PETITIONER:
INSTITUTE OF CHARTERED ACCOUNTANTS
Vs.
RESPONDENT:
L.K. RATNA & OTHERS
DATE OF JUDGMENT21/10/1986
BENCH:
PATHAK, R.S.
BENCH:
PATHAK, R.S.
MUKHARJI, SABYASACHI (J)
CITATION:
1987 AIR 71 1986 SCR (3)1048
1986 SCC (4) 538 JT 1986 671
1986 SCALE (2)614
CITATOR INFO :
RF 1992 SC 248 (537)
ACT:
Chartered Accountants Act, 1949, ss. 17(3), 21(3),
21(4), 22A and First Schedule Part I clauses 6 & 7
Regulations 11-15-Member of Institute of Chartered
Accountants-Charged with Misconduct-Disciplinary Committee-
Jurisdiction of-Scope of inquiry-Member, Whether entitled to
hearing by Council of Institute after Disciplinary Committee
submits report.
Sec. 21-Nature of Proceedings before the Disciplinary
Committee & Council of the Institute-What are-The conclusion
of Disciplinary Committee does not enjoy the status of a
'finding'-Conclusion of Council is the first determinative
finding-Council-Whether obliged to give reasons for its
finding.
Administrative Law-Professional Body-Charge of
misconduct-Disciplinary Committee conducting inquiry &
submitting report to Council for final decision-
Participation of members of Disciplinary Committee in
Council deliberations-Principles of Natural Justice-Whether
violated.
HEADNOTE:
The appellant-the Institute of Chartered Accountants of
India was created as a body corporate under the Chartered
Accountants Act 1949. Its members are Chartered Accountants.
The affairs of the Institute are managed by a body known as
the Council of the Institute which is headed by the
President. Below him is the Vice-President. One of the
Standing Committees of the Council is the Disciplinary
Committee. It consists of the President and the Vice-
President ex-officio of the Council, two members elected by
the Committee from its members, and a third member nominated
by the Central Government.
Section 21 of the Act lays down the procedure for
conducting inquiries relating to cases of misconduct by the
members and the penalty which may be imposed. Sub-s. (1) of
s. 21 provides that where
1050
the Council is prima facie of opinion that any member has
been guilty of any professional or other misconduct it shall
refer the case to the Disciplinary Committee which is to
hold an inquiry and report the result to the Council. Sub-s.
4 lays down that where the finding of the Disciplinary
Committee is that a member has been guilty of professional
misconduct it shall afford an opportunity of being heard and
may thereafter make an order either to: (a) reprimand the
member; or (b) remove the name of the member from the
Register for such period not exceeding five years, or (c)
where it appears to the Council that the case is one in
which the name of the member ought to be removed from the
register for a period exceeding five years or permanently or
if the member is guilty of misconduct other than any such
misconduct as is referred to in sub-s. 4, it shall forward
the case to the High Court with its recommendations thereon.
Section 22A of the Act entitles a member to prefer an appeal
to the High Court against an order of the Council.
The respondents-Chartered Accountants and members of
the Institute, were charged for committing the offences of
professional misconduct under clauses 6 & 7 of Part I of the
First Schedule to the Act, in that they had prepared and
brought out a brochure relating to Management Consultancy
Services, and had sent out letters to Auditor Firms
appraising them of its existence. The Council considered
their replies and being of the prima facie opinion that they
were guilty of professional misconduct referred the cases to
the Disciplinary Committee which, after affording a personal
hearing to the respondents, submitted its report to the
Council opining that they were guilty of professional
misconduct. The Council considered the aforesaid report,
and, after having found the respondents guilty of the
misconduct, proposed to remove their names from the register
of members for a period not exceeding five years in
accordance with the procedure laid down in section 21(4).
The respondents were informed that they would be called upon
to appear before the Council to make a representation
against the proposed action and that the scope of the oral
hearing or written representation would be restricted to the
penalty proposed.
Aggrieved by the order of the appellant, the
respondents filed Writ Petitions in the High Court. A Single
Judge of the High Court allowed the petitions, quashed the
orders imposing penalty on the respondents and remanded the
cases to the Council for fresh consideration on the finding:
(i) that the Council should have given an opportunity to the
respondents to represent before it against the report of the
Disciplinary Committee; and (ii) that the decision of the
Council was
1051
vitiated inasmuch as the President, the Vice-President and
the two members of the Institute, who were also members of
the Disciplinary Committee, were disqualified from
participating in the proceedings of the Council when it
considered the report of the Disciplinary Committee. The
appeals filed by the appellant having been summarily
rejected by the Division Bench, the Institute appealed to
this Court.
Dismissing the appeals of the appellant, this Court,
^
HELD: 1.1 A member accused of misconduct is entitled to
a hearing by the Council when, on receipt of the report of
the Disciplinary Committee, it proceeds to find whether he
is or is not guilty. [1067D]
1.2 The Council is empowered to find a member guilty of
misconduct. The penalty which follows is so harsh that it
may result in his removal from the register of Members for a
substantial number of years. The removal of his name from
the register deprives him of the right to a certificate of
practice. In these circumstances there is every reason to
presume in favour of an opportunity to the member of being
heard by the Council before it proceeds to pronounce him
guilty of misconduct. [1063F-G]
2.1 In the scheme incorporated in s. 21 of the Act
there are separate functionaries, the Disciplinary
Committee, the Council and in certain cases, the High Court.
