Holding

Rule 9(3)(b) is intra vires as it is within the general rule‑making power under Section 29A(1) of the Chartered Accountants’ (Amendment) Act, 2006 and aligns with the Act’s purpose.

Summary

The Bank of Rajasthan complained that the audit firm Ramesh C. Agrawal & Co. failed to flag suspicious transactions, leading the Director (Discipline) to give a prima facie opinion that the appellant was not guilty of professional misconduct. The Board of Discipline disagreed and, relying on Rule 9(3)(b) of the 2007 Rules, referred the matter to the Disciplinary Committee. The appellant challenged the validity of Rule 9(3)(b) as ultra vires Section 21A(4) of the Chartered Accountants’ (Amendment) Act, 2006, arguing that the Board could only advise further investigation. The Supreme Court examined the statutory scheme, the general rule‑making power under Section 29A(1) and the specific enumerated heads under Section 29A(2), applying the “generality versus enumeration” principle. It held that Rule 9(3)(b) falls within the general power to make rules for carrying out the Act and is consistent with the object of the misconduct chapter. Consequently, the appeal was dismissed and the rule upheld.

Issues considered

Whether Rule 9(3)(b) of the Chartered Accountants’ (Procedure of Investigation of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 exceeds the rule‑making authority conferred on the Central Government under Section 29A of the Chartered Accountants’ (Amendment) Act, 2006 and is ultra vires Section 21A(4) of the Act.

Legislation cited

Chartered Accountants’ (Amendment) Act, 2006s. 21, s. 21A, s. 29A
Chartered Accountants’ (Procedure of Investigation of Professional and Other Misconduct and Conduct of Cases) Rules, 2007s. Rule 9

Subjects

Administrative LawSubordinate LegislationDoctrine of Ultra ViresDelegated LegislationRule‑making PowerChartered Accountants ActProfessional MisconductGenerality vs Enumeration

Judgment

[2024] 2 S.C.R. 194 : 2024 INSC 94

Naresh Chandra Agrawal
v.
The Institute of Chartered Accountants of India and Others
(Civil Appeal No. 4672 of 2012)
08 February 2024
[Pamidighantam Sri Narasimha and Aravind Kumar,* JJ.]

Issue for Consideration
Whether Rule 9(3)(b) of the Chartered Accountants’ (Procedure of
Investigation of Professional and Other Misconduct and Conduct
of Cases) Rules, 2007 is inconsistent with and beyond the rule-
making power of the Central Government.

Headnotes
Chartered Accountants’ (Amendment) Act, 2006 – Chartered
Accountants’ (Procedure of Investigation of Professional and
Other Misconduct and Conduct of Cases) Rules, 2007 – Writ
petition was filed with a prayer to declare Rule 9(3)(b) of the
Rules, 2007 as invalid on the ground that the said rule was
ultra vires section 21 A (4) of the Act – Challenge was repelled
by the High Court:
Held: The rule-making power has been conferred u/s. 29A, which
is titled as ‘Power of the Central Government to make Rules’
– While sub-clause (1) of s. 29A sets out the general power of
delegation, sub-clause (2) provides for enumerated heads – The
power to make rules under the latter clause is without prejudice
to the general power under the former clause – In exercise of the
enabling power (s.29A(2)(c)) to make rules relating to procedure
of investigation u/s. 21(4), the Rules 2007 have been made –
Admittedly, Rule 9(3) goes beyond what is provided for u/s. 21A(4)
in terms of the options available to the Board of Discipline in case
it disagrees with the opinion of the Director (Discipline) – Other
than the option of advising the director to further investigate, Rule
9(3) provides the additional option to the Board for proceeding to
deal with the complaint by itself or referring it to the Disciplinary
Committee, depending on whether the alleged misconduct falls
under the First Schedule or the Second Schedule – Since the
general delegation of power is without any specific guideline, it

* Author
[2024] 2 S.C.R. 195

Naresh Chandra Agrawal v. The Institute of Chartered
Accountants of India and Others

may be necessary to understand the object of the Act vis-à-vis
the chapter on Misconduct – This Chapter defines and prohibits
professional misconduct, while aiming to uphold honesty, integrity,
and professionalism in the practice of chartered accountancy – By
addressing instances of misconduct, it establishes a framework for
accountability, reinforcing the credibility of individual professionals
and the reputation of the entire profession – To achieve these
goals, the Act includes a disciplinary mechanism, ensuring a fair
and transparent process for investigating and adjudicating alleged
cases of misconduct – In this background, there is not the slightest
hesitation to conclude that the impugned rule is completely in sync
with the object and purpose of framing the Chapter on ‘Misconduct’
under the Act. [Paras 34, 35, 36]
Administrative Law – Subordinate Legislation – Summarization
of the legal principles that may be relevant in adjudicating
cases where subordinate legislation are challenged on the
ground of being ‘ultra vires’ the parent Act:
Held: (a) The doctrine of ultra vires envisages that a Rule making
body must function within the purview of the Rule making authority,
conferred on it by the parent Act – As the body making Rules
or Regulations has no inherent power of its own to make rules,
but derives such power only from the statute, it must necessarily
function within the purview of the statute – Delegated legislation
should not travel beyond the purview of the parent Act; (b) Ultra
vires may arise in several ways; there may be simple excess of
power over what is conferred by the parent Act; delegated legislation
may be inconsistent with the provisions of the parent Act; there
may be non-compliance with the procedural requirement as laid
down in the parent Act – It is the function of the courts to keep all
authorities within the confines of the law by supplying the doctrine
of ultra vires; (c) If a rule is challenged as being ultra vires, on
the ground that it exceeds the power conferred by the parent
Act, the Court must, firstly, determine and consider the source of
power which is relatable to the rule – Secondly, it must determine
the meaning of the subordinate legislation itself and finally, it
must decide whether the subordinate legislation is consistent
with and within the scope of the power delegated; (d) Delegated
rule-making power in statutes generally follows a standardized
pattern – A broad section grants authority with phrases like ‘to
carry out the provisions’ or ‘to carry out the purposes’ – Another
sub-section specifies areas for delegation, often using language
196 [2024] 2 S.C.R.

