SC: CAs can be banned for misconduct outside professional sphere
Following a Supreme Court verdict, chartered accountants (CAs) in India are now confronting a reality wherein they might face disciplinary action for 'lapses' in behavior even outside their field of work. In a recent judgement, the SC ruled that disciplinary action can be taken against CAs if their conduct, professional or otherwise, brings 'disrepute' to their profession. Here are the details.
What we know about the SC judgement
The SC judgement came in a case that pitted the Institute of Chartered Accountants of India (ICAI) against a CA, Gurvinder Singh, with the point of contention being Singh selling 100 shares. While details about Singh's conduct aren't known, the SC bench ruled that the ICAI could take disciplinary action against Singh, if it deemed Singh's actions to bring disrepute to the profession.
The SC judgement interpreted a section of the CA Act
The SC judgement overturned an earlier Delhi High Court order which had ruled that CAs could not be held professionally accountable for 'lapses' in conduct outside their field of work. Zeroing on Section 21(3) of the Chartered Accountants Act, 1949, the SC said that ICAI could take action against any CA accused of any crime that attracts penal code punishment of less than six months.
What became of Singh following the SC judgement
Following the SC judgement, the ICAI removed Singh from its rolls for six months, and as per regulations, the matter has been referred to the Delhi High Court.
The implications of the SC judgement
Commenting on the SC judgement, people familiar with the matter told ET that CAs could now see their licenses temporarily suspended or permanently cancelled by ICAI for lapses in conduct outside their professional sphere. Earlier, the ICAI - which is responsible for issuing CA licenses - could only take disciplinary action against CAs for professional misconduct. That charge now lies with the National Financial Reporting Authority (NFRA).
Former ICAI president comments on the SC judgement
"This judgement now settles and vindicates ICAI's position. The example that we normally use is if a CA drinks and drives or creates a scene in public space that can bring disrepute to the profession, action should be taken against him," said former ICAI president Manoj Fadnis.