The controlling authority is the Council. The Disciplinary
Committee plays a subordinate role. It conducts an inquiry
into the allegations. Since the inquiry is into allegations
of misconduct by the member, it possesses the character of a
quasi-judicial proceedings. The Disciplinary Committee
thereafter submits a report of the result of the inquiry to
the Council. The Disciplinary Committee is merely a
Committee of the Institute, with a function specifically
limited by the provisions of the Act. Its conclusions are
tentative only. They cannot be regarded as 'findings'. The
Disciplinary Committee is not vested by the Act with power
to render any findings. It is the Council which is empowered
to find whether the member is guilty of misconduct. The
finding by the Council is the determinative decision as to
the guilt of the member, and because it is determinative,
the Act requires it to be recorded. [1062C-H]
A responsibility so grave as the determination that a
member is guilty of misconduct, and the recording of that
finding, has been specifically assigned by the Act to the
governing body, the Council. It is also
1052
only upon a finding being recorded by the Council that the
Act moves forward to the final stage of penalisation. The
recording of the finding by the Council is the
jurisdictional spring board for the penalty proceeding which
follows. [1062H; 1063A-B]
2.2 The report constitutes the material to be
considered by the Council. The Council will take into regard
the allegations against the member, his case in defence, the
recorded evidence, and the conclusions expressed by the
Disciplinary Committee. The nature of the function
discharged by the Council in rendering its finding is quasi-
judicial. A member whose conduct has been the subject of
inquiry by the Disciplinary Committee ending in conclusions
adverse to him can legiti-mately entertain an apprehension
that the President and the Vice-President of the Council and
the other members of the Disciplinary Committee would
maintain the opinion expressed by them in their report and
would press the acceptance of the report by the Council.
Although the member has participated in the inquiry, he has
had no opportunity to demonstrate the fallibility of the
conclusions of the Disciplinary Committee. It is the
material which falls within the domain of consideration by
the Council. It should also be open to the member, to point
out to the Council any error in the procedure adopted by the
Disciplinary Committee which could have resulted in
vitiating the inquiry. [1063B-D]
S. 21(8) arms the Council with power to record oral and
documentary evidence, and it is precisely to take account of
that eventuality and to repair the error that this power has
been conferred. It cannot, therefore, be denied that even
though the member has participated in the inquiry before the
Disciplinary Committee, there is a range of consideration by
the Council on which he has not been heard. He is clearly
entitled to an opportunity of hearing before the Council
finds him guilty of misconduct. [1063D-E]
3.1 The finding by the Council operates with finality
in the proceedings, and it constitutes the foundation for
the penalty by the Council on him. [1063G-H]
The power to find and record whether a member is guilty
of misconduct has been specifically entrusted by the Act to
the entire Council itself and not to a few of its members
who constitute the Disciplinary Committee. [1063H; 1064A]
3.2 It is the character and complexion of the
proceeding consi-
1053
dered in conjunction with the structure of power constituted
by the Act which leads to the conclusion that the member is
entitled to a hearing by the Council before it can find him
guilty. [1064A-B]
Manek Lal v. Dr. Prem Chand, [1957] SCR 575, referred
to.
4. There is no doubt that there is difference between
the provisions of s. 21(3) and 21(4), in that while in s.
21(4) Parliament has indicated that an opportunity of being
heard should be accorded to the member, nowhere in s. 21(3)
there is such requirement. But, that does not affect the
question. The textual different is not decisive. It is the
substance of the matter, the character of the allegations,
the far-reaching consequences of a finding against the
member, the vesting of responsibility in the governing body
itself, all these and kindred considerations enter into the
decision of the question whether the law implies a hearing
to the member at that stage. [1064D-E]
5. There is nothing in Regulation 14 which excludes the
operation of the principle of natural justice entitling the
member to be heard by the Council when it proceeds to render
its finding. [1065B-C]
The principles of natural justice must be read into the
unoccupied interstices of the statute unless there is a
clear mandate to the contrary. [1065C]
6. There are cases where an order may cause serious
injury as soon as it is made, an injury not capable of being
entirely erased when the error is corrected on subsequent
appeal. Where a member of a highly respected and publicly
trusted profession is found guilty of misconduct and suffers
penalty, the damage to his professional reputation can be
immediate and far-reaching. To many a man, his professional
reputation is his most valuable possession. It is often the
carefully garnered fruit of a long period of scrupulous,
conscientious and diligent industry. It is the portrait of
his professional honour. In such a case, after the blow
suffered by the initial decision, it is difficult to
contemplate complete restitution through an appellate
decision. Therefore, there is manifest need to ensure that
there is no breach of fundamental procedure in the original
proceeding, and to avoid treating an appeal as an overall
substitution for the original proceeding. [1066F-H; 1067A-C]
7.1 By virtue of s. 17(3) it is obligatory that the
Disciplinary Committee should be composed of the President
and the Vice-President of the Council and three other
members of the Council. While that is so,
1054
there is nothing in the Act to suggest that the meetings of
the Council must always be presided over by the President or
the Vice-President and that no meeting can be held in their
absence. There is an element of flexibility which makes it
possible for the Council to consider the report of the
Disciplinary Committee without the participation of the
members of the Committee. Because of the 'flexibility'
potential in the scheme, the doctrine of necessity, cannot
come into play. [1069E-H]
7.2. There is nothing in s. 21 of the Act to indicate
whether the members of the Disciplinary Committee should be
excluded when the Council enters upon its task. The function
of the Disciplinary Committee of holding an inquiry under s.
21(1) of the Act into the conduct of the member calls for a
recording of evidence by the Committee. Its duty does not
end there. It must consider the evidence and come to its
conclusions. Section 21(2) of the Act plainly says, it must
report "the result of its enquiry" to the Council. In the
absence of express or implied statutory intendment to the
contrary, the members of such a committee would be
disqualified from participating in the deliberations of the
Council when it proceeds to consider the report in order to
find whether the member is guilty of misconduct. For that
alone would be consistent with the fundamental principle
that justice must not only be done but must also appear to
be done. [1068B-F]
Re Daneyger and Alberta Pharmaceutical Association, 17
D.L.R. (3d) 206, Re Prescott, 19 D.L.R. (3d) 446, Re
Merchant and Benchers of the Law Society, 32 D.L.R. (3d) 178
and Law Socieety of Upper Ganada v. French, 49 D.L.R. (3d)
1, distinguished.
