Naresh Chandra Agrawal vs. The Institute of Chartered Accountants of India [February 08, 2024]
This case arose from a complaint by the Bank of Rajasthan against M/s Ramesh C. Agrawal & Co., an audit firm in which Naresh Chandra Agrawal was a partner, for failing to report suspicious transactions at the Sahara India, Aliganj, Lucknow branch. The Director (Discipline) of the Institute of Chartered Accountants of India (ICAI) initially found no prima facie case of professional misconduct against Agrawal. However, the Board of Discipline disagreed and referred the matter to the Disciplinary Committee under Rule 9(3)(b) of the Chartered Accountants (Procedure of Investigation of Professional and Other Misconduct and Conduct of Cases) Rules, 2007.
Agrawal challenged the validity of Rule 9(3)(b), arguing it was ultra vires (beyond the powers granted by) Section 21A(4) and Section 29A(2)(c) of the Chartered Accountants Act, 1949, as it allegedly allowed the Board of Discipline to overrule the Director’s findings without explicit statutory authority.
Key Legal Issue
Whether Rule 9(3)(b) of the 2007 Rules, which empowers the Board of Discipline to refer a complaint to the Disciplinary Committee even if the Director finds no misconduct, is ultra vires the parent Act.
Supreme Court’s Analysis
The Court examined the scope of the Central Government’s rule-making power under Section 29A of the Chartered Accountants Act, 1949. It noted that Section 29A(1) provides a broad, general delegation to make rules to carry out the purposes of the Act, not limited to the specific matters listed in Section 29A(2).
The Court held that Rule 9(3)(b) is consistent with the object and purpose of the Act—ensuring that genuine complaints of professional misconduct are not dismissed at the threshold due to a single officer’s opinion. The Board of Discipline’s ability to refer matters for deeper inquiry by the Disciplinary Committee is a procedural safeguard, not an overreach.
The Court rejected the argument that the rule was ultra vires, emphasizing that the general rule-making power under Section 29A(1) is wide enough to cover procedural provisions like Rule 9(3)(b), even if not specifically mentioned in Section 29A(2).
The Supreme Court also affirmed the High Court’s view that the rule furthered the legislative intent of maintaining high standards of professional conduct among chartered accountants.
Judgment
The Supreme Court dismissed Agrawal’s appeal, upholding the validity of Rule 9(3)(b) and the Board of Discipline’s decision to refer the matter to the Disciplinary Committee.
The Court clarified that delegated legislation made under a general rule-making power should be interpreted in a manner that furthers the Act’s objectives, especially in professional regulatory contexts.
Significance
This judgment establishes that when a parent statute grants broad rule-making powers, subordinate legislation will be upheld if it advances the statute’s purpose and does not contradict its express provisions. The decision strengthens procedural safeguards in professional misconduct investigations and underscores the judiciary’s deference to regulatory bodies in maintaining professional standards.
Citation:
Naresh Chandra Agrawal v. The Institute of Chartered Accountants of India & Others, [2024] 2 S.C.R. 194; 2024 INSC 94; Civil Appeal No. 4672 of 2012; Supreme Court of India, decided on February 8, 2024.
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