Mismatch in ICAI Charges with CBI Complaint: Karnataka HC quashes Disciplinary order against CA Practising 40+ Years [Read Order]

The Karnataka high court has quashed disciplinary order against a Chartered Accountant( CA ) practising more than 40 plus years due to mismatch in charges between the CBI complaint and ICAI.

Justice E.S.Indiresh noted “It is settled principle in law that the delinquent must be aware about the charge framed against him before participating in the enquiry proceedings by the Disciplinary Authority.” In this case, the accountant did not get the opportunity to put up his case better.

The writ petition was filed by Mr. Naginchand Khincha, an accountant practising since 1974 challenging the decision of the ICAI’s board of discipline order. He faced criminal prosecution initiated by the Central Bureauof Investigation (CBI) with an Income Tax Officer under the Prevention of Corruption Act, 1988.

The allegation against him was that the accountant-petitioner acted as a conduit for bribing the Income Tax Officer to settle a tax dispute of a client. While certain charges under the PC Act were later dropped, the criminal trial continued on limited counts before the Special Court.

Parallelly, the CBI forwarded a complaint to ICAI under the Chartered Accountants Act, 1949 and the 2007 Disciplinary Rules on the grounds that charging an exorbitant fee, allegedly in violation of Clause 7.7 of the ICAI Code of Ethics.

The ICAI prima facie found guilty of the matter and passed the order. However, according to the petitioner, there was a complete disconnect between the CBI complaint and the disciplinary charges.

It was submitted by the Petitioner-CA that while the CBI’s complaint to ICAI alleged charging of excessive professional fees, the disciplinary proceedings were proceeded on the basis of the bribery aspect which was not raised by the CBI in its complaint.

Also read: ICAI Reprimands CA for Withholding Audit Working Papers and FilingIncomplete Forms 23AC & 23ACA with MCA [Read Order]

On the other hand, the ICAI submitted that the disciplinary process strictly followed the procedure prescribed under the CA Act and the 2007 Rules. It said that there is no legal bar to continuing disciplinary proceedings parallel to criminal prosecution.

The ICAI also argued that the petitioner had an alternative remedy by way of appeal under Section 22G of the CA Act. Therefore the writ petition was not maintainable.

The court noted that the CBI complaint alleged violation of the ICAI Code of Ethics by charging excessive professional fees, whereas the disciplinary proceedings proceeded on allegations relating to bribery and conduct bringing disrepute to the profession.

It was held that these two allegations were “distinct and different” and could not be conflated.

The bench said that a professional facing disciplinary action must be clearly informed of the precise charge against him, and that disciplinary findings cannot rest on allegations that were never the basis of the original complaint.

The disciplinary proceedings and criminal prosecution should continue independently. The awareness of the charges is mandatory and it cannot be compromised, said the court.

With regards to the submission of ICAI stating that the petition has alternate remedy, the high court said that “having arrived at a conclusion that the entire departmental proceedings before the respondent is based on disputed facts on record, as per the aforementioned finding at paragraph No.15 by the Board of Discipline at Annexure-A, I am of the view that, relegating the petitioner to approach the appropriate authority is a useless formality.”

Therefore, allowing the petition, the Karnataka High Court quashed the order of ICAI’s Board of Discipline.

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