Chartered accountants, pay attention! You can be proceeded against for acts that bring disrepute to your profession

In a landmark decision, the Supreme Court has held that chartered accountants can be proceeded against for their acts that cause disrepute to their profession irrespective of the fact whether this relates to their professional work or not. The case pertains to an appeal arising out of a complaint dated 16.03.2005 against a

chartered accountant in connection with the sale of 100 shares which had been transferred to the Chartered Account’s own name. It was also pleaded before the apex court that the matter has been ‘settled’ between the chartered accountant and the complainant in this case.

However, it is pertinent to note that a Disciplinary Committee has, based on certain facts, found this Chartered Accountant to be guilty of a practice which was not in the Chartered Accountant’s professional capacity.

While deciding the case, the High Court’s observation was that the chartered accountant had been functioning in his individual capacity in his dealings. It had also been observed that while selling shares that he had held, he had not been acting in his professional capacity. However, the apex court bench pointed out that the High Court had not appreciated correctly the section 21(3) of Chartered Accountants Act 1949.

“It is clear that the impugned judgment is incorrect and must therefore be set aside. We remand the matter to the High Court to be decided afresh,” the Supreme Court bench comprising of Justice RF Nariman and Justice Navin Sinha said.

The apex court bench held that when such an act causes disrepute to the profession itself, it does not matter whether this act relates to the CA’s professional work or not.