8. The Council is obliged to give reasons for its
finding that a member is guilty of misconduct. In fairness
and justice, the member is entitled to know why he has been
found guilty. [107 1E-G]
The member has been given a right of appeal to the High
Court under s. 22-A of the Act. To exercise his right of
appeal effectively he must know the basis on which the
Council has found him guilty. Further, a finding by the
Council is the first determinative finding on the guilt of
the member. It is a finding by a Tribunal of first instance.
The conclusion of the Disciplinary Committee does not enjoy
the status of a "finding". Moreover, the reasons contained
in the report by the Disciplinary Committee for its
conclusion may or may not constitute the basis of the
finding rendered by the Council. The Council must,
therefore, state the reasons for the finding. [1071F-G]
1055
9. Due recognition should be given to the fundamental
principles and accepted axioms of law. [1070B-C]
[Removal of the anomaly by suitable legislative
amendment of s. 17(3) of the Act so that the constitution of
the Disciplinary Committee should not necessarily include
the President and the Vice-President of the Council was
suggested by the Court.] [1070B-C]
James Edward Jeffs and Others v. New Zealand Dairy
Production and Marketing Board and others, [1967] 1 AC 551,
Chandra Bhavan Boarding and Lodging Bangalore v. The State
of Mysore and Anr.[1970] 2 SCR 600 and K.L. Tripathi v.
State Bank of India and Others, [1984] 2 SCC 43,
inapplicable.
Leary v. National Union of Vehicle Builders, [1971] 1
Ch. 34, Re Cardinal and Board of Commissioners of Police of
City of Cornwall, [1974] 42 D.L.R. (3d) 323, Wisland v.
Medical Practioners Disciplinary Committee, [1974] 1
N.Z.L.R. 29 and Reid v. Rowley, [1977] 2 N.Z.L.R. 472,
referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1911
and 1912 of 1980.
From the Judgment and Order dated 16.4.1980 of the
Bombay High Court in Appeal No. 203 and 205 of 1980.
F.S. Nariman, Anil B. Divan, K.K. Jain, S.K. Gupta,
Promod Dayal, G. Banerjee and A.D. Sanger for the Appellant.
Atul Setalvad, Atul Rajadhya and Mrs. A.K. Verma for
the Respondents.
The Judgment of the Court was delivered by
PATHAK, J. These appeals raise some fundamental
questions in regard to the conduct and procedure of
disciplinary proceedings taken under the Chartered
Accountants Act, 1949. Two of the questions are:
1. “Whether a member of the Institute of Chartered
Accountants of India is entitled to a hearing by
the Council of the Institute after the
Disciplinary Committee has sub-
1056mitted its report to the Council of its enquiry
into allegations of misconduct against the member?2. When the Council proceeds to consider the
Report of the Disciplinary Committee, is the
proceeding vitiated by the presence of the members
of the Disciplinary Committee who include the
President and the Vice-President of the Council
and three other members of it?”The appellant is the Institute of Chartered Accountants
of India (the “Institute”). The Institute was created as a
body corporate under the Chartered Accountants Act, 1949
(the “Act”), and its members are Chartered Accountants. The
affairs of the Institute are managed by a body known as the
Council of the Institute, which is headed by a President and
a Vice-President below him. There are three Standing
Committees of the Council, and one of them is the
Disciplinary Committee. The Disciplinary Committee consists
of the President and the Vice-President ex-officio of the
Council, two members elected by the Committee from its
members and a third member nominated by the Central
Government. Chapter V of the Act contains provisions dealing
with cases of misconduct of members of the Institute.
Section 21 provides for conducting enquiries relating to
such misconduct and the penalties which may be imposed, and
section 22A provides for an appeal by a member against the
imposition of a penalty. As the sections are material, they
may be set forth:S.21. Procedure in inquiries relating to
misconduct of members of Institute
(1) Where on receipt of information by, or of a
complaint made to it, the Council is prima facie
of opinion that any member of the Institute has
been guilty of any professional or other
misconduct, the Council shall refer the case to
the Disciplinary Committee, and the Disciplinary
Committee shall thereupon hold such inquiry and in
such manner as may be prescribed, and shall report
the result of its inquiry to the Council.
(2) If on receipt of such report the Council finds
that the member of the Institute is not guilty of
any professional or other misconduct, it shall
record its finding accordingly and direct that the
proceedings shall be filed or the complaint shall
be dismissed, as the case may be.1057
(3) If on receipt of such report the Council finds
that the member of the Institute is guilty of any
professional or other misconduct, it shall record
a finding accordingly and shall proceed in the
manner laid down in the succeeding sub-section.
(4) Where the finding is that a member of the
Institute has been guilty of a professional
misconduct specified in the First Schedule, the
Council shall afford to the member an opportunity
of being heard before orders are passed against
him on the case, and may thereafter make any of
the following orders, namely:(a) reprimand the member;
(b) remove the name of the member from the
Register for such period, not exceeding five
years, as the Council thinks fit:Provided that where it appears to the Council
that the case is one in which the name of the
member ought to be removed from the Register for a
period exceeding five years or permanently, it
shall not make any order referred to in clause (a)
or clause (b), but shall forward the case to the
High Court with its recommendations thereon.
