Introduction
In a country like India with a population of 125 Crore citizens and 6.8 crore taxpayers in the year 2017 to 2018 only 3 lakhs are Chartered Accountants. As of April 2018, only 44% of this 3 Lakh are in full time practice.[1] As they help in tax related matters in every possible way such as, supporting Government authorities, Auditing, making tax strategies, wealth management, etc. makes them one of the most sought-after profession for students who want to get the big bucks.
The average salary of a CA is 7 lakhs per year[2]. But is it easy to be a CA? Absolutely not. In the year 2021, 3116 students gave the final CA exam and only 44 of them passed to actually become a CA.[3]
That does not mean that people get deterred by these numbers, every year more and more students by choice or by force sit and give the CA exam in the hopes that one day they might even be their own boss having their own office in the own firm that they manage with their friend.
But becoming a CA is not just this, clearing an exam and filing and managing taxes, there are laws that govern these CA’s as well. Some of them are explained below:
Laws governing a Chartered Accountant
I. The Chartered Accountants Act, 1949 [Amended by The Chartered Accountants (Amendment) Act, 2011]
This Act regulate the practice of Chartered Accountants in India. Enacted on 1st May 1949, this Act established the Institute of Chartered Accountants in India (hereinafter as ICAI) under Chapter II of the Act starting from Section 3 to 8.
Chapter III of the Act talks about the constitution of the Council of ICAI. This council will also be establishing a Tribunal under Section 10B. Section 9 to 18 talks about the working of the Council and membership of the Council as well as the Tribunal.
Chapter IV states the maintenance of a register for all CA’s who are eligible to practice the profession. Section 20 talks about when can a CA be removed from the Register on conditions such as:
- Death
- Request for removal
- Unpaid fee prescribed
- Any order passed against him for removal from the Register, etc.
Chapter V deals with the misconduct of CA’s and how they can be penalized is given in Chapter VII. Section 21B states the establishment of the Disciplinary committee, whereas Section 22 defines Professional or other misconduct and Section 22G gives the opportunity to appeal to authority within 90 days of any order passed against him by the ICAI or the Disciplinary Committee.
Chapter VIIA deals with the establishment of Quality Review Board whose functions are stated in Section 28B as:
- Make recommendations to the council regarding the quality of the services provided by the members of the ICAI.
- Review and audit the quality of the services provided by the ICAI.
- Guiding the members in improving the quality of the services.
There are The Chartered Accountants Regulations, 1988[4] also governs the practice of Chartered Accountants. These regulations keep up with the current trends and are amended accordingly.
II. Rules made by the Central Government
Section 29A gives the Central Government to make rules under which it has made the following rules:
- The Chartered Accountants (Procedures of Meetings of Quality Review Board, and Terms and Conditions of Service and allowances of the Chairperson and members of the Board) Rules, 2006
- The Appellate Authority (Allowance payable to, and other terms and conditions of service of Chairperson and members and the manner of meeting expenditure of the Authority) Rules, 2006
- The Chartered Accountants (Election Tribunal) Rules, 2006
- The Chartered Accountants (Nomination of members to the Council) Rules, 2006
- The Chartered Accountants (Election to the Council) Rules, 2006[5]
- The Chartered Accountants (Procedure of Investigations of Professional and other Misconduct and Conduct of Cases) Rules, 2007[6]
- Amendment to Chartered Accountants (Procedure of investigations of professional and other misconduct of cases) Rules, 2007
Joshi John v. The Institute of Chartered Accountants of India[7]
In this case, the Kerala High Court ruled against the ICAI on April 26, 2021, held that the professional body’s refusal to allow Chartered Accountants to register a new firm without first resolving a dispute with the previous partnership firm violates the constitutional right to practice a profession.
Parties of the case
| Petitioner | Joshi John |
| Respondent no. 1 | ICAI |
| Respondent no. 2 | Anitha C. Shenoy |
| Respondent no. 3 | Girija P.K. |
Facts
The petitioner, a Chartered Accountant with the Institute of Chartered Accountants of India (ICAI), is enraged by the ICAI’s refusal to register his sole proprietorship on its website.
The petitioner wanted the respondent to record the dissolution of the firm ‘R Menon and Associates‘ in accordance with Section 43 of the Partnership Act, and to remove the petitioner’s name from all records pertaining to the firm in any capacity with effect from November 21, 2019. Other ancillary reliefs were also requested.
According to the petitioner, Anitha C. Shenoy (Respondent no. 2) and Girija P.K (Respondents no. 3) were partners in the firm “R. Menon & Associates” with offices in Ernakulam. The partnership was formed on June 30, 2015, according to the Partnership Agreement.
