Chartered Accountant Act, 1949:

Where a CA sold his shares but continued to receive dividends declared by the Company by cheating upon transferee, such activity could not be said done in relation to practice as CA as such act of dishonesty was done in individual capacity.

Thus, disciplinary committee’s proposal to remove CA’s name from registers of members of ICAI for 6 months was to be set aside.

Facts:

• A Chartered Accountant sold his shares in November 1999 however, share transfer deed for transfer of shares was lodged on November 04, 2004.
• In the meantime, CA continued to receive dividend declared by company for 5 years
• The transferee made complaint about this conduct of CA before the Disciplinary Committee of the Institute of Chartered Accountants.
• The Disciplinary Committee found that the conduct of CA was wholly unworthy and amounted to professional misconduct.

On appeal the High Court held as under:

1. In the instant case the respondent was acting as an individual in his dealings with the complainant which were purely commercial.
2. While selling the shares held by him the respondent was not acting as a Chartered Accountant. He was not discharging any function in relation to his practice as a Chartered Accountant.
3. In the decision reported as AIR 1958 SC 72 Council of Institute of Chartered Accountants & Anr. vs. B. Mukhreja, a Chartered Accountant who had been appointed as a liquidator was held liable for professional misconduct on the reasoning that Regulation 78 provided for a Chartered Accountant to act as a liquidator and thus while acting as a liquidator Sh. B. Mukhreja would be deemed to be in practice as a Chartered Accountant.
4. The judgment brings out that the acts of omission or commission must relate to the offender acting as a Chartered Accountant and rendering service for remuneration and must be engaged in an activity which a Chartered Accountant would be entitled to be engaged in, wearing the hat of a Chartered Accountant.
5. For example, a Chartered Accountant may drive rashly and negligently and in the process may kill a human being. This conduct would be an offence, but not a misconduct for the purposes of the Act
6. The Disciplinary Committee’s proposal to remove CA’s name from registers of members of ICAI for 6 months was to be set aside. –[2016] 72 com 197 (Delhi)