(5) Where the misconduct in respect of which the
Council has found any member of the Institute
guilty is misconduct other than any such
misconduct as is referred to in subsection (4), it
shall forward the case to the High Court with its
recommendations thereon.(6) On receipt of any case under sub-section (4)
or subsection (5), the High Court shall fix a date
for the hearing of the case and shall cause notice
of the date so fixed to be given to the member of
the Institute concerned, the Council and to the
Central Government, and shall afford such member,
the Council and the Central Government an
opportunity of being heard, and may thereafter
make any of the following orders namely:(a) direct that the proceedings be filed, or
dismiss the complaint, as the case may be;1058
(b) reprimand the member;
(c) remove him from membership of the
Institute either permanently or for such
period as the High Court thinks fit;(d) refer the case to the Council for further
inquiry and report.(7) ………………………………………
(8) For the purposes of any inquiry under this
section, the Council and the Disciplinary
Committee shall have the same powers as are vested
in a civil court under the Code of Civil
Procedure, 1908, in respect of the following
matters, namely:(a) summoning and enforcing the attendance of
any person and examining him on oath;(b) the discovery and production of any
document; and(c) receiving evidence on affidavit.
22A. Appeals
(1) Any member of the Institute aggrieved by any
order of the Council imposing on him any of the
penalities referred to in sub-section (4) of
Section 21, may, within thirty days of the date on
which the order is communicated to him, prefer an
appeal to the High Court:Provided that the High Court may entertain
any such appeal after the expiry of the said
period of thirty days, if it is satisfied that the
member was prevented by sufficient cause from
filing the appeal in time.(2) The High Court may, on its own motion or
otherwise, after calling for the records of any
case, revise any order made by the Council under
sub-section (2) or sub-section (4) of Section 21
and may-1059
(a) confirm, modify or set aside the order;
(b) impose any penalty or set aside, reduce,
confirm, or enhance the penalty imposed by
the order;(c) remit the case to the Council for such
further inquiry as the High Court considers
proper in the circumstances of the case; or(d) pass such other order as the High Court
thinks fit:
Provided that no order of the Council shall
be modified or set aside unless the Council has
been given an opportunity of being heard and no
order imposing or enhancing a penalty shall be
passed unless the person concerned has also been
given an opportunity of being heard.”
The Act provides for the framing of Regulations. Regulations
11 to 15 set forth the procedure for an enquiry into
allegations of misconduct.
Messrs A.F. Ferguson & Co. (“Ferguson & Co.”) is a
reputed firm of Chartered Accountants. The respondent Lalit
Kumar Ratna is a partner and the respondents Ashok Kumar
Behl and P.R. Bhoopatkar are employees in the firm. All
three are Chartered Accountants and members of the
Institute.
In 1967 Ferguson & Co. established a Management
Consultancy Division. Ratna was head of the Division, and
Behl and Bhoopatkar worked under him. On April 15, 1970,
Ferguson & Co. wrote to the Institute enquiring whether it
could send out letters to Auditor Firms apprising them of
the existence of the Management Consultancy Service and
whether it was forbidden from doing so by any rules of the
Institute. The Secretary of the Institute replied that the
Council had appointed a Sub-Committee for considering the
ethical problems arising out of the functioning of the
Institute’s members in the area of Management Consultancy
Service and the firm was requested to wait for the
recommendations of the Sub-Committee.
On December 8, 1971, Ratna issued a circular to the
partners and principals of the firm setting forth guidelines
on bringing the Management Consultancy Service brochures to
the attention of their
1060
respective clients. Meanwhile, Ferguson & Co. also referred
the matter to their solicitors, and the solicitors advised
that making available of printed informative material in the
form of a brochure would not be in contravention of Clauses
6 and 7 in Part I of the First Schedule to the Act or
otherwise amount to professional misconduct.
A few days later the Council published an “exposure
draft”, setting forth the proposals under consideration by
the Council regarding the regulations and ethical rules in
respect of Management Consultancy Services by Chartered
Accountants, and invited members to send their suggestions
on the proposals. It was pointed out further that the
recommendations to be made by the Council would require
appropriate amendments in Part I of the First Schedule to
the Act which contained rules in respect of professional
misconduct.
Meanwhile, Ratna had prepared a brochure relating to
the Management Consultancy Service to be provided by
Ferguson & Co. It was stated that the brochure was intended
for the use of the clients of the firm who requested
information regarding such services and that it was for
limited circulation only, the clients themselves being
warned of that restriction. On February 19, 1973, the
Council wrote to Ferguson and Co. inviting its attention to
the brochure and alleging that it contained information
against the firm under Section 21 of the Chartered
Accountants Act read with clauses 6 and 7 of Part I of the
First Schedule to the Act, and in accordance with Regulation
11(5) (b) read with Regulation 12 of the Chartered
Accountants Regulations 1964, the firm was required to
disclose to the Council the name of the member answerable to
the charge of misconduct. In reply, the firm named Ratna as
the member responsible for the brochure.
On April 14, 1973, Ratna submitted a written statement
to the Institute denying that he was guilty of professional
misconduct and he set forth a detailed statement of the
reasons in support of his stand. The Council considered the
matter in its meeting of September 13, 14 and 15, 1973 and
being of prima facie opinion that Ratna was guilty of
professional misconduct referred the case to the
Disciplinary Committee. The Disciplinary Committee consisted
of the President, S.K. Gupta, the Vice-President, N.C.
