1 signed the statement of accounts he fully knew that a loan had been granted by the trustees to the Company in violation of Rules 11 and 12 and further that cheques received in repayment of the loan were number cashed and, indeed, were number intended to be cashed.
1 owed a duty to all the subscribers of the Provident Fund who were in the position of beneficiaries.
As a sequel to this letter the trustees passed a resolution on May 27, 1955 that the cheques amounting to Rs.
The Disciplinary Committee held that .he loans were given in companytravention of the Rules of the Provident Fund and failure to report on the default in clearing the cheques received in repayment of the loans amounted to a failure to report on a material misstatement known to respondent No.
1 therefore owed a duty to the companytributors to the Provident Fund for making a true report to them of the financial position.
1 of the charges of misconduct.
The Disciplinary Committee made a report on September 13, 1958.
It was alleged in the companyplaint that 1 the loan granted to the Company was in companytravention of Rule 12 of the Provident Fund Rules and the auditor failed to disclose this in the statement of account, and 2 the auditor failed to invite attention to the fact that huge amount was shown as cash in hand in the financial statement for the years 1953 and 1954 in companytravention of Rule 11 of the Fund.
Respondent No.
In other words, the cheques were issued by the Company number with the intention of repayment of the loan by their being cashed but.
C. Chagla, S. V. Gupta and K. Baldev Mehta, for respon dent No.
1 pointed out in his letter dated May 25, 1955 that loans were granted and adjustment was made during the accounting year he did number disclose this fact in his numbere when he signed the statement of account on June 30, 1955 knowing fully well that the cheques were number only uncashed but were returned to the Company in pursuance of the resolution of the Trustees dated May 27, 1955.
R. Gokhale, R. K. P. Shankardas, H. K. Puri and K. K. Jain for the appellant.
1 should have brought out this fact in his report and that respondent No.
1 before the Institute of Chartered Accountants of, India, hereinafter referred to as the Institute.
with effect from the issue of the cheques.
It is number companyrect to say that respondent No.
Though respondent No.
1 signed the statement of Accounts ending December 31, 1953 on May 14, 1954 and the statement of Accounts ending December 31, 1954 on June 30, 1955.
1 owed a duty only to the Company which had appointed him to perform the Auditing,.
It was also maintained by Mr. Chagla that respondent No.
6,21,864/ companyld number be presented to the bank on the verbal request of the management of the Anand Bazar Patrika Ltd., this meeting companysidering all the relevant facts resolves that all the cheques be returned to the Company to the debit of the loan account bearing an interest of 6 per annum with effect from the date of issue of the cheques.
By its judgment dated December 5, 1962 the High Court set aside the findings of the Disciplinary Committee as companyfirmed by the Council of the Institute and absolved respondent No.
1 was guilty of misconduct under items o , p and q of the Schedule to The Act.
426 of 1965.
Udayarathnam, for respondent No.
1 also failed to point out in the statement of account that adjustment of loans was made by showing in a very vague manner cash in hand Cheques and cash as Rs.
Appeal by special leave from the judgment and order dated December 5, 1962 of the Calcutta High Court in Matter No.
Respondent No.
78 of 1959.
1 a meeting of the Board of Trustees was held on May 27, 1955 when a resolution was passed to the following effect This meeting records with regret that the cheques amounting to Rs.
The statement was signed by the Trustees of the Fund and respondent No.
1 wrote to the Company as follows It appears that certain loans were granted by the Trustees of the Fund to.
1 to the beneficiaries of the Fund.
After receipt of the letter from respondent No.
6,21,864/ and odd were number presented to the Bank on the verbal request of the COMpany and that the cheques should be returned to the Company, and the amount should be debited to the loan account bearing interest at 6 p.a.
It is number possible for us to accept this argument.
The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought, by special leave, from the judgment of the Calcutta High Court dated December 5, 1962 in matter No.
Under s. 21 of the Act the matter was referred to the Calcutta High Court for final orders.
Respondent No.
78 of 1959.
1 also knew of the resolution of the trustees dated May 27, 1955 that the cheques were to be returned to the Company and the amount was ordered by the trustees to be entered and carried over to the loan account.
1 after signing the statements gave the following certificate Checked with the books and accounts produced and found companyrect.
Respondent No.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
Respondent No.
1 knew that the cheques were number really intended to be encashed by the trustees.
Later on Kishori Lal Dutta, respondent No.
It appears that in the year 1954 the Trustees of the Fund had made Certain advances amounting to about Rs.
1 guilty of professional misconduct.
The Council of the Institute agreed with the report of the Disciplinary Committee and held respondent No.
Cheques issued by you to the Fund should also be cleared promptly.
2, President of the Employees Union filed a companyplaint against respondent No.
6,21,864/ to tile Company in companytravention of the Rules of the Fund.
1 is a Chartered Accountant and was appointed by the Board of Directors of the Company to audit the accounts of the Provident Fund for the years 1953 and 1954.
Respondent No.
The companyplaint was referred by the Council of the Institute to the Disciplinary Committee for an inquiry under s. 21 of the Chartered Accountants Act Act 38 of 1949 , hereinafter called the Act, read with regulation made thereunder.
Accordingly the Disciplinary Committee held that respondent No.
6,21,86.4 and the proportion of the cheques to the cash was number specified.
It is manifest therefore,that on June 30, 1955 when respondent No.
Ananda Bazar Patrika Limited is a Joint Stock Company, hereinafter referred to as the Company and has got an employees Provident Fund Scheme which was being managed by a Board of Trustees.
The Disciplinary Committee found that the loans were admittedly granted by the Trustees in companytravention of the Provident Fund Rules and respondent No.
The Director of the Company issued various cheques in repayment of the advance, but at the request of the management of the Company the cheques were kept with the Trustees of the Fund uncashed and number credited in the account of the Fund.
In his letter dated May 25, 1955 respondent No.
1 was guilty of number disclosing the fact that a large amount of loan was given out of the fund of the Provident Fund to the Company and that the cheques received in payment of these loans and shown as cash in hand Cheques and cash were number uncashed at least upto the day on which he wrote the letter to the Directors i.e., May 25, 1955 and the number disclosure of this material information was an act of misconduct on the part of respondent No.
the Company in 1954 which although adjusted within the accounting year does number appear to be in accordance with the Provident Fund Rules.
After receipt of the cheques the Trustees of the Fund made book entries showing the repayment of the loan so granted to the Company, though in fact numbere ,of these cheques had been cashed when such entries were made.
The companytributors to the Provident Fund had a beneficial interest in the Fund and the primary object of auditing the Fund was to appraise them of the true financial position of the accounts and investments made from Time to time.
1 dated May 25, 1955 addressed to the Company in which he pointed out that the loans granted by the trustees do number appear to be in accordance with the Provident Fund Rules and the cheques issued by the Company should be cleared promptly.
1 owed a duty only to the Company which appointed him to audit the accounts of the Provident Fund and there was numberduty owed by respondent No.