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like ‘without prejudice to the generality of the foregoing power’ –
In determining if the impugned rule is intra vires/ultra vires the
scope of delegated power, Courts have applied the ‘generality vs
enumeration’ principle; (e) The “generality vs enumeration” principle
lays down that, where a statute confers particular powers without
prejudice to the generality of a general power already conferred,
the particular powers are only illustrative of the general power,
and do not in any way restrict the general power – In that sense,
even if the impugned rule does not fall within the enumerated
heads, that by itself will not determine if the rule is ultra vires/intra
vires – It must be further examined if the impugned rule can be
upheld by reference to the scope of the general power; (f) The
delegated power to legislate by making rules ‘for carrying out the
purposes of the Act’ is a general delegation, without laying down
any guidelines as such – When such a power is given, it may
be permissible to find out the object of the enactment and then
see if the rules framed satisfy the Act of having been so framed
as to fall within the scope of such general power confirmed; (g)
However, it must be remembered that such power delegated by
an enactment does not enable the authority, by rules/regulations,
to extend the scope or general operation of the enactment but is
strictly ancillary – It will authorize the provision of subsidiary means
of carrying into effect what is enacted in the statute itself and will
cover what is incidental to the execution of its specific provision
– In that sense, the general power cannot be so exercised as to
bring into existence substantive rights or obligations or disabilities
not contemplated by the provisions of the Act itself; (h) If the rule
making power is not expressed in such a usual general form but
are specifically enumerated, then it shall have to be seen if the
rules made are protected by the limits prescribed by the parent
Act. [Para 32]

Case Law Cited
Tamil Nadu and Anr. v. P. Krishnamurthy and Ors.,
[2006] 3 SCR 396 : (2006) 4 SCC 517; Academy of
Nutrition Improvement v. Union of India, [2011] 8 SCR
680 : (2011) 8 SCC 274; Afzal Ullah vs. The State of
Uttar Pradesh, 1963 SCC Online SC 76 – relied on.
BSNL v. TRAI, [2013] 12 SCR 999 : (2014) 3 SCC
222; Afzal Ullah v. State of U.P, [1964] 4 SCR 991 :
AIR 1964 SC 264; Rohtak and Hissar Districts Electric
[2024] 2 S.C.R. 197

Naresh Chandra Agrawal v. The Institute of Chartered
Accountants of India and Others

Supply Co. Ltd. v. State of U.P., [1966] 2 SCR 863 :
AIR 1966 SC 1471; K. Ramanathan v. State of T.N.,
[1985] 2 SCR 1028 : (1985) 2 SCC 116; D.K. Trivedi
and Sons v. State of Gujarat, 1986 Supp SCC 20; State
of Jammu and Kashmir v Lakhwinder Kumar and Ors.,
[2013] 2 SCR 1070 : (2013) 6 SCC 333; PTC India Ltd.
v. Central Electricity Regulatory Commission, [2010] 3
SCR 609 : (2010) 4 SCC 603; Hindustan Zinc Ltd. vs
Andhra Pradesh State Electricity Board, [1991] 2 SCR
643 : (1991) 3 SCC 299; Shri Sitaram Sugar Co. Ltd.
vs Union of India, [1990] 1 SCR 909 : (1990) 3 SCC
223 – referred to.
King Emperor v. Sibnath Banerji, AIR 1945 PC 156;
State of Kerala v. Shri M. Appukutty, (1963) 14 STC
242 – referred to.

List of Acts
Chartered Accountants’ (Amendment) Act, 2006 – Chartered
Accountants’ (Procedure of Investigation of Professional and Other
Misconduct and Conduct of Cases) Rules, 2007.

List of Keywords
Administrative Law; Subordinate Legislation; Doctrine of ultra vires;
Rule making body; Rule making authority; Delegated legislation;
Rule exceeds the power conferred by the parent Act; Delegated
rule-making power in statutes; Generality vs enumeration.

Case Arising From

CIVIL APPELLATE JURISDICTION : Civil Appeal No.4672 of 2012

From the Judgment and Order dated 05.09.2011 of the High Court of
Delhi at New Delhi in WP No.6488 of 2011
Appearances for Parties
Dr. Anurag Kr. Agarwal, Umesh Mishra, Sanjay Jain, Advs. for the
Appellant.
K. M. Nataraj, ASG, Pramod Dayal, Nikunj Dayal, Ms. Sushma
Suri, Sharath Nambiar, Chinmayee Chandra, Digvijay Dam, Yogya
Rajpurohit, Advs. for the Respondents.
198 [2024] 2 S.C.R.