Krishnan, two members of the Institute, R.K. Khanna and
Bansi S. Mehta and the Government nominee, Ganapathi. The
Disciplinary Committee gave a personal hearing on January 4,
1974, to Ratna and his counsel. On February 14, 1974, the
Disciplinary Committee submitted its report to the Council
opining
1061
that Ratna was guilty of professional misconduct under
clauses 6 and 7 of Part I of the First Schedule to the Act
insofar as he solicited clients directly or indirectly and
also advertised professional attainments of his services. In
its meeting of February 16, 1974 the Council considered the
report of the Disciplinary Committee and found that Ratna
was guilty of the misconduct. In February 25, 1974, the
Institute wrote to Ratna that the Council had found him
guilty of professional misconduct, as charged, and that it
was proposed to remove his name from the Register of Members
for a period not exceeding five years in accordance with the
procedure laid down in s. 21(4) of the Act. He was informed
that he would be called upon to appear before the Council at
its next meeting but in case he did not wish to be heard in
person he was entitled to send a written representation
against the proposed action. He was required to take note
that the scope of the oral hearing for consideration of the
written representation would be restricted to the penalty
proposed. Copies of the Report of the Disciplinary Committee
and the findings of the Council were forwarded to him. On
March 4, 1974, Ratna applied for extension of time to enable
him to make his representation and the Council granted him
time up to April 13, 1974, for that purpose.
It may be stated at this stage that parallel
proceedings were taken in the case of Behl and Bhoopatkar.
The brochure was treated as information against them also,
and on April 14, 1973, they sent their written statements to
the Institute. Their submissions were considered by the
Council, which being of opinion that they were prima facie
guilty of misconduct, referred the matter to the
Disciplinary Committee. On January 4, 1974, the Disciplinary
Committee granted a full personal hearing to these two
respondents, who were represented by counsel. As in the case
of Ratna, the Disciplinary Committee made its report to the
Council that these two respondents were guilty of
professional misconduct under clauses 6 and 7 of Part I of
the First Schedule to the Act, and in its meeting on
February 16, 1974 the Council held them guilty accordingly
and proposed the same penalty as in Ratna’s case. They were
also invited to appear in person or to make a written
representation against the penalty proposed before the
Council.
Ratna now filed W.P. No. 426 of 1974 and Behl and
Bhoopatkar filed W.P. No. 428 of 1974 in the High Court of
Bombay. The Writ Petitions were allowed by Lentin, J by
separate orders dated March 3, 1980, on the finding that the
Council should have given an opportunity to the members to
represent before it against the report of the Disci-
1062
plinary Committee and that the President, the Vice-President
and the two members of the Institute who were members of the
Disciplinary Committee were disqualified from participating
in the proceedings of the Council when it considered the
report of the Disciplinary Committee, and that as the
decision of the Council was consequently vitiated the orders
imposing penalty on the respondents were quashed and the
case remanded to the Council for fresh consideration. The
Institute appealed to a Division Bench of the High Court and
the appeals have been summarily rejected by separate orders
dated April 16, 1980.
It is apparent that in the scheme incorporated in s. 21
of the Act there are separate functionaries, the
Disciplinary Committee, the Council and, in certain cases,
the High Court. The controlling authority is the Council,
which is only logical for the Council is the governing body
of the Institute. When the Council receives information or a
complaint alleging that a member of the Institute is guilty
of misconduct, and it is prima facie of opinion that there
is substance in the allegations it refers the case to the
Disciplinary Committee. The Disciplinary Committee plays a
subordinate role. It conducts an inquiry into the
allegations. Since the inquiry is into allegations of
misconduct by the member, it possesses the character of a
quasi-judicial proceeding. The Disciplinary Committee
thereafter submits a report of the result of the inquiry to
the Council. The Disciplinary Committee is merely a
Committee of the Institute, with a function specifically
limited by the provisions of the Act. As a subordinate body,
it reports to the Council, the governing body. The report
will contain a statement of the allegations, the defence
entered by the member, a record of the evidence and the
conclusions upon that material. The conclusions are the
conclusions of the Committee. They are tentative only. They
cannot be regarded as ‘findings’. The Disciplinary Committee
is not vested by the Act with power to render any findings.
It is the Council which is empowered to find whether the
member is guilty of misconduct. Both s. 21(2) and s. 21(3)
are clear as to that. If on receipt of the report the
Council finds that the member is not guilty of misconduct,
s. 21(2) requires it to record its finding accordingly, and
to direct that the proceedings shall be filed or the
complaint shall be dismissed. If, on the other hand, the
Council finds that the member is guilty of misconduct, s.
21(3) requires it to record a finding accordingly, and
thereafter to proceed in the manner laid down in the
succeeding subsections. So the finding by the Council is the
determinative decision as to the guilt of the member, and
because it is determinative the Act requires it to be
recorded. A responsibility so grave as the determina-
1063
tion that a member is guilty of misconduct, and the
recording of that finding, has been specifically assigned by
the Act to the governing body, the Council. It is also
apparent that it is only upon a finding being recorded by
the Council that the Act moves forward to the final stage of
penalisation. The recording of the finding by the Council is
the jurisdictional springboard for the penalty proceeding
which follows.
Now when it enters upon the task of finding whether the
member is guilty of misconduct, the Council considers the
report submitted by the Disciplinary Committee. The report
constitutes the material to be considered by the Council.
The Council will take into regard the allegations against
the member, his case in defence, the recorded evidence and
the conclusions expressed by the Disciplinary Committee.
Although the member has participated in the inquiry, he has
had no opportunity to demonstrate the fallibility of the
conclusions of the Disciplinary Committee. It is material
which falls within the domain of consideration by the
Council. It should also be open to the member, we think, to
point out to the Council any error in the procedure adopted
by the Disciplinary Committee which could have resulted in
vitiating the inquiry. S. 21(8) arms the Council with power
to record oral and documentary evidence, and it is precisely
to take account of that eventuality and to repair the error
that this power seems to have been conferred. It cannot,
therefore, be denied that even though the member has
participated in the inquiry before the Disciplinary
Committee, there is a range of consideration by the Council
on which he has not been heard. He is clearly entitled to an
opportunity of hearing before the Council finds him guilty
of misconduct.
At this point it is necessary to advert to the
fundamental character of the power conferred on the Council.
