Delhi High Court seeks response from Central government, ICAI in challenge to Chartered Accountants Act provisions

The Delhi High Court on Thursday issued notice in a plea challenging the constitutional validity of recent amendments to the Chartered Accountants Act, 1949 [Venugopal Swami B v. Union of India and Ors]..A Division Bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad directed the Central government, the Institute of Chartered Accountants of India (ICAI), the Institute of Cost Accountants of India and the Institute of Company Secretaries of India to file their replies within six weeks. The case will be listed for further consideration on January 20, 2023..The plea has been filed by one Venugopal Swami B through Advocates Biju Mattam, Chetan Garg and Ankita Bafna. It has challenged the validity of Sections 21A(6) & (7), 21(9), and 21B (6) & (7) of the Chartered Accountants Act as amended by the Chartered Accountants and Company Secretaries (Amendment) Act, 2022..According to the petition, Sections 21A (6) & (7) provide for punishing a firm whose partner or owner has been repeatedly found guilty of misconduct during the last five years, its other partners who may not be privy to or even aware of such any misconduct, and removal of a member of the firm from the register if they fail to pay the fine imposed.Section 21(9) says that the status of actionable information and complaints pending before the Disciplinary Directorate, Boards of Discipline and Disciplinary Committees and the orders passed by the Boards of Discipline shall be made available in the public domain by the Disciplinary Directorate.Sections 21(B)(6) & (7) are stated to be identical to sub sections (21)(A)(6) & (7), as both provide for appropriate punishments that may be attracted in case of non-payment of fine..The petitioner argued that the provisions of the Amendment Act are against settled principles of law and natural justice as they punish the firm and its unrelated and innocent partners who may not even be privy to or aware of the alleged misconduct of the member.“While sub-section (5) of Section 21A provides opportunity for being heard to the accused member before passing any order or taking action under clause (a), (b) or (c) of Sub Section (5), the Act denies any such opportunity to the Firm/ innocent/unrelated partner(s) before passing order under sub-Section (6) or (7). Again, the action that may be initiated against Firm/ innocent/unrelated partner(s) is more stringent, harsh and unproportionate than what would be imposed upon the member who is found guilty of misconduct itself,” the plea stated.