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Judgment / Order of the Supreme Court
Judgment
Aravind Kumar, J.
1. The facts in brief are set out herein below:
The Bank of Rajasthan Limited, (hereinafter referred to as
‘Complainant-bank’) had engaged the services of M/s Ramesh C.
Agrawal & Co. (hereinafter referred to interchangeably as ‘the firm’/
‘service provider’) for the purpose of conducting audit work. The
audit work was to be carried out in respect of Sahara India, Aliganj,
Lucknow Branch for a period of 3 years commencing from 01.01.2007.
According to this arrangement, the service provider was required to
submit monthly audit reports in respect of daily transactions/banking
affairs of the concerned branch. This report had to be submitted within
a particular time frame, i.e., by the 7th of the succeeding month. The
service provider was also required to report any suspicious activity
or foul play pertaining to the transactions under review, to the Chief
Executive Officer of the Complainant bank.
On 27.09.2009, a series of circuitous transactions (hereinafter referred
to as ‘subject transaction’) involving large sums of money are said
to have taken place in certain accounts of the branch, which were
neither regular nor normal in nature. However, in the audit report
submitted to the Complainant bank, these transactions were not
flagged.
2. According to the Complainant, the main purpose of engaging the firm
for audit related work was to assist it in timely detection of irregularities/
lapses, besides observing as to whether the transactions were within
the policy parameters as laid down by the Reserve Bank of India. In
having failed to point out the suspicious transactions that took place
on 27.09.2009, the Complainant alleges that the firm had utterly failed
to discharge its professional obligation under the terms, as agreed.
3. It is in this background that the Complainant wrote to the firm, vide
letter dated 05.03.2009 and called for its explanation. No satisfactory
response was received. On 05.09.2009, yet another letter was issued
to the firm, but no reply was received in that regard.
4. Accordingly, the Complainant proceeded to register its complaint
against the audit firm before the Director (Discipline) on 21.12.2009.
The Director (Discipline) forwarded a copy of the complaint to the firm
[2024] 2 S.C.R. 199

Naresh Chandra Agrawal v. The Institute of Chartered
Accountants of India and Others

and called upon it to disclose the name(s) of the member/person(s)
who was/were responsible for conducting the audit and preparing
the report pertaining to the subject transaction.
5. On 15.02.2010, there was a letter communication received by the
Director (Discipline) from the audit firm, in which it was stated that
the Appellant was given the responsibility for reviewing the subject
transactions. The Appellant filed his written statement on 02.04.2010.
The Complainant bank submitted its rejoinder on 02.06.2010. Certain
additional documents were sought by the Director (Discipline) from
the Complainant on 10.12.2010.
6. On consideration of the complaint, the written statement and the
other matters on record, the Director (Discipline) arrived at a prima
facie conclusion that the Appellant was not guilty of any professional
or other misconduct within the meaning of clause (7), (8) and (9)
of Part 1 of the Second Schedule of the Chartered Accountants’
(Amendment) Act, 2006.
7. On such opinion of the Director being placed before the Board of
Discipline, Respondent No.1 informed the Appellant that the Board of
Discipline had disagreed with the prima facie opinion of the Director
(Discipline) and the Board had decided to refer the matter to the
Disciplinary Committee for further action under Chapter V of the
Chartered Accountants’ (Procedure of Investigation of Professional
and Other Misconduct and Conduct of Cases) Rules, 2007 (for short
‘Rules, 2007’).
8. The action of the Board in disagreeing with the prima facie opinion
of the Director (Discipline) and referring the matter for further action
before the Disciplinary Committee was impugned before the High
Court of Delhi in W.P.(C) No.6488 of 2011. The prayer in the said
writ petition was to declare Rule 9(3)(b) of the Rules, 2007 as invalid
on the ground that the said rule was ultra vires section 21 A (4) of
the Act. The Ld. Division Bench having repelled the said challenge,
the Appellants are now before us.
9. According to the Ld. Counsel for the Appellant, when the Director
(Discipline) was of the prima facie opinion that the Appellant was not
guilty of the alleged misconduct, the Board had two options available
to it according to Section 21 A (4) of the Act. It could either close the
200 [2024] 2 S.C.R.

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matter at that very stage or direct the Director (Discipline) to further
investigate and it could not have assumed the role of the Director
and acted as the investigating agency by referring the matter to the
Disciplinary Committee. It is submitted that there is no substantive
basis in the parent Act for the action impugned in this appeal. The
Ld. Counsel argued that the impugned Rule, being a delegated
legislation, cannot provide for any action which is not contemplated
under the parent Act.
10. Per contra, Ld. Counsel for the Respondent has sought to justify the
correctness of the view taken in the impugned order. According to
him, if the argument of the Appellant is accepted, the result would
be that the Director (Discipline), who is merely a Secretary to the
Board of Discipline, would have greater powers than the Board itself.
This is because the Board would not be able to overrule the prima
facie view taken by the Director (Discipline). The Board could, at
best, direct the Director (Discipline) to conduct further investigation
and nothing more. It is submitted that the legislature would not have
intended such a consequence. There is nothing in the scheme of
the Act to suggest that the Board cannot refer the matter to the
Disciplinary Committee for further action.
11. Therefore, considering the arguments canvassed on behalf of both
sides, the following question falls for our consideration:
“Whether Rule 9(3)(b) of the Rules, 2007 is inconsistent
with and beyond the rule-making power of the Central
Government?”
Relevant provisions in the Act and Rules:
12. It may be necessary to refer to certain provisions of the Act in order
to better understand the scheme of the applicable law pertaining
to investigation of complaints alleging misconduct. The relevant
provisions are extracted hereinbelow:
“21. Disciplinary Directorate. -
(1) The Council shall, by notification, establish a
Disciplinary Directorate headed by an officer of the
Institute designated as Director (Discipline) and such
other employees for making investigations in respect
of any information or complaint received by it.
[2024] 2 S.C.R. 201

Naresh Chandra Agrawal v. The Institute of Chartered
Accountants of India and Others