The Council is empowered to find a members guilty of
misconduct. The penalty which follows is so harsh that it
may result in his removal from the Register of Members for a
substantial number of years. The removal of his name from
the Register deprives him of the right to a certificate of
practice. As is clear from s. 6(1) of the Act, he cannot
practice without such certificate. In the circumstances
there is every reason to presume in favour of an opportunity
to the member of being heard by the Council before it
proceeds to pronounce upon his guilt. As we have seen, the
finding by the Council operates with finality in the
proceeding, and it constitutes the foundation for the
penalty imposed by the Council on him. We consider it
significant that the power to find and record whether a
member is guilty of misconduct has been specifically
entrusted by the
1064
Act to the entire Council itself and not to a few of its
members who constitute the Disciplinary Committee. It is the
character and complexion of the proceeding considered in
conjunction with the structure of power constituted by the
Act which leads us to the conclusion that the member is
entitled to a hearing by the Council before it can find him
guilty. Upon the approach which has found favour with us, we
find no relevance in James Edward Jeffs and others v. New
Zealand Dairy Production and Marketing Board and others,
[1967] 1 AC 551 cited on behalf of the appellant. The Court
made observations there of a general nature and indicated
the circumstances when evidence could be recorded and
submissions of the parties heard by a person other than the
decision making authority. Those observations can have no
play in a power structure such as the one before us.
Our attention has been invited to the difference
between the terms in which s. 21(3) and s. 21(4) have been
enacted and, it is pointed out, that while in s. 21(4)
Parliament has indicated that an opportunity of being heard
should be accorded to the member, nowhere in s. 21(3) do we
find such requirement. There is no doubt that there is that
difference between the two provisions. But, to our mind,
that does not affect the question. The textual difference is
not decisive. It is the substance of the matter, the
character of the allegations, the far-reaching consequences
of a finding against the member, the vesting of
responsibility in the governing body itself, all these and
kindred considerations enter into the decision of the
question whether the law implies a hearing to the member at
that stage.
Learned counsel for the appellant relies on Chandra
Bhavan Boarding and Lodging, Bangalore v. The State of
Mysore and Anr., [1970] 2 SCR 600, where this Court found
that the procedure adopted by the Government in fixing a
minimum wage under s. 5(1) of the Minimum Wages Act, 1948
was not vitiated merely on the ground that the Government
had failed to constitute a committee under s. 5(1) (a) of
that Act. Reference was also made to K.L. Tripathi v. State
Bank of India and Others, [1984] 1 SCC 43 where the
petitioner complained of a breach of the principles of
natural justice on the ground that he was not given an
opportunity to rebut the material gathered in his absence.
Neither case is of assistance to the appellant. In the
former, the Court found that reasonable opportunity had been
given to all the concerned parties to represent their case
before the Government made the impugned order. In the
latter, the Court held that no real prejudice had been
suffered by the complainant in the circumstances of the
case.
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It is next pointed out on behalf of the appellant that
while Regulation 15 requires the Council, when it proceeds
to act under s. 21(4), to furnish to the member a copy of
the report of the Disciplinary Committee, no such
requirement is incorporated in Regulation 14 which
prescribes what the Council will do when it receives the
report of the Disciplinary Committee. That, it is said,
envisages that the member has no right to make a
representation before the Council against the report of the
Disciplinary Committee. The contention can be disposed of
shortly. There is nothing in Regulation 14 which excludes
the operation of the principle of natural justice entitling
the member to be heard by the Council when it proceeds to
render its finding. The principles of natural justice must
be read into the unoccupied interstices of the statute
unless there is a clear mandate to the contrary.
It is then urged by learned counsel for the appellant
that the provision of an appeal under s. 22-A of the Act is
a complete safeguard against any insufficiency in the
original proceeding before the Council, and it is not
mandatory that the member should be heard by the Council
before it proceeds to record its finding. Section 22-A of
the Act entitles a member to prefer an appeal to the High
Court against an order of the Council imposing a penalty
under s. 21(4) of the Act. It is pointed out that no
limitation has been imposed on the scope of the appeal, and
that an appellant is entitled to urge before the High Court
every ground which was available to him before the Council.
Any insufficiency, it is said, can be cured by resort to
such appeal. Learned counsel apparently has in mind the view
taken in some cases that an appeal provides an adequate
remedy for a defect in procedure during the original
proceeding. Some of those cases are mentioned in Sir William
Wades erudite and classic work on “Administrative Law” But
as that learned author observes, “in principle there ought
to be an observance of natural justice equally at both
stages”, and
“if natural justice is violated at the first
stage, the right of appeal is not so much a true
right of appeal as a corrected initial hearing:
instead of fair trial followed by appeal, the
procedure is reduced to unfair trial followed by
fair trial.”
And he makes reference to the observations of Megarry J. in
Leary v. National Union of Vehicle Builders, [1971] 1 Ch.
34. Treating with another aspect of the point, that learned
Judge said:
“If one accepts the contention that a defect of
natural justice
1066
in the trial body can be cured by the presence of
natural justice in the appellate body, this has
the result of depriving the member of his right of
appeal from the expelling body. If the rules and
the law combine to give the member the right to a
fair trial and the right of appeal, why should he
be told that he ought to be satisfied with an
unjust trial and a fair appeal? Even if the appeal
is treated as a hearing de novo, the member is
being stripped of his right to appeal to another
body from the effective decision to expel him. I
cannot think that natural justice is satisfied by
a process whereby an unfair trial, though not
resulting in a valid expulsion, will nevertheless
have the effect of depriving the member of his
right of appeal when a valid decision to expel him
is subsequently made. Such a deprivation would be
a powerful result to be achieved by what in law is
a mere nullity; and it is no mere triviality that
might be justified on the ground that natural
justice does not mean perfect justice. As a
general rule, at all events, I hold that a failure
of natural justice in the trial body cannot be
cured by a sufficiency of natural justice in an
appellate body.”
