REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
TRANSFER PETITION (CIVIL) NO(S). 2849-2859/2019
THE INSTITUTE OF CHARTERED
ACCOUNTANTS OF INDIA & ORS. ...PETITIONER (S)
VERSUS
SHAJI POULOSE & ORS. ...RESPONDENT(S)
WITH
TRANSFER PETITION (CIVIL) NO(S). 727-728/2020
J U D G M E N T
ASHOK BHUSHAN,J.
These transfer petitions have been filed by the
Institute of Chartered Accountants of India under
Article 139-A(1) of the Constitution of India read
with Order XL Rule 1 of the Supreme Court Rules, 2013
for transfer of several writ petitions pending in the
Kerala High Court, Madras High Court and Calcutta
High Court.
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2. Notices were issued in the transfer petitions. A
counter affidavit has also been filed by one of the
respondents, i.e., respondent No.1.
3. We have heard Shri Arvind Datar, learned senior
counsel for the petitioners and Shri R. Basant,
learned senior counsel and other counsel appearing
for respondents.
4. In the writ petitions, which are sought to be
transferred, writ petitioners have challenged
validity of Chapter VI of Guidelines No.1-
CA(7)/02/2008 dated 08.08.2008 issued by the Council
of petitioner Institute on the ground that the same
is violative of Article 19(1)(g) of the Constitution
of India. The said Chapter VI of the Guidelines
dated 08.08.2008 stipulates that a member of the
Institute in practice shall not accept, in a
financial year, more than the “specified number of
tax audit assignments”, which is at present 60 under
Section 44AB of the Income-tax Act, 1961. Further,
Section 22 of the Chartered Accountants Act, 1949
defines “professional or other misconduct” to include
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any act or omission provided in any of the Schedules
to the Act. Clause (1) of Part II of the Second
Schedule to the Act stipulates that a member of the
Institute, whether in practice or not, shall be
deemed to be guilty of professional misconduct if he
contravenes any of the provisions of the Act or the
regulations made thereunder or any guidelines issued
by the Council of the Institute. As such, if a
member of the Institute contravenes the provisions of
the aforesaid Chapter VI of the Guidelines dated
08.08.2008, he shall be deemed to be guilty of
professional misconduct under the Chartered
Accountants Act, 1949.
5. Learned senior counsel submits that in order to
avoid multiplicity of proceedings, conflict of
decisions and also settle the law comprehensively,
which is a question of law of general public
importance, the Institute of Chartered Accountants of
India being the regulatory body for the profession of
Chartered Accountants has filed the present transfer
petitions for transfer of all the aforesaid writ
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petitions to this Court for final and conclusive
determination of the issues involved.
6. Shri R. Basant, learned senior counsel appearing
for the respondent and other counsels have submitted
that there is no good reason for transfer of the writ
petitions pending in the different High Courts. it
is submitted that the only reason of transfer of the
writ petitions is convenience of the petitioners,
whereas the constitutional protection and right
availed by the writ petitioners under Article 226 of
the Constitution will be taken away, if the transfer
is allowed. The provisions of Article 139A is an
exception to the general rule of law, which can be
exercised only rarely and in exceptional
circumstances. By the impugned Guidelines, the
applicants have introduced a cap on the number of
audit assignments that can be taken up by each
Chartered Accountant throughout the country
irrespective of the nature of the audit, the nature
and volume of business of the clients, the local
conditions, local laws, the place of practice of each
Chartered Accountant etc., all these questions are
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important while deciding the question of breach of
Articles 14 and 19(1)(g) of the Constitution. It is
necessary that this Court may have the advantage of
the judgments of different High Courts in different
parts of the country. It is submitted that there are
earlier occasions where such transfer petitions have
been dismissed. It is further submitted that in
event, it is found necessary to transfer all writ
petitions be transferred to one High Court instead of
transferring petitions to this Court. It is lastly
submitted by learned counsel for the respondent that
in several writ petitions, various interim orders are
operating in favour of the writ petitioners, which
may be allowed to continue.
7. We have heard the learned counsel for the parties
and have perused the records.
8. Section 44AB of the Income-tax Act, 1961 was
inserted in the statute book by the Finance Act, 1984
and the same came into force w.e.f. 01.04.1985.
Section 44AB provides that every person carrying on
business, if his total sales, turnover or gross
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receipts exceed Rs.1 crore, and every person carrying
on a profession, if his gross receipts exceed Rs.50
lakhs, in any previous year, is required to get his
accounts of such previous year audited by a Chartered
Accountant, and obtain before the specified date, a
report of the audit in the prescribed form duly
signed and verified by such Chartered Accountant.