(2) On receipt of any information or complaint along
with the prescribed fee, the Director (Discipline) shall
arrive at a prima facie opinion on the occurrence of
the alleged misconduct.
(3) Where the Director (Discipline) is of the opinion
that a member is guilty of any professional or other
misconduct mentioned in the First Schedule, he
shall place the matter before the Board of Discipline
and where the Director (Discipline) is of the opinion
that a member is guilty of any professional or other
misconduct mentioned in the Second Schedule or in
both the Schedules, he shall place the matter before
the Disciplinary Committee.
(4) In order to make investigations under the
provisions of this Act, the Disciplinary Directorate
shall follow such procedure as may be specified.
(5) Where a complainant withdraws the complaint, the
Director (Discipline) shall place such withdrawal
before the Board of Discipline or, as the case
may be, the Disciplinary Committee, and the said
Board or Committee may, if it is of the view that the
circumstances so warrant, permit the withdrawal at
any stage.
21A. Board of Discipline. —
(1) The Council shall constitute a Board of Discipline
consisting of--
(a) a person with experience in law and having
knowledge of disciplinary matters and the
profession, to be its presiding officer.
(b) two members one of whom shall be a member
of the Council elected by the Council and the
other member shall be nominated by the Central
Government from amongst the persons of
eminence having experience in the field of law,
economics, business, finance or accountancy.
(c) the Director (Discipline) shall function as the
Secretary of the Board.
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(2) The Board of Discipline shall follow summary disposal
procedure in dealing with all cases before it.
(3) Where the Board of Discipline is of the opinion that a
member is guilty of a professional or other misconduct
mentioned in the First Schedule, it shall afford to the
member apportunity of being heard before making
any order against him and may thereafter take any
one or more of the following actions, namely: --
(a) reprimand the member.
(b) remove the name of the member from the
Register up to a period of three months.
(c) impose such fine as it may think fit, which may
extend to rupees one lakh.
(4) The Director (Discipline) shall submit before the
Board of Discipline all information and complaints
where he is of the opinion that there is no prima
facie case and the Board of Discipline may, if it
agrees with the opinion of the Director (Discipline),
close the matter or in case of disagreement,
may advise the Director (Discipline) to further
investigate the matter.]
21B. Disciplinary Committee. —
(1) The Council shall constitute a Disciplinary Committee
consisting of the President or the Vice-President of the
Council as the Presiding Officer and two members to
be elected from amongst the members of the Council
and two members to be nominated by the Central
Government from amongst the persons of eminence
having experience in the field of law, economics,
business, finance or accountancy:
Provided that the Council may constitute more
Disciplinary Committees as and when it considers
necessary.
(2) The Disciplinary Committee, while considering the
cases placed before it shall follow such procedure
as may be specified.
[2024] 2 S.C.R. 203

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Accountants of India and Others

(3) Where the Disciplinary Committee is of the opinion
that a member is guilty of a professional or other
misconduct mentioned in the Second Schedule or
both the First Schedule and the Second Schedule,
it shall afford to the member an opportunity of being
heard before making any order against him and
may thereafter take any one or more of the following
actions, namely: --
(a) reprimand the member.
(b) remove the name of the member from the
Register permanently or for such period, as it
thinks fit.
(c) impose such fine as it may think fit, which may
extend to rupees five lakhs.
(4) The allowances payable to the members nominated
by the Central Government shall be such as may be
specified.]
“29A. Power of Central Government to make rules:
(1) The Central Government may, by notification, make
rules to carry out the provisions of this Act.
(2) In particular, and without prejudice to the generality
of the foregoing powers, such rules may provide for
all or any of the following matters, namely :−
(a) the manner of election and nomination in respect
of members to the Council under sub-section
(2) of Section 9;
(b) the terms and conditions of service of the
Presiding Officer and Members of the Tribunal,
place of meetings and allowances to be paid
to them under sub-section (3) of Section 10B;
(c) the procedure of investigation under sub-section
(4) of Section 21;
(d) the procedure while considering the cases by the
Disciplinary Committee under sub-section (2),
and the fixation of allowances of the nominated
members under sub-section (4) of Section 21B;
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(e) the allowances and terms and conditions of
service of the Chairperson and members of the
Authority and the manner of meeting expenditure
by the Council under Section 22C;
(f) the procedure to be followed by the Board in its
meetings under Section 28C ; and
(g) the terms and conditions of service of the
Chairperson and members of the Board under
sub-section (1) of Section 28D.]
(emphasis supplied)
Rule 9 of the Rules, 2007 is extracted hereinbelow:
Rule 9. Examination of the Complaint
(1) The Director shall examine the complaint, written
statement, if any, rejoinder, if any, and other additional
particulars or documents, if any, and form his prima
facie opinion as to whether the member or the
firm is guilty or not of any professional or other 10
misconduct or both under the First Schedule or the
Second Schedule or both.
(2) (a) Where the Director is of the prima facie opinion
that, −
(i) the member or the firm is guilty of any misconduct
under the First Schedule, he shall place his
opinion along with the complaint and all other
relevant papers before the Board of Discipline.
(ii) the member or the firm is guilty of misconduct
under the Second Schedule or both the First and
Second Schedules, he shall place his opinion
along with the complaint and all other relevant
papers before the Committee.
(b) If the Board of Discipline or the Committee, as the
case may be, agrees with the prima facie opinion of
the Director under clause (a) above, then the Board
of Discipline or the Committee may proceed further
under Chapter IV or V respectively.
[2024] 2 S.C.R. 205