The view taken by Megarry, J. was followed by the
Ontario High Court in Canada in Re Cardinal and Board of
Commissioners of Police of City of Cornwall, [1974] 42
D.L.R. (3d) 323. The Supreme Court of New Zealand was
similarly inclined in Wislang v. Medical Practioners
Disciplinary Committee, [1974] 1 N.Z.L.R. 29 and so was the
Court of Appeal of New Zealand in Reid v. Rowley, [1977] 2
N.Z.L.R. 472.
But perhaps another way of looking at the matter lies
in examining the consequences of the initial order as soon
as it is passed. There are cases where an order may cause
serious injury as soon as it is made, an injury not capable
of being entirely erased when the error is corrected on
subsequent appeal. For instance, as in the present case,
where a member of a highly respected and publicly trusted
profession is found guilty of misconduct and suffers
penalty, the damage to his professional reputation can be
immediate and far-reaching. “Not all the King’s horses and
all the King’s men” can ever salvage the situation
completely, notwithstanding the widest scope provided to an
appeal. To many a man, his professional reputation is his
most valuable possession. It affects his standing and
dignity among his fellow members in the profession, and
guarantees the esteem of his clientele. It is often the
carefully garnered fruit of a long period of scrupulous,
1067
conscientious and diligent industry. It is the portrait of
his professional honour. In a world said to be notorious for
its blase attitude towards the noble values of an earlier
generation, a man’s professional reputation is still his
most sensitive pride. In such a case, after the blow
suffered by the initial decision, it is difficult to
contemplate complete restitution through an appellate
decision. Such a case is unlike an action for money or
recovery of property, where the execution of the trial
decree may be stayed pending appeal, or a successful appeal
may result in refund of the money or restitution of the
property, with appropriate compensation by way of interest
or mesne profits for the period of deprivation. And,
therefore, it seems to us, there is manifest need to ensure
that there is no breach of fundamental procedure in the
original proceeding, and to avoid treating an appeal as an
overall substitute for the original proceeding.
Upon the aforesaid considerations, we are of definite
opinion that a member accused of misconduct is entitled to a
hearing by the Council when, on receipt of the report of the
Disciplinary Committee, it proceeds to find whether he is or
is not guilty. The High Court is, therefore, right in the
view on this point.
Accordingly, the respective findings of the Council
that Ratna, Behl and Bhoopatkar are guilty of misconduct are
vitiated and must be quashed. Consequently, the penalty
imposed on each of them is also liable to be quashed.
Our decision on the first question is sufficient to
dispose of these appeals. But the appellant is anxious to
obtain our opinion on the second question also as, it is
said, the question is bound to arise in future in cases of
disciplinary proceedings. As it was one of the points on
which the High Court allowed the writ petitions, and as we
have already heard full agrument on it, we proceed now to
consider the point.
The question is whether the respective findings of the
Council holding the three members guilty of misconduct can
be said to be vitiated by bias because the members of the
Disciplinary Committee participated in those proceedings. As
has been pointed out, s. 17 of the Act provides for a
Disciplinary Committee, consisting of the President and the
Vice-President ex-officio of the Council, who will be the
Chairman and Vice-Chairman respectively of the Disciplinary
Committee, and three other members of the Council, two of
them
1068
being elected by the Council to the Committee, and the third
being nominated by the Central Government from amongst the
persons nominated to the Council by the Central Government.
Therefore, all the five members of the Disciplinary
Committee are drawn from the Council.
Now the Council is vested with power under s. 21 to
find whether the member is guilty of misconduct. There is
nothing in s. 21 of the Act, however, to indicate whether
the members of the Disciplinary Committee should be excluded
when the Council enters upon its task. The answer must be
found from the general scheme of the Act and the fundamental
principles of law.
There can be no dispute that the function of the
Disciplinary Committee of holding an enquiry under s. 21(1)
of the Act into the conduct of the member calls for a
recording of evidence by the Committee. Its duty does not
end there. It must consider the evidence and come to its
conclusions. As s. 21(2) of the Act plainly says, it must
report “the result of its enquiry” to the Council. In the
absence of express or implied statutory intendment to the
contrary, it appears to us that the members of such a
Committee would be disqualified from participating in the
deliberations of the Council when it proceeds to consider
the report in order to find whether the member is guilty of
misconduct. For that alone would be consistent with the
fundamental principle that justice must not only be done but
must also appear to be done. The nature of the function
discharged by the Council in rendering its finding is quasi
judicial, and we are reminded of the observations of this
Court as far back as Manek Lal v. Dr. Prem Chand, [1957] SCR
575.
“It is well settled that every member of a
tribunal that is called upon to try issues in
judicial or quasi-judicial proceedings must be
able to act judicially; and it is of the essence
of judicial decisions and judicial administration
that judges should be able to act impartially,
objectively and without any bias. In such cases
the test is not whether in fact a bias has
affected the judgment; the test always is and must
be whether a litigant could reasonably apprehend
that a bias attributable to a member of the
tribunal might have operated against him in the
final decision of the tribunal. It is in this
sense that it is often said that justice must not
only be done but must also appear to be done.”
1069
We must remember that the President and the Vice-
President of the Council and 3 members of the Council
compose the Disciplinary Committee. The President and the
Vice-President do certainly hold significant status in the
meetings of the Council. A member whose conduct has been the
subject of enquiry by the Disciplinary Committee ending in
conclusions adverse to him can legitimately entertain an
apprehension that the President and the Vice-President of
the Council and the other members of the Disciplinary
Committee would maintain the opinion expressed by them in
their report and would press for the acceptance of the
report by the Council. To the member whose conduct has been
investigated by the Committee, the possibility of the
Council disagreeing with the report in the presence of the
President and the Vice-President and the other members of
the Committee would so rather remote. His fears would be
aggravated by the circumstance that the President would
preside over the meeting of the Council, and would thus be
in a position to control and possibly dominate the
proceedings during the meeting. We do not doubt that the
President and the Vice-President, and also the three other
members of the Disciplinary Committee, should find it
possible to act objectively during the decision-making
process of the Council. But to the member accused of
misconduct, the danger of partisan consideration being
accorded to the report would seem very real indeed.
