21. Disciplinary Directorate
(1) The Council shall, by notification2, establish a
Disciplinary Directorate headed by an officer
of the Institute designated as Director
(Discipline) and such other employees for
making investigations in respect of any
information or complaint received by it.
(2) On receipt of any information or complaint
along with the prescribed fee, the Director
(Discipline) shall arrive at a prima facie
opinion on the occurrence of the alleged
misconduct.
(3) Where the Director (Discipline) is of the
opinion that a member is guilty of any
professional or other misconduct mentioned
in the First Schedule*
, he shall place the
matter before the Board of Discipline and
where the Director (Discipline) is of the
opinion that a member is guilty of any
professional or other misconduct mentioned in
the Second Schedule** or in both the
Schedules, he shall place the matter before
the Disciplinary Committee.
(4) In order to make investigations under the
provisions of this Act, the Disciplinary
Directorate shall follow such procedure as may
be specified3
.
(5) Where a complainant withdraws the
complaint, the Director (Discipline) shall place
*
Please see pages 74-79. ** Pease see pages 80-82.
42
such withdrawal before the Board of
Discipline or, as the case may be, the
Disciplinary Committee, and the said Board or
Committee may, if it is of the view that the
circumstances so warrant, permit the
withdrawal at any stage.]
4
21A. Board of Discipline
(1) The Council shall constitute a Board of
Discipline consisting of−
(a) a person with experience in law and
having knowledge of disciplinary
matters and the profession, to be its
presiding officer;
(b) two members one of whom shall be a
member of the Council elected by the
Council and the other member shall be
nominated by the Central Government
from amongst the persons of eminence
having experience in the field of law,
economics, business, finance or
accountancy;
(c) the Director (Discipline) shall function
as the Secretary of the Board.
(2) The Board of Discipline shall follow summary
disposal procedure in dealing with all cases
before it.
(3) Where the Board of Discipline is of the
opinion that a member is guilty of a
professional or other misconduct mentioned in
the First Schedule, it shall afford to the
member an opportunity of being heard before
making any order against him and may
43
thereafter take any one or more of the
following actions, namely :−
(a) reprimand the member;
(b) remove the name of the member from
the Register up to a period of three
months;
(c) impose such fine as it may think fit
which may extend to rupees one lakh.
(4) The Director (Discipline) shall submit before
the Board of Discipline all information and
complaints where he is of the opinion that
there is no prima facie case and the Board of
Discipline may, if it agrees with the opinion of
the Director (Discipline), close the matter or
in case of disagreement, may advise the
Director (Discipline) to further investigate the
matter.
21B. Disciplinary Committee
(1) The Council shall constitute a Disciplinary
Committee consisting of the President or the
Vice-President of the Council as the Presiding
Officer and two members to be elected from
amongst the members of the Council and two
members to be nominated by the Central
Government from amongst the persons of
eminence having experience in the field of
law, economics, business, finance or
accountancy:
Provided that the Council may constitute
more Disciplinary Committees as and when it
considers necessary.
44
(2) The Disciplinary Committee, while considering
the cases placed before it shall follow such
procedure as may be specified5
.
(3) Where the Disciplinary Committee is of the
opinion that a member is guilty of a
professional or other misconduct mentioned in
the Second Schedule or both the First
Schedule*
and the Second Schedule**, it shall
afford to the member an opportunity of being
heard before making any order against him
and may thereafter take any one or more of
the following actions, namely :−
(a) reprimand the member;
(b) remove the name of the member from
the Register permanently or for such
period, as it thinks fit;
(c) impose such fine as it may think fit,
which may extend to rupees five lakhs.
(4) The allowances payable to the members
nominated by the Central Government shall be
such as may be specified.
21C. Authority, Disciplinary Committee, Board of
Discipline and Director (Discipline) to have
powers of civil court
For the purposes of an inquiry under the provisions
of this Act, the Authority, the Disciplinary Committee, Board
of Discipline and the Director (Discipline) 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 :−
*
Please see pages 74-79. ** Please see pages 80-82. *** No.5 of 1908
45
(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.
Explanation − For the purposes of Sections 21, 21A,
21B, 21C and 22, “member of the Institute” includes a
person who was a member of the Institute on the date of
the alleged misconduct although he has ceased to be a
member of the Institute at the time of the inquiry.
21D. Transitional provisions
All complaints pending before the Council or any
inquiry initiated by the Disciplinary Committee or any
reference or appeal made to a High Court prior to the
commencement of the Chartered Accountants
(Amendment) Act, 2006, shall continue to be governed by
the provisions of this Act, as if this Act had not been
amended by the Chartered Accountants (Amendment) Act,
2006.]