The said provisions are popularly called “compulsory
tax audits”. The said Section 44AB had been enacted
to prevent evasion of taxes, plug loopholes enabling
tax avoidance and also facilitate tax administration,
which would ensure that the economic system does not
result in concentration of wealth to the common
detriment. The said section therefore fulfilled the
directive principles laid down under Article 39(c) of
the Constitution of India.
9. In exercise of the powers conferred by Clause
(ii) of Part II of the Second Schedule to the Act,
the council of the Institute issued a notification
bearing No.1-CA(7)/3/88 dated 13.01.1989 specifying
that a member of the Institute in practice shall be
deemed to be guilty of professional misconduct, if he
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accepts in a financial year, more than specified
number of tax audit assignments under Section 44AB of
the Income-tax Act, 1961. The specified number being
30 in a financial year, whether in respect of
corporate or non-corporate assesses. One K.
Bhagavatheeswaran, who was a practicing Chartered
Accountant, filed Writ Petition No.5925 of 1989
before the Madras High Court challenging the legality
and validity of the Notification dated 13.01.1989 and
Writ Petition No.5926 of 1989 challenging the
legality and validity of the Notification dated
25.05.1987 being violative of Article 19(1)(g) of the
Constitution. Misc. Petition No.2844 of 1989 - Prem
Chand & Ors. Vs. Institute of Chartered Accountants
of India & Anr. was filed before the High Court of
Madhya Pradesh at Jabalpur, challenging the validity
and legality of the Notification dated 13.01.1989.
10. There were other writ petitions filed in
different High Courts. The transfer petitions were
filed by Institute of Chartered Accountants of India
being Transfer Petition Nos. 614-615 of 1990, which
were rejected by this Court on 03.04.1991 observing
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that the concerned High Courts may dispose of the
writ petitions at an early date. A Writ Petition
No.2085 of 1993 – Prakash Mehta Vs. ICAI where
validity and legality of the Notification dated
13.01.1989 was challenged, was dismissed on
16.05.2005. Madhya Pradesh High Court vide its
judgments dated 18.04.1995 in Writ Petition No.2844
of 1989 had held that the Notification dated
13.01.1989 does not take away the right of a
Chartered Accountant to carry on profession, against
which judgment, a Special Leave Petition No.21988 of
1995 was filed, in which leave was granted but Civil
Appeal was dismissed as withdrawn by order dated
04.05.1999. Madras High Court vide its judgment
dated 13.07.1998 had allowed the Writ Petition
No.5925 of 1989 – K. Bhagavatheeswaran Vs. Vs.
Institute of Chartered Accountants of India and Ors.,
which judgment was also confirmed by the Division
Bench in a writ appeal.
11. The Chartered Accountants Act, 1949 was amended
by the Parliament by the Chartered Accountants
(Amendment) Act, 2006, after which amendment, the
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erstwhile Notifications were superseded by Guidelines
dated 08.08.2008. After the above Guidelines, this
Court by order dated 01.04.2013 dismissed the Civil
Appeal Nos.7208-7209 of 2005 having become
infructuous, which order was to the following
effect:-
“In view of the above, we do not
propose to hear the appeals on merit and
the same are dismissed as having become
infructuous. However, in case any member
is aggrieved of the existing guidelines
and files a representation before the
appellant, the appellant shall consider it
and pass appropriate order, and if any
member is aggrieved thereof whether he has
made representation or not, would have
right to challenge it before the
appropriate forum.”
12. After issuance of the Guidelines dated
08.08.2008, various writ petitions have been filed in
different High Courts, details of various writ
petitions as given in the transfer petition are as
follows:-
“(1) W.P. (C) No.25662/2016 titled as
'Shaji Poulose vs. The Institute of
Chartered Accountants of India & Ors.'
Pending before the Hon’ble High Court
of Judicature of Kerala at Ernakulam;
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(2) W.P. (C) No.12963/2017 titled as ‘T.R.
Mohan Das vs. The Institute of
Chartered Accountants of India & Ors.'
pending before the Hon'ble High Court
of Judicature of Kerala at Ernakulam;
(3) W.P. (C) No.19026/2017 titled as 'E.
