ICAI can initiate suo moto proceedings against CAs in Nirav Modi case, rules Delhi HC

The Delhi High Court on Saturday ruled that even in the absence of a written complaint, the Institute of Chartered Accountants of India (ICAI) has the power to initiate suo motu disciplinary proceedings against its members.

A batch of petitions were filed by chartered accountants wanting to cancel the disciplinary proceedings initiated against them by the ICAI.

A single-bench judge of Justice Yashwant Varma said: “A written complaint or allegation in writing cannot, in any manner, be understood to be a pre-requisite or a sine qua non for the initiation of action under Section 21.

“That material need not necessarily be in the written or be interpreted as being confined to something which an individual may choose to bring to the notice of the institute. Acceptance of a submission to the contrary would amount to restricting the width and amplitude of the power conferred by Section 21 which enables the institute to proceed on the basis of ‘any information’.”

However, the court said that a news article cannot be counted as an evidence.

“A newspaper report, as is well settled, cannot and does not constitute evidence per se. A report that may appear in the print media or on a visual news platform, can at best be understood as being an external source from which the institute may gather or derive knowledge of a particular fact or incident,” the judge said.

These petitioners were employed with firms which were appointed as joint statutory auditors of the Punjab National Bank to conduct a limited review of its financial statements.

ICAI issued show cause notices to the petitioners for allegedly not complying with various auditing standards in the money laundering case involving Nirav Modi, who had defrauded banks to the tune of Rs 12,000 crore.

The CAs had said that the ICAI cannot initiate suo motu proceedings as they were based merely on news reports.

In response, the court said: “The court is of the firm opinion that the Institute did have the requisite information as contemplated by Section 21 and which justified the initiation of the enquiry against the petitioners in the facts of the present case.”

“The answer to the question whether a particular power stands conferred under statute must necessarily be answered on a reading of the statute and on discernment of its scope. The meaning to be conferred upon a statute cannot rest merely on the fact that the power though being found to exist was never invoked earlier,” the court added.A

Justice Varma further dismissed the petitions and said that the ICAI is entitled to proceed in the matter.




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