Naresh Chandra Agrawal v. The Institute of Chartered
Accountants of India and Others

(c) If the Board of Discipline or the Committee, as the
case may be, disagrees with the prima facie opinion
of the Director under clause (a) above, it shall either
close the matter or advise the Director to further
investigate the matter
(3) Where the Director is of the prima facie opinion
that the member or the firm is not guilty of any
misconduct either under the First Schedule or the
Second Schedule, he shall place the matter before
the Board of Discipline, and the Board of Discipline, −
(a) if it agrees with such opinion of the Director,
shall pass order, for closure.
(b) if it disagrees with such opinion of the
Director, then it may either proceed under
chapter IV of these rules, if the matter
pertains to the First Schedule, or refer the
matter to the Committee to proceed under
Chapter V of these rules, if the matter
pertains to the Second Schedule or both
the Schedules and may advise the Director
to further investigate the matter.
(4) The Director shall, after making further investigation
as advised by the Board of Discipline under sub-rule
(2) or (3) of this rule or by the Committee under sub-
rule (2), shall further proceed under this rule.”
(emphasis supplied)
13. Section 21(1) empowers the Council to establish a Disciplinary
Directorate for making investigations into the complaints received by
it. The head of this authority is designated as Director (Discipline).
Section 21(2) provides that the Director (Discipline), on receipt of
any information or complaint, shall arrive at a prima facie opinion
on the occurrence of the alleged misconduct. Section 21(3) states
that should the Director (Discipline) arrive at a prima facie opinion
that the member is guilty of professional misconduct, he shall refer
the matter to the Board of Discipline or the Disciplinary Committee,
depending on whether the alleged misconduct falls within the First
Schedule or the Second Schedule or both. If the alleged misconduct
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falls within the First Schedule, the matter is placed before the Board
of Discipline and if it falls within the Second Schedule or in both the
Schedules, the matter is placed before the Disciplinary Committee.
Section 21(4) provides that the procedure for investigation would
be as prescribed under the relevant rules.1 In the event where
the Complainant wishes to withdraw his/her complaint, Section
21(5) provides that the Director (Discipline) shall place the request
for withdrawal before the Board of Discipline or the Disciplinary
Committee, as the case may be, and the Board or Committee would
take a final call in this regard.
14. The Board of Discipline is constituted under Section 21A of the
Act. The Director (Discipline) is to function as the Secretary of the
Board, as per Section 21A(1)(c) of the Act. Section 21A (2) provides
that the Board shall follow a summary procedure in dealing with
cases referred to it. Where the Board finds that a member is guilty
of professional or other misconduct mentioned in First Schedule, it
may resort to imposing any of the three punishments enumerated
in Section 21A (3).
15. Section 21A (4) requires the Director (Discipline) to submit all
information and complaints to the Board, where he is of the opinion
that there is no prima facie case in the complaint. It further provides
that if the Board agrees with the opinion of the Director (Discipline),
it may close the matter and if it disagrees with the opinion, it may
advise the Director (Discipline) to further investigate into the complaint.
16. Similar scheme to deal with complaints relating to misconduct as
prescribed in the Second Schedule is found in Section 21B (1) to (4).
17. Section 29A is titled ‘Power of Central Government to make rules’.
Section 29A (1) enables the Central Government ‘to make rules
to carry out the provisions of this Act’. Section 29A (2) sets out
enumerated heads under which rules may be made. Rule 9(3), which
is part of Rules, 2007 appears to have been made under Section
29A(2)(c). It is relevant to note that the power to make rules under
sub-section (2) of Section 29A is ‘without prejudice to the generality
of the foregoing power’ provided for in Section 29A(1).

1 Chartered Accountants’ (Procedure of Investigation of Professional and Other Misconduct and Con-
duct of Cases) Rules, 2007
[2024] 2 S.C.R. 207

Naresh Chandra Agrawal v. The Institute of Chartered
Accountants of India and Others

