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Oops…Ethics?!

Oops…Ethics?!

In February, 2017, the High Court of Delhi took cognizance of a report submitted by SEBI to the Council of the Institute of Chartered Accountants of India, on the incorrect certificate issued by a practicing Chartered Accountant with regard to allotment of share application money by a listed private company.

Crux of the case

In the said case – Council of the Institute of Chartered Accountants of India vs. Kailash Chander Agarwal & anr 1, the SEBI initially conducted a detailed investigation into the three certificates issued by the practicing professional. In the certificate in which the professional certified about the receipt and allotment of share application monies, it was observed that the date of encashment of cheque was not consciously recorded. It was established beyond doubt that the share application money was received after the issue of the certificate by the professional.

The stand taken by regulators

The SEBI came to the conclusion that the certificate issued by the professional was false and misleading. The SEBI concluded that the professional colluded with the management of the company in defrauding the investors. The matter was then referred to the ICAI which formed a disciplinary committee. After several hearings, committee also concurred with the SEBI investigation report. Finding the professional guilty of gross professional misconduct, the professional body recommended the removal of the name of the professional from the institute for a period of 5 years.

THE BLACK’S LAW DICTIONARY “Professional Misconduct” means behavior different from what is prescribed in the moral, ethical and professional code of conduct.

Sharp focus on professionals

The above case yet again puts the spotlight on the professional (conduct or) misconduct of professionals especially Lawyers, Chartered Accountants, Company Secretaries and or Cost Accountants.

A profession is a vocation requiring knowledge in a specialized area that requires high degree of consistency in service.

  • The existence of a body of specialised knowledge or techniques;
  • Formalised method of acquiring training and experience;
  • Formation of professional and ethical codes for the guidance of conduct;

Professional misconduct is behaviour not confirming to the prevailing standards or laws, dishonest intention, dereliction of duty or management especially by persons entrusted or engaged to act on another’s behalf. It can be an act done wilfully with wrong intention by people engaged in (any) profession.

The definition of misconduct is a wide expression. It is not exhaustive and is only relative in nature. The misconduct has to be construed with reference to the subject matter and context in which the case arises.

Each of the professional bodies have their own statutes and disciplinary committees that decide on the existence and intensity of misconduct by the professional. Over the years almost all professional bodies especially of Advocates, CA’s, CS’s and CWA’s have ruled that the following will constitute professional misconduct:

  • Wilful misrepresentation as professional;
  • Solicitation of work by circulation of notices and or advertisements;
  • Undercutting / underselling remuneration with the intention of edging out competition
  • Engaging in any other business or occupation without informing or obtaining consent of the statutory professional body under which they are registered.
  • Sharing confidential information of client
  • Entering into any agreements / arrangement that will lead to conflict of interest
  • Misfeasance
  • Malfeasance

Not all conduct is misconduct

However, there have been quite a few instances in which the Courts have overruled the decisions taken by the disciplinary committees of the professional statutory bodies. On 16th February, 2017, the division bench of the Supreme Court set aside the decision of the disciplinary committee passed in the T A Kathiru Kunju Vs. Jacob Mathai   2. The bench held that negligence, unless gross, would not amount to professional misconduct. In such offence there must be an element of moral delinquency.

An error of judgement was also considered not to constitute an offence of professional misconduct, unless there was an element of wrongful intention present. Therefore “misconduct” acquires its connotation from the context, delinquency in its performance and its impact on the given task.

WELCOME MOVE BY THE CIC

In February this year, the Central information Commission (CIC) has directed the Bar Council of Delhi to report or publish cases of professional misconduct of advocates, proven or otherwise, in compliance with the Right to Information Act. This has been done to enable the public know the credibility of the counsels who represent them.

 The direction given by the CIC is at present only for the Advocates. It is only a matter of time before the members of other professional bodies are brought under this ambit.

It is pertinent to note here that each of the professional bodies are governed by their own regulations, ethical codes and conduct.

The Chartered Accountants Act 1949; The Company Secretaries Act, 1980 and The Cost and Work accountants Act, 1959 (including their regulations and amendments) contain similar provisions relating to the professional (mis) conduct. The offences of professional misconduct have been clearly tabulated based on their level of intensity. While most cases attract either penalty or temporary suspension from membership, some grave cases of misconduct are decided by the Courts’ and permanent suspension from membership is pronounced.

The scenario in other countries

Like in India, all other countries that have CPAs, Chartered Secretaries and Lawyers have very clearly defined laws, ethics and codes of conduct laid down. Professionals in countries such as the UK, Singapore, Australia, Hong Kong, Canada, Malaysia, South Africa, Zimbabwe and Bangladesh abide by the code of conduct and penal provisions laid down by the Institute of Certified Public Accountants (ICPA) Institute of Chartered Secretaries & Administrators (ICSA).

Conclusion

Professionals such as Advocates, Chartered Accountants, Company Secretaries and or Cost Accountants are a class apart from other non-professionals. This is not only due to the specialised education, training, skill and experience they continuously obtain in the course of their work, but primarily due to the nobility and high morals that is associated with each such profession. Such professions should not be viewed only as business, trade or means of furthering monetary and other gains. It is a mirror reflecting the attitude, honesty, integrity and credibility of the professional rendering such services. It is these qualities that continues to maintain the thin but clear line between professional conduct and misconduct thereby reinforcing people’s faith in the rule of law.

 

Notes:

  1. CHAT.A REF. 3/2011
  2. CA No. 3860 of 2007

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