The partnership was for an indefinite period of time. The partnership received a Registration Certificate from the ICAI on February 15, 2018. At the same time, the second respondent was also working as a sole practitioner.
According to the Petitioner, he was the Working Partner, while respondents no. 2 and 3 lived in Kozhikode and Dubai, respectively, and did not participate actively in the partnership’s management.
The petitioner was served with a notice to vacate the partnership office premises by the third respondent’s husband, who is also the landlord. In addition, a Rent Control Petition was filed. Because both of the other Partners agreed to vacate the premises, the Firm surrendered the premises to the said landlord.
The petitioner, who had invested in the premises, stood to lose his money if the premises were to be vacated. He no longer wanted to be a part of the partnership and, as a result, he sent notice to respondents 2 and 3 dissolving the partnership with effect from November 20, 2019.
The third respondent, on the other hand, responded that the partnership could not be dissolved unilaterally. According to the third respondent, if the petitioner wanted to leave, he should have resigned and left the other Partners to reorganize and continue the partnership.
The petitioner submitted an application to the ICAI to record the Partnership’s dissolution, but it was not recorded because the ICAI’s web portal required OTP confirmation by other Partners. The petitioner wanted to continue working as a Chartered Accountant at a different address, under the name and style “Joshi John & Associates.”
The ICAI noted in their web portal application to register the new Firm that the petitioner must change his Head Office address because he is in charge of another partnership at a different address. Following that, the petitioner proposed that “Joshi John & Co.” be registered as a sole proprietorship.
Despite the petitioner’s attempt to upload Form-18 for the proprietorship, the Form-18 shows the petitioner as a partner of the dissolved “R. Menon & Associates” by default. The petitioner wrote a series of letters expressing his frustration with the Form-18 uploading process.
The ICAI asserts that the consent of the other two partners is required to dissolve the firm “R. Menon & Associates.” The ICAI appears to believe that while a dissolution of a Partnership Firm is pending, another activity of registering a Proprietary Firm cannot be started.
Thus, the issue at hand affects the petitioner’s fundamental right to pursue his profession.
Issues
Whether the ICAI can force a CA to continue in a partnership of CA’s even after dissolution of the partnership firm or retirement of the CA?
Held
After considering a petition filed by Joshi John, HC Justice N Nagaresh issued the aforementioned judgement. According to the High Court, “The Chartered Accountants Act does not empower the Council to adjudicate inter se dispute between members of the Institute or disputes between partner-members of a Firm, unless those disputes fall within the ambit of Chapter V of the Act, 1949.”
The High Court also added that “Though the decision of the Council to evolve a mechanism of Alternate Dispute Resolution (ADR) to resolve inter se disputes between their members/Firms is laudable, availability of such ADR mechanism cannot be a reason not to record the current status of a Chartered Accountant in a Firm, in the registers maintained under Regulation 190.”
The Court in conclusion stated that:
“33. The forcible continuance of the petitioner, as a partner of a Firm which is loaded with partnership disputes, has civil consequences also on the petitioner. As per the general decisions taken by the Council, the Council will not only record in their registers that the partnership is under dispute but will communicate the said fact C & A.G. and Reserve Bank of India, while furnishing the particulars of a Firm for empanelment of Bank/C&AG audits. Such recording and communication will indeed affect the chances of the petitioner to get audit assignments.
34. The decision of the ICAI not to recognise and record the retirement of the petitioner from ‘M/s. R. Kumar and Associates’ will therefore cause unnecessary and unwarranted hindrance to the professional advancement of the petitioner. It will offend the fundamental right of the petitioner to practice a profession freely, guaranteed to him under Article 19(1)(g) of the Constitution of India. The petitioner is therefore entitled to reliefs, in this writ petition.”
Thus, directing ICAI to let the petitioner make his own firm to continue his work and earn his livelihood. The Court also directed the ICAI to let Respondent no. 2 and 3 to constitute another firm if the are eligible and want to constitute one.
References
- Why India has demand – supply misalliance of CA’s available at: timesofindia.indiatimes.com. ↑
- Average Chartered Accountant Salary in India available at: payscale.com ↑
- CA Final Pass Percentage 2021 – Check CA old and New Courses pass percentage available at: finance.careers360.com ↑
- Amended on 1st October 2020 ↑
- Updated on 1st October 2020 ↑
- Updated on 1st October 2020 ↑
- Joshi John v. The Institute of Chartered Accountants of India W.P.(C) No.5833/2020 referred from: indiankanoon.org ↑