18. Having discussed the scheme of relevant provisions in the parent
Act, we may now peruse the contents of Rule 9.
19. Rule 9 is titled ‘Examination of Complaint’. Sub-clause (1) provides
for the procedure to be followed on receipt of complaint. The Director
(Discipline) is required to form his prima facie opinion as to whether
the member is guilty or not of the alleged misconduct. Sub-clause (2)
sets out the procedure to be followed in the event where the Director
(Discipline) reaches a prima facie opinion that the member is guilty
of professional misconduct. What is of utmost significance for us is
to see the procedure to be followed when the Director (Discipline)
comes to a prima facie opinion that the member is not guilty of alleged
misconduct, as has been examined in the instant case. This can be
found in sub-clause (3) of Rule 9. It provides that the Board can
accept the opinion of the Director (Discipline) and pass an order for
closure (Rule 9(3)(a)). Where the Board disagrees with the opinion
of the Director (Discipline), it may proceed under Chapter IV of the
Rules, 2007 if the matter pertains to the First Schedule or it may
advise the Director to further investigate the matter. Similarly, the
Board could refer the matter to the Disciplinary Committee for action
under Chapter V if the matter pertains to the Second Schedule or it
could advise the Director (Discipline) to conduct further investigation.
Analysis and Findings:
20. Now, let us contrast Section 21A (4) with Rule 9(3) to examine if
there is any substance in the argument that Rule 9(3) is ultra vires
Section 21A (4). In the event the Board disagrees with the opinion
of the Director (Discipline), Section 21A(4) provides that the Board
may advise the Director to further investigate the matter. However,
Rule 9(3) does not limit itself to just this option. It also enables the
Board to straightaway proceed to act by itself or refer the matter
to the Disciplinary Committee, depending on whether the alleged
misconduct relates to the First Schedule or Second Schedule. It is
in this background that the learned counsel for the Appellant has
strenuously submitted that the Rule goes beyond the enabling power
set out in the parent Act.
21. In State of Tamil Nadu and Anr. v. P. Krishnamurthy and Ors. (2006)
4 SCC 517, this Court recollected the following principles while
adjudging the validity of subordinate legislation, including regulations:
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15. There is a presumption in favour of constitutionality or
validity of a subordinate legislation and the burden is upon
him who attacks it to show that it is invalid. It is also well
recognized that a subordinate legislation can be challenged
under any of the following grounds:
(a) Lack of legislative competence to make the
subordinate legislation.
(b) Violation of fundamental rights guaranteed under the
Constitution of India.
(c) Violation of any provision of the Constitution of India.
(d) Failure to conform to the statute under which it is
made or exceeding the limits of authority conferred
by the enabling Act.
(e) Repugnancy to the laws of the land, that is, any
enactment.
(f) Manifest arbitrariness/unreasonableness (to an extent
where the court might well say that the legislature
never intended to give authority to make such rules)
(emphasis supplied)
22. Of the six available grounds for challenging subordinate legislation,
it is quite clear that the scope of the challenge raised in this petition
is restricted to one ground in the instant case; that the Rule exceeds
the limits of authority conferred by the enabling Act. Therefore, it
becomes important to examine the scope of power available under
the Act before we can adjudge whether the Rules exceed the limits
of authority conferred by the enabling Act.
23. As we have noted earlier, the Rules, 2007, have been framed
purportedly in exercise of the power conferred under Section 29A(2)
(c) of the Act, which enables the Central Government to make rules
regarding ‘the procedure of investigation under sub-section (4) of
Section 21’. However, the enumerated heads set out in Section 29A(2)
cannot be read as exhaustive since the legislature has deployed
the expression ‘without prejudice to the generality of the foregoing
provisions’ before enumerating the specific heads for exercising the
rule-making power. In that sense, the power to make rules generally
for carrying out the provisions of the Act is found in Section 29A(1).
[2024] 2 S.C.R. 209

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Accountants of India and Others

Section 29A (2) is only an illustrative list of subjects with respect to
which the Central Government may make rules. The illustrative list
of subjects cannot limit the scope of general power available under
the wider rule-making power found in Section 29A(1).
24. Experience of legislative drafting in India has shown that, generally,
the delegation of power to formulate rules follows a standardized
pattern within statutes. Typically, a section of the statute grants
this authority in broad terms, using phrases like ‘to carry out the
provisions of this Act’ or ‘to carry out the purposes of this Act.’
Subsequently, another sub-section details specific matters or areas
for which the delegated power can be exercised, often employing
language such as ‘in particular and without prejudice to the generality
of the foregoing power.’ Judicial interpretation of such provisions
underscores that the specific enumeration is illustrative and should
not be construed as limiting the scope of the general power. This
approach allows for flexibility in rulemaking, enabling the authorities
to address unforeseen circumstances. A key principle emerges from
this interpretation: even if specific topics are not explicitly listed in the
statute, the formulation of rules can be justified if it falls within the
general power conferred, provided it stays within the overall scope
of the Act. This mode of interpretation has been categorised as the
‘generality versus enumeration’ principle in some precedents of this
Court2. This delicate balance between specificity and generality in
legal delegation is crucial for effective governance and adaptability
to evolving legal landscapes.
25. For the sake of completeness, we may refer to some leading
precedents of this Court which have discussed the ‘generality versus
enumeration’ principle.
26. In State of Jammu and Kashmir v Lakhwinder Kumar and Ors.,
(2013) 6 SCC 333, this Court held that when a general power to
make regulations is followed by a specific power to make regulations,
the latter does not limit the former. This is the principle of ‘generality
vs enumeration’: a residuary provision can always be given voice.