6
[22. Professional or other misconduct defined
For the purposes of this Act, the expression
“professional or other misconduct” shall be deemed to
include any act or omission provided in any of the
Schedules, but nothing in this Section shall be construed to
limit or abridge in any way the power conferred or duty
cast on the Director (Discipline) under sub-section (1) of
Section 21 to inquire into the conduct of any member of
the Institute under any other circumstances.]
*** No.5 of 1908 *** No.5 of 1908
46
7[22A. Constitution of Appellate Authority
(1) The Central Government shall, by notification,
constitute an Appellate Authority consisting
of−
(a) a person who is or has been a judge of a
High Court, to be its Chairperson;
(b) two members to be appointed from
amongst the persons who have been
members of the Council for at least one
full term and who is not a sitting
member of the Council;
(c) two members to be nominated by the
Central Government from amongst
persons having knowledge and
practical experience in the field of law,
economics, business, finance or
accountancy.
(2) The Chairperson and other members shall be
part-time members.
22B. Term of office of Chairperson and members of
Authority
(1) A person appointed as the Chairperson shall
hold office for a term of three years from the date on which
he enters upon his office or until he attains the age of sixtyfive years, whichever is earlier.
(2) A person appointed as a member shall hold
office for a term of three years from the date on which he
enters upon his office or until he attains the age of sixty-two
years, whichever is earlier.
47
22C. Allowances and conditions of service of
Chairperson and members of Authority
The allowances payable to, and other terms and
conditions of service of, the Chairperson and members and
the manner of meeting expenditure of the Authority by the
Council and such other authorities shall be such as may be
specified8
.
22D. Procedure to be regulated by Authority
(1) The office of the Authority shall be at Delhi.
(2) The Authority shall regulate its own
procedure.
(3) All orders and decisions of the Authority shall
be authenticated by an officer duly authorised
by the Chairperson in this behalf.
22E. Officers and other staff of Authority
(1) The Council shall make available to the
Authority such officers and other staff
members as may be necessary for the
efficient performance of the functions of the
Authority.
(2) The salaries and allowances and conditions of
service of the officers and other staff members
of the Authority shall be such as may be
prescribed.
22F. Resignation and removal of Chairperson and
members
(1) The Chairperson or a member may, by notice
in writing under his hand addressed to the
Central Government, resign his office:
48
Provided that the Chairperson or a member
shall, unless he is permitted by the Central
Government to relinquish his office sooner,
continue to hold office until the expiry of three
months from the date of receipt of such notice
or until a person duly appointed as his
successor enters upon his office or until the
expiry of term of office, whichever is earlier.
(2) The Chairperson or a member shall not be
removed from his office except by an order of
the Central Government on the ground of
proved misbehaviour or incapacity after an
inquiry made by such person as the Central
Government may appoint for this purpose in
which the Chairperson or a member
concerned has been informed of the charges
against him and given a reasonable
opportunity of being heard in respect of such
charges.
22G. Appeal to Authority
(1) Any member of the Institute aggrieved by
any order of the Board of Discipline or the
Disciplinary Committee imposing on him any of
the penalties referred to in sub-section (3) of
Section 21A and sub-section (3) of Section
21B, may within ninety days from the date on
which the order is communicated to him,
prefer an appeal to the Authority:
Provided that the Director (Discipline) may
also appeal against the decision of the Board
of Discipline or the Disciplinary Committee to
the Authority, if so authorised by the Council,
within ninety days:
Provided further that the Authority may
entertain any such appeal after the expiry of
49
the said period of ninety days, if it is satisfied
that there was sufficient cause for not filing
the appeal in time.
(2) The Authority may, after calling for the
records of any case, revise any order made
by the Board of Discipline or the Disciplinary
Committee under sub-section (3) of Section
21A and sub-section (3) of Section 21B and
may −
(a) confirm, modify or set aside the order;
(b) impose any penalty or set aside, reduce,
or enhance the penalty imposed by the
order;
(c) remit the case to the Board of Discipline
or Disciplinary Committee for such
further enquiry as the Authority
considers proper in the circumstances of
the case; or
(d) pass such other order as the Authority
thinks fit:
Provided that the Authority shall give an
opportunity of being heard to the parties concerned before
passing any order.]
____________________
1 Substituted, for the following, by the Chartered Accountants
(Amendment) Act, 2006 and came into force w.e.f. 17th
November, 2006 :−
A“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
50
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.
(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-sections.
(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 sub-section
(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 :−
* Please see pages 74-79.
51
(a) direct that the proceedings be filed, or dismiss
the complaint, as the case may be;
(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) Where it appears to the High Court that the transfer of
any case pending before it to another High Court will promote
the ends of justice or tend to the general convenience of the
parties, it may so transfer the case, subject to such conditions,
if any, as it thinks fit to impose, and the High Court to which
such case is transferred shall deal with it as if the case had been
forwarded to it by the Council.