Hrishikesan vs. The Institute of
Chartered Accountants of India & Ors.'
pending before the Hon'ble High Court
of Judicature of Kerala at Ernakulam;
(4) W.P. Nos.17956 to 17958/2017 titled as
'Mr. R. Murlidharan vs. The
Comptroller & Auditor General of India
& Ors.' pending before the Hon'ble
High Court of Judicature at Madras;
(5) W.P. NO.22771/2017 titled as 'Radha
Kanta Das vs. The Institute of
Chartered Accountants of India & Ors.'
pending before the Hon'ble High Court
of Judicature at Calcutta;
(6) W.P. (C) No.12273/2019 titled as 'C.
Suresh Kumar vs. The Institute of
Chartered Accountants of India & Ors.'
pending before the Hon'ble High Court
of Judicature of Kerala at Ernakulam;
(7) W.P. No.19162/2019 titled as 'Ms. V.
Gayathri Devi vs. The Institute of
Chartered Accountants of India & Ors.'
pending before the Hon'ble High Court
of Judicature at Madras;
(8) W.P. No.18124/2019 titled as 'Kamalesh
Mitra vs. The Institute of Chartered
Accountants of India & Ors.' pending
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bolero the Hon’ble High Court at
Calcutta, and
(9) W.P. No.18590/2019 titled as 'Pralay
Chakraborty vs. The Institute of
Chartered Accountants of India & Ors.'
pending before the Hon’ble High Court
at Calcutta.
13. In various writ petitions filed in different High
Courts apart from challenging the guidelines dated
08.08.2008, disciplinary proceedings initiated
against the writ petitioner for violation of the
guidelines dated 08.08.2008 were also challenged. For
example, in writ petition No.25662 of 2016, Shaji
Poulose versus Institute of Chartered Accountant of
India and others, the guidelines dated 08.08.2008 as
well as communication dated 28.03.2015, 23.06.2016
and 13.07.2016 were under challenge. The High Court
issued notice and stayed the disciplinary proceeding
against the writ petitioner therein.
14. Learned counsel for the respondents have also
relied on the judgment of this Court in Institute of
Chartered Accountants of India versus Southern
Petrochemical Industries Corporation Limited and
another, (2007) 15 SCC 649, in which case the
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Transfer petition was filed in this Court by the
Institute of Chartered Accountants of India for
transferring writ petitions filed in different High
Courts challenging Constitutional validity of
paragraph 33 of Accounting Standard 22 framed by
Institute of Chartered Accountant of India. This
Court allowed the Transfer petition and directed all
the writ petitions to be heard by Calcutta High
Court. Learned counsel for the respondent submits
that this Court may consider transferring all the
writ petitions to any one High Court in the present
matter also.
15. The fact that this Court on 03.04.1991 had
dismissed the Transfer Petition Nos.614-615 of 1990
observing that the concerned High Courts may dispose
of the writ petition on early date cannot be treated
any kind of bar in transferring the writ petition in
the present batch of cases. At the time when the
earlier transfer petition was dismissed, conflicting
judgments on subject in issue by different High
Courts had not come. As noted above, with respect to
the cap on the number of audits, there are
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conflicting judgments of different High Courts taking
different views on the similar guidelines. Further,
this Court’s judgment in Institute of Chartered
Accountants of India versus Southern Petrochemical
Industries Corporation Limited and another (supra),
transferring the writ petition to one High Court i.e.
Calcutta High Court does not preclude the
consideration of prayer of the petitioner for
transferring the writ petitions to this Court in
present matter.
16. The guidelines which are impugned in the High
Court and consequent disciplinary proceedings
initiated against various chartered accountants
throughout the country is an issue of public
importance affecting Chartered Accountants as well as
the citizens who have to obtain compulsory tax
audits. We are satisfied that to settle the law and
to clear the uncertainty among tax professionals and
citizens, it is appropriate that this Court may
transfer the writ petition, to authoritatively
pronounce the law on the subject.
17. We, however, find substance in the submissions
made by learned counsel for the respondents-writ
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petitioners that the interim orders operating in
different writ petitions which are sought to be
transferred should be allowed to be continued till
this Court considers the matter and passes any other
order.
18. In result, these Transfer Petitions are allowed.
The writ petitions mentioned above are withdrawn to
this Court.
19. The Registry should transmit this order to the
respective High Courts immediately. The interim
orders passed in the writ petitions which are being
transferred to this Court shall continue till any
other order is passed by this Court.
......................J.
(ASHOK BHUSHAN )
......................J.
( R. SUBHASH REDDY )
......................J.
( M .R. SHAH )
New Delhi,
December 09, 2020.
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