2 See, BSNL v. TRAI, (2014) 3 SCC 222; King Emperor v. Sibnath Banerji: AIR 1945 PC 156; Afzal
Ullah v. State of U.P, AIR 1964 SC 264; Rohtak and Hissar Districts Electric Supply Co. Ltd. v. State of
U.P.,AIR 1966 SC 1471; K. Ramanathan v. State of T.N. (1985) 2 SCC 116; D.K. Trivedi and Sons v.
State of Gujarat, 1986 Supp SCC 20
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27. In Academy of Nutrition Improvement v. Union of India (2011) 8
SCC 274, this Court had interpreted a pari materia expression “in
particular and without the generality of the foregoing power, such
Rules may provide for all or any of the following matters”. This Court
held as follows :
“………where power is conferred to make subordinate
legislation in general terms, the subsequent particularisation
of the matters/topics has to be construed as merely
illustrative and not limiting the scope of the general power.
Consequently, even if the specific enumerated topics in
section 23(1A) may not empower the Central Government
to make the impugned rule (Rule 44-I), making of the
Rule can be justified with reference to the general power
conferred on the central government under section 23(1),
provided the rule does not travel beyond the scope of
the Act”
28. In the case of State of Kerala v. Shri M. Appukutty (1963) 14 STC
242, the provisions of Section 19 (1) and (2) (f) of the Madras General
Sales Tax Act of 1939 came up for consideration of this Court. It
was unsuccessfully argued therein that Rule 17(1) was ultra vires
the rule making power specifically enumerated in Section 19(2)(f).
29. The relevant provisions involved there were similar in form to the
applicable provisions in the instant case.
Section 19 (1),(2),2(f) read as follows:
(1) The State Government may make rules to carry out
the purposes of this Act.
(2) In particular and without prejudice to the generality
of foregoing power such rules may provide for-- *****
(f) the assessment to tax under this Act of any turnover
which has escaped assessment and the period within
which such assessment may be made, not exceeding
three years;
Dealing with the objection raised, this Court observed:--
“..... Rule 17 (1) and (3A) ex facie properly fall under Section
19(2)(f). In any event as was said by the Privy Council in
King Emperor v. Sibnath Banerji MANU/PR/0024/1945,
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the rule-making power is conferred by Sub-section (1) of
that section and the function of Sub-section (2) is merely
illustrative and the rules which are referred to in Sub-section
(2) are authorised by and made under Sub-section (1).
The pro-visions of Sub-section (2) are not restrictive
of Sub-section (1) as expressly stated in the words
‘without prejudice to the generality of the foregoing
power’ with which Sub-section (2) begins and which
words are similar to the words of Sub-section (2) of
Section 2 of the Defence of India Act which the Privy
Council was considering.....”
(emphasis supplied)
30. While examining the “generality versus enumeration” principle, this
Court, in PTC India Ltd. v. Central Electricity Regulatory Commission,
(2010) 4 SCC 603, referred with approval to its earlier Judgement
in Hindustan Zinc Ltd. vs Andhra Pradesh State Electricity Board
(1991) 3 SCC 299, wherein the scope of Sections 49(1) & (2) of the
Electricity Supply Act, 1948 fell for consideration. Under Section 49(1),
a general power was given to the Board to supply electricity to any
person not being a licensee, upon such terms and conditions as the
Board thinks fit and the Board may, for the purposes of such supply,
frame uniform tariff under Section 49(2). The Board was required to
fix uniform tariff after taking into account certain enumerated factors.
In this context, this Court, in Hindustan Zinc Ltd., held that the power
of fixation of tariff in the Board ordinarily had to be done in the light
of specified factors; however, such enumerated factors in Section
49(2) did not prevent the Board from fixing uniform tariff on factors
other than those enumerated in Section 49(2), as long as they were
relevant and in consonance with the Act. This Court then referred,
with approval, to its judgment in Shri Sitaram Sugar Co. Ltd. vs Union
of India (1990) 3 SCC 223, wherein it was held that the enumerated
factors/topics in a provision did not mean that the authority cannot
take any other matter into consideration which may be relevant; and
the words in the enumerated provision are not a fetter; they are not
words of limitation, but are words for general guidance.
31. In Afzal Ullah vs. The State of Uttar Pradesh reported in 1963 SCC
Online SC 76, it was argued that the impugned bye-laws were invalid,
because they were outside the authority conferred on the delegate
to make bye-laws by Section 298(2) of the Act, and it was also
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contended that the bye-laws were invalid for the additional reason
that they were inconsistent with Section 241 of the Act. Rejecting
the said contentions, this Court observed as follows:
“Even if the said clauses did not justify the impugned bye-
law, there can be little doubt that the said bye-laws would
be justified by the general power conferred on the Boards
by s. 298(1). It is well-settled that the specific provisions
such as are contained in the several clauses of s. 298(2)
are merely illustrative and they cannot be read as restrictive
of the generality of powers prescribed by s. 298(1) vide
Emperor v. Sibnath Banerji & Ors MANU/PR/0024/1945. If
the powers specified by s. 298(1) are very wide and they
take in within their scope bye-laws like the ones with which
we are concerned in the present appeal, it cannot be said
that the powers enumerated under s. 298(2) control the
general words used by s. 298(1). These latter clauses
merely illustrate and do not exhaust all the powers
conferred on the Board, so that any cases not falling
within the powers specified by section 298(2) may
well be protected by s. 298(1), provided, of course, the
impugned bye-laws can be justified by reference to the
requirements of s. 298(1). There can be no doubt that
the impugned bye-laws in regard to the markets framed
by respondent No. 2 are for the furtherance of municipal
administration under the Act, and so, would attract the
provisions of s. 298(1). Therefore we are satisfied that
the High Court was right in coming to the conclusion that
the impugned bye-laws are valid.”
(emphasis supplied)
32. From reference to the precedents discussed above and taking an
overall view of the instant matter, we proceed to distil and summarise
the following legal principles that may be relevant in adjudicating
cases where subordinate legislation are challenged on the ground
of being ‘ultra vires’ the parent Act:
(a) The doctrine of ultra vires envisages that a Rule making body
must function within the purview of the Rule making authority,
conferred on it by the parent Act. As the body making Rules or
Regulations has no inherent power of its own to make rules, but
[2024] 2 S.C.R. 213

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Accountants of India and Others

