ICAI Can Hold Firm as a Whole Responsible Even if Individual CA Is Taking Responsibility for Allegations | HC

Case Details: Harinderjit Singh vs. Disciplinary Committee ICAI - [2024] 164 taxmann.com 142 (Delhi)[03-07-2024]

Judiciary and Counsel Details

• Prathiba M. Singh, J.
• Sudhir Makkar, Saurabh Kripal, Sr. Advs. Allwyn Noronha, Kamal Shankar, Gautam Verma, Atul N. & Arjun Narang, Advs. for the Petitioner.
• Ramji Srinivasan, Sr. Adv. Ms Pooja M. Saigal, Nikhil Sabri, Nipun Gupta & Ms Namrata, Advs. for the Respondent.

Facts of the Case

The issued before the High Court was:

“Whether the proceedings for misconduct can only be against the person, who is identified as the member answerable ‘members concerned’ and not against the firm or any other member or all other members of the firm.”

High Court Held

The High Court held that Section 21A and Section 21B of the Chartered Accountants Act, 1949 empowers the ICAI’s Disciplinary Committee, if it believes that the member is guilty of professional or other misconduct, to reprimand a member, remove the name of the member, or even impose a fine. Rule 8 of the 2007 Rules makes it clear that the notice of complaint can be given to the firm setting out the acts of omission and commission at the firm’s address. The firm can send a declaration as to the persons responsible or member answerable for answering the complaint.

The explanation makes it clear that the notice to the firm is the notice to all the members who are the partners or employees of the firm on the date of registration of the complaint. The firm can disclose the name of a person who shall be responsible for answering the complaint provided such a member was associated with the firm either as a partner or employee at the time of the alleged misconduct. The proviso to Rule 8 (2) makes it clear that if no member owns responsibility regarding the allegations, then the firm shall be responsible.

Sections 21A and 21B of the Act, read with Rule 8 of the Rules, clarify that the ICAI is fully empowered to take action against a firm and issue notices even to a firm.

In the case of any complaint or allegation regarding a single incident or an act of a member, the firm can designate the person associated with the said act, which is alleged to be misconduct. The position would, however, be different, say, in a case where the allegations are in respect of arrangements entered into by firms with other international counterparts, spanning over decades and multiple agreements. A single individual cannot be pinned down in such situations to be responsible for answering the complaint as a member. The firm has to be held accountable if found guilty in such circumstances, failing which the Act would be rendered toothless.

Under Rule 8(2) of the Rules, the pre-condition for a member answerable who can be held responsible is that such a member has to be associated with the alleged misconduct. The letters repeatedly written by the firm, the Petitioners, and the identified persons who have given declarations as answerable members do not inspire confidence. This court thinks that one individual can be made a scapegoat for such wide-ranging allegations of misconduct against multiple groups/entities or firms forming a part of the PWC group, even if such an individual willingly volunteers to absolve the firm and everyone else responsible.

If the ICAI’s DC believes that a member is incorrectly taking responsibility for wide-ranging allegations, the ICAI is fully empowered to hold the firm as a whole as being responsible.