Explanation I − In this Section “High Court” means the highest
civil court of appeal, not including the Supreme Court, exercising
jurisdiction in the area in which the person whose conduct is
being inquired into carries on business, or has his principal place
of business at the commencement of the inquiry:
Provided that where the cases relating to two or more members
of the Institute have to be forwarded by the Council to different
High Courts, the Central Government shall, having regard to the
ends of justice and the general convenience of the parties,
determine which of the High Courts to the exclusion of others
shall hear the cases against all the members.
Explanation II − For the purposes of this Section “member of
the Institute” includes a person who was a member of the
Institute on the date of the alleged misconduct although he has
ceased to be a member of the Institute at the time of the
inquiry.
(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
52
(c) receiving evidence on affidavit.”
AThis Section was earlier substituted, for the following, by the
Chartered Accountants (Amendment) Act, 1959 :−
“21. Procedure in inquiries relating to misconduct of
members of the Institute −
(1) Where on receipt of information or on receipt of a
complaint made to it, the Council is of opinion that any member
of the Institute has been guilty of conduct which, if proved, will
render him unfit to be a member of the Institute or where a
complaint against a member of the Institute has been made by
or on behalf of the Central Government, the Council shall cause
an inquiry to be held in such manner as may be prescribed, and
the findings of the Council shall be forwarded to the High Court.
(2) On receipt of the finding, the High Court shall fix a date
for the hearing of the case and shall cause notice of the day 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 before orders are passed on the
case.
(3) The High Court may, thereafter, either pass such final
orders on the case as it thinks fit or refer it back for further
inquiry by the Council and upon receipt of the finding after such
inquiry, deal with the case in the manner provided in subsection (2) and pass final orders thereon.
(4) Where it appears to the High Court that the transfer of
any case, pending before it to another High Court will promote
the ends of justice, or tend to the general convenience of the
parties, it may so transfer the case, subject to such conditions,
if any, as it thinks fit to impose, and the High Court, to which
such case is transferred, shall deal with it as if the finding of the
Council relating to case had been forwarded to it.
Explanation − In this Section, `High Court’ means the highest
civil court of appeal, not including the Federal Court, to which the
Council forwards its finding, exercising jurisdiction in the area in
which the person whose conduct is being inquired into carries on
business, or has his principal place of business at the
commencement of the inquiry:
53
Provided that where the findings of the Council relating to two or
more members of the Institute have to be forwarded by the
Council to different High Courts, the Central Government shall,
having regard to the ends of justice and the general
convenience of the parties, determine which of the High
Courts, to the exclusion of the others, shall hear the cases
against all the members.
2 For the notification, please see Appendix No. (15).
3&5 Rules made by the Central Government, called `The Chartered
Accountants (Procedure of Investigations of Professional and
Other Misconduct and Conduct of Cases) Rules, 2007’ have been
published in the Gazette of India, Extraordinary, Part II, Section
3, sub-section (i) dated 28th February, 2007 and have come into
force from that date.
4 Inserted by the Chartered Accountants (Amendment) Act, 2006
and came into force w.e.f. 17th November, 2006.
6 Substituted, for the following, by the Chartered Accountants
(Amendment) Act, 2006 and came into force w.e.f. 17th
November, 2006 :−
A“22. Professional misconduct defined
For the purposes of this Act, the expression “professional
misconduct” shall be deemed to include any act or omission
specified in any of the Schedules, but nothing in this Section
shall be construed to limit or abridge in any way the power
conferred or duty cast on the Council under sub-section (1) of
Section 21 to inquire into the conduct of any member of the
Institute under any other circumstances.”
AThis Section was earlier substituted, for the following, by the
Chartered Accountants (Amendment) Act, 1959 :−
“22. Misconduct defined
For the purpose of this Act, the expression, “conduct which, if
proved, will render a person unfit to be a member of the
Institute” shall be deemed to include any act or omission
specified in the Schedule, but nothing in this Section shall be
construed to limit or abridge in any way the power conferred on
the Council under sub-section (1) of Section 21 to inquire into
the conduct of any member of the Institute under any other
circumstances.”
54
7 Substituted, for the following, by the Chartered Accountants
(Amendment) Act, 2006, and came into force w.e.f. 17th
November, 2006 :−
A“22A. Appeals
(1) Any member of the Institute aggrieved by any order of
the Council imposing on him any of the penalties 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−
(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.
Explanation − In this Section “High Court” and “member of the
Institute” have the same meanings as in Section 21.”
AThis Section was inserted by the Chartered Accountants
(Amendment) Act, 1959.
8 Rules made by the Central Government, called `The Appellate
Authority (Allowances payable to, and other terms and
conditions of service of Chairperson and members and the
55
manner of meeting expenditure of the Authority) Rules, 2006
have been published in the Gazette of India, Extraordinary, Part
II, Section 3, sub-section (i) dated 17th November, 2006 and
have come into force from that date.