derives such power only from the statute, it must necessarily
function within the purview of the statute. Delegated legislation
should not travel beyond the purview of the parent Act.
(b) Ultra vires may arise in several ways; there may be simple
excess of power over what is conferred by the parent Act;
delegated legislation may be inconsistent with the provisions of
the parent Act; there may be non-compliance with the procedural
requirement as laid down in the parent Act. It is the function of
the courts to keep all authorities within the confines of the law
by supplying the doctrine of ultra vires.
(c) If a rule is challenged as being ultra vires, on the ground that it
exceeds the power conferred by the parent Act, the Court must,
firstly, determine and consider the source of power which is
relatable to the rule. Secondly, it must determine the meaning
of the subordinate legislation itself and finally, it must decide
whether the subordinate legislation is consistent with and within
the scope of the power delegated.
(d) Delegated rule-making power in statutes generally follows a
standardized pattern. A broad section grants authority with
phrases like ‘to carry out the provisions’ or ‘to carry out the
purposes.’ Another sub-section specifies areas for delegation,
often using language like ‘without prejudice to the generality
of the foregoing power.’ In determining if the impugned rule is
intra vires/ultra vires the scope of delegated power, Courts have
applied the ‘generality vs enumeration’ principle.
(e) The “generality vs enumeration” principle lays down that, where
a statute confers particular powers without prejudice to the
generality of a general power already conferred, the particular
powers are only illustrative of the general power, and do not in
any way restrict the general power. In that sense, even if the
impugned rule does not fall within the enumerated heads, that
by itself will not determine if the rule is ultra vires/intra vires. It
must be further examined if the impugned rule can be upheld
by reference to the scope of the general power.
(f) The delegated power to legislate by making rules ‘for carrying out
the purposes of the Act’ is a general delegation, without laying
down any guidelines as such. When such a power is given,
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it may be permissible to find out the object of the enactment
and then see if the rules framed satisfy the Act of having been
so framed as to fall within the scope of such general power
confirmed.
(g) However, it must be remembered that such power delegated by
an enactment does not enable the authority, by rules/regulations,
to extend the scope or general operation of the enactment but
is strictly ancillary. It will authorize the provision of subsidiary
means of carrying into effect what is enacted in the statute
itself and will cover what is incidental to the execution of its
specific provision. In that sense, the general power cannot be
so exercised as to bring into existence substantive rights or
obligations or disabilities not contemplated by the provisions
of the Act itself.
(h) If the rule making power is not expressed in such a usual general
form but are specifically enumerated, then it shall have to be
seen if the rules made are protected by the limits prescribed
by the parent Act.
33. With this background in view, we may now apply the principles to
the factual context obtained in the instant case.
34. In the instant case, the ultra vires challenge has been mounted on
the ground that the impugned Rule exceeds the power conferred by
the parent Act. If we look at the parent Act, the rule-making power
has been conferred under Section 29A, which is titled as ‘Power of
the Central Government to make Rules’. While sub-clause (1) of
Section 29A sets out the general power of delegation, sub-clause (2)
provides for enumerated heads. As noted earlier, the power to make
rules under the latter clause is without prejudice to the general power
under the former clause. In exercise of the enabling power (Section
29A(2)(c)) to make rules relating to procedure of investigation under
Section 21(4), the Rules 2007 have been made. Admittedly, Rule 9(3)
goes beyond what is provided for under Section 21A(4) in terms of
the options available to the Board of Discipline in case it disagrees
with the opinion of the Director (Discipline). Other than the option
of advising the director to further investigate, Rule 9(3) provides the
additional option to the Board for proceeding to deal with the complaint
[2024] 2 S.C.R. 215

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by itself or referring it to the Disciplinary Committee, depending on
whether the alleged misconduct falls under the First Schedule or the
Second Schedule. But as we have seen from principles discussed
above, the scrutiny cannot stop at examining if the impugned rule
is relatable to any specific enumerated head. We must go further
and examine if it can be related to the general delegation of power
under Section 29A(1), which authorises the Central Government to
make rules for carrying out the purposes of the Act.
35. Since the general delegation of power is without any specific guideline,
it may be necessary to understand the object of the Act vis-à-vis the
chapter on Misconduct. It is only then can we examine whether the
impugned rule falls within the scope of such general power conferred.
Object of the CA Act vis a vis Chapter on Misconduct:
36. The Chartered Accountants Act, 1949, is a legislation that governs
the regulation of the chartered accountancy profession in India. The
chapter on “Misconduct” in the Chartered Accountants Act, 1949, plays
a crucial role in maintaining the ethical standards of the profession in
India. Its main objectives are to set ethical guidelines, prevent actions
that may compromise public interests, ensure accountability among
chartered accountants, and preserve the profession’s reputation. This
Chapter defines and prohibits professional misconduct, while aiming
to uphold honesty, integrity, and professionalism in the practice of
chartered accountancy. By addressing instances of misconduct, it
establishes a framework for accountability, reinforcing the credibility
of individual professionals and the reputation of the entire profession.
To achieve these goals, the Act includes a disciplinary mechanism,
ensuring a fair and transparent process for investigating and
adjudicating alleged cases of misconduct.
37. Seen in this background, we have not the slightest hesitation to
conclude that the impugned rule is completely in sync with the
object and purpose of framing the Chapter on ‘Misconduct’ under
the Act. As has been rightly argued by the learned counsel for the
Respondent, accepting the contention of the Appellant will create
an anomalous situation. The Director (Discipline) who functions as
a secretary to the Board of Discipline as per Section 21A (2) will be
having greater powers than the Board itself. The ‘prima facie’ opinion
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of the Director will become nothing but a final opinion if the Board
will have no option except to direct the Director (Discipline) to further
investigate the matter. The Section is silent as to what would happen
in a situation where the Director (Discipline) on further investigation
concludes in accordance with his preliminary assessment. Therefore,
even if we accept, for the sake of argument, that Rule 9(3) cannot
be saved under Section 29A(2)(c), as it directly relates to furthering
the purposes of the Act in ensuring that a genuine complaint of
professional misconduct against the member is not wrongly thrown
out at the very threshold, it can be easily concluded that the impugned
Rule falls within the scope of the general delegation of power under
Section 29A(1).
38. Accordingly, we dismiss this appeal. No costs.

Headnotes prepared by: Ankit Gyan Result of the case: Appeal dismissed.