See Pandurang Dattatraya Khandekar v. The Bar Council of Maharashtra, Bombay, AIR 1984 SC 110.
(Para. 6)
“The test of what constitutes “grossly improper conduct in the discharge of professional duties” has been laid down in many cases. In the case of in re A Solicitor Ex parte the Law Society (1912) 1 KB 302, Darling, J. adopted the definition of “infamous conduct in a professional respect”, on the part of a medical man in Allinson v. General Council of Medical Eduction & Registration (1894) 1 QB 750, applied to professional misconduct on the part of Solicitor, and observed;
“If it is shown that a medical man, in the pursuit of his profession, has done some thing with regard to it which would be reasonably regarded as disgraceful or dishonourable by his professional brethren of good repute and competency, then it is open to the General Medical Council to say that he has been guilty of “infamous conduct in a professional respect”.
The Privy Council approved of the definition in George Frier Grahame v. Attorney General, Fiji AIR 1936 PC 224 and this Court in the matter of P. An. Advocate (1964) 1 SCR 697: AIR 1963 SC 1313 has followed the same.”
7. Normally in a case of this nature, where professional misconduct of the nature involved has been concluded, a reprimand would have been proper and appropriate. But in view of the fact that the whole episode took place nearly eight years back, and in view of the physical state of mind of the respondent and his present lack of professional work, we think it proper to file the proceedings, as recommended by the Council.
The reference is accordingly answered.
Order accordingly.
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