The objection on the ground of bias would have been
excluded if the statute had expressed itself to the
contrary. But nowhere do we find in the Act any evidence to
establish such exclusion. It is true that by virtue of s.
17(3) it is obligatory that the Disciplinary Committee
should be composed of the President and the Vice-President
of the Council and three other members of the Council. While
that is so, there is nothing in the Act to suggest that the
meetings of the council must always be presided over by the
President or the Vice-President, and that no meeting can be
held in their absence. We find that Regulation 140 framed
under the Act contemplates that the Council may meet in the
absence of the President and the Vice-President, and
provides that in their absence a member elected from among
the members who are present should preside. There is an
element of flexibility which makes it possible for the
Council to consider the report of the Disciplinary Committee
without the participation of the members of the Committee.
Because of the ‘flexibility’ potential in the scheme, the
doctrine of necessity, to which reference has been made on
behalf of the Institute, cannot come into play. We must
admit that it does appear anomalous that the President and
the Vice-President of the Council should be disabled from
participating in a meeting of the
1070
Council because they are bound by statute to function as the
Chairman and the Vice-Chairman of the Disciplinary
Committee, and were it not for the factor of flexibility
which we see in the scheme, we would have been compelled to
the conclusion that the Act implies an exclusion of the
doctrine of bias. But as we have observed, no such exclusion
is implied by the scheme of the Act or its policy. We
suggest the removal of the anomaly by suitable legislative
amendment of s. 17(3) of the Act so that the constitution of
the Disciplinary Committee should not necessarily include
the President and the Vice-President of the Council. It is
only appropriate that due recognition should be given to the
fundamental principles and accepted axioms of law.
Learned counsel for the Institute relies on Re Dancyger
and Alberta Pharmaceutical Association, 17 D.L.R. (3d) 206;
Re Prescott, 19 D.L.R. (3d) 446; Re Merchant and Benchers of
the Law Society. 32 D.L.R. (3d) 178 and the majority opinion
in Law Society of Upper Canada v. French, 49 D.L.R. (3d) 1
in support of the contention that participation by the
members of the Disciplinary Committee does not vitiate the
proceedings of the Council. The principal basis on which the
Canadian courts proceeded in upholding the validity of the
meeting of the parent body, despite the participation
therein of the members of the Disciplinary Committee, lay in
this that the entire proceeding, that is to say the enquiry
by the Committee and the subsequent consideration of its
report by the parent body, constituted a single proceeding,
and had to be distinguished from a case where the decision
by a subordinate body was assailed in appeal before a
superior authority. This distinction, it seems to us, can be
of little assistance if full play is given to the maxim that
no man shall be a Judge in his own cause. We are impressed
by the soundness of the minority opinion pronounced by that
learned and distinguished Judge, Laskin, C.J.C. in Law
Society of Upper Canada v. French (supra) decided by the
Supreme Court of Canada. He observed:
“I do not think that the issue herein falls to be
decided according to whether the proceedings in
Convocation are or amount to an appeal or are or
amount to a review under a two-stage scheme of
inquiry into allegations of professional
misconduct. No doubt, characterization of the
proceedings as an appeal may lend weight to the
contention of the appellant solicitor, but the
principle underlying his position rises above any
such formalistic approach. The principle is
immanent in the ancient maxim nemo judex in causa
sua, expressed by Coke in Dr. Benham’s case (1610)
8. Co. Rep. 113b, 77E.R. 646.”
1071
The conclusion reached by us has not been an easy one.
The authorities on the subject have oscillated from one
extreme to the other, and an analysis of the cases points at
times to some rather slender element in the mosaic of facts
which has influenced the outcome. There is good reason
ultimately for adopting a liberal view, for as has been
observed by the late Professor S.A. De Smith in his
‘Judicial Review of Administrative Action’ Fourth Edition p.
261:
“….. a report will normally include a statement
of findings and recommendations, which may be
controverted before the parent body; and in such a
case the participation of members of the sub-
committee in the final decision may be of dubious
validity. The problem is not merely one of strict
law; it is also one of public policy.”
Accordingly, we concur with the High Court that the
finding of the Council holding the respondents Ratna, Behl
and Bhoopatkar guilty of misconduct is vitiated by the
participation of the members of the Disciplinary Committee.
Before we conclude, we may refer to a third point
raised before us, the point being whether the Council is
obliged to give reasons for its finding that a member is
guilty of misconduct. It seems to us that it is bound to do
so. In fairness and justice, the member is entitled to know
why he has been found guilty. The case can be so serious
that it can attract the harsh penalties provided by the Act.
Moreover, the member has been given a right of appeal to the
High Court under s. 22-A of the Act. To exercise his right
of appeal effectively he must know the basis on which the
Council has found him guilty. We have already pointed out
that a finding by the Council is the first determinative
finding on the guilt of the member. It is a finding by a
Tribunal of first instance. The conclusion of the
Disciplinary Committee does not enjoy the status of a
“finding”. Moreover, the reasons contained in the report by
the Disciplinary Committee for its conclusion may or may not
constitute the basis of the finding rendered by the Council.
The Council must, therefore, state the reasons for its
finding.
The appeals fail and are dismissed, but in the
circumstances of the case we make no order as to costs.
M.L.A. Appeals dismissed.
1072