THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA & ORS.versusSHAJI POULOSE & ORS.

                         [2020] 9 S.C.R. 851                              851


      THE INSTITUTE OF CHARTERED ACCOUNTANTS                              A
                   OF INDIA & ORS.
                                  v.
                     SHAJI POULOSE & ORS.
           (Transfer Petition (Civil) Nos. 2849-2859/2019)                B
                       DECEMBER 09, 2020
      [ASHOK BHUSHAN, R. SUBHASH REDDY AND
                 M. R. SHAH, JJ.]
       Transfer Petition – Constitution of India – Art. 139-A(1) –
                                                                          C
Supreme Court Rules, 2013 – Or. XL, Rule 1 – 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 Art. 19(1)(g) of the Constitution
– The said chapter VI of the guidelines dated 08.08.2008 stipulates       D
that a member of the Institute in practice shall not accept, in a
financial year, more than “specified number of tax audit
assignments”, which is at present 60 u/s. 44 AB of the Income Tax
Act, 1961 – Several writ petitions regarding the same were pending
in the Kerala High Court, Madras High Court and Calcutta High
                                                                          E
Court – 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 petitions to the Supreme Court for final and conclusive
determination of the issues involved – Held: The guidelines which
are impugned in the High Court and the consequent disciplinary            F
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 – To settle the law and to clear the uncertainity
among tax professionals and citizens, it is appropriate that the
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Supreme Court may transfer the writ petition, to authoritatively
pronounce the law on the subject – However, the interim orders
operating in different writ petitions which are sought to be
transferred should be allowed to be continued till the Supreme Court
considers the matter and passes any other order – In result, Transfer
Petitions are allowed.                                                    H
                                  851
852             SUPREME COURT REPORTS                           [2020] 9 S.C.R.


A            Institute of Chartered Accountants of India v. Southern
             Petrochemical Industries Corporation Limited and
             Another (2007) 15 SCC 649 – referred to.
                                Case Law Reference
      (2007) 15 SCC 649                  referred to               Para 14
B            CIVIL ORIGINAL JURISDICTION: Transfer Petition (Civil)
      Nos. 2849-2859 of 2019.
             Petitions under Article 139-A(1) of the Constitution of India read
      with order XL Rule 1 of the Supreme Court Rules, 2013.
             With
C            Transfer Petition (Civil) Nos. 727-728 of 2019.
             Arvind Datar, Sr. Adv., Pramod Dayal, Nikunj Dayal, Advs. for
      the Petitioners.
             N. Venkataraman, ASG, R. Basant, Sr. Adv., Raghenth Basant,
      E.M.S. Anam, Piyush Beriwal, Bhuvan Mishra, Ms. Anil Katiyar, B.
D     Ramana Kumar, Raghunatha Sethupathy, K. Paari Vendhan,
      Krishanmohan, Goutham Shivshankar, Sajith P., Vishu P., Ashwin Kumar
      D.S., Ms. Surbhi Mehta, Tapesh Kumar Singh, Aditya Pratap Singh,
      Ms. Bhaswati Singh, Advs. for the Respondents.
             The Judgment of the Court was delivered by
E            ASHOK BHUSHAN, J.
             1. 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,
F     Madras High Court and Calcutta High Court.
             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
G     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
H     08.08.2008 stipulates that a member of the Institute in practice shall not
      THE INSTITUTE OF CHARTERED ACCOUNTANTS                                     853
     OF INDIA v. SHAJI POULOSE [ASHOK BHUSHAN, J.]

accept, in a financial year, more than the “specified number of tax audit        A
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 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
                                                                                 B
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           C
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        D
for the profession of Chartered Accountants has filed the present transfer
petitions for transfer of all the aforesaid writ 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        E
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          F
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       G
each Chartered Accountant etc., all these questions are 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
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854            SUPREME COURT REPORTS                           [2020] 9 S.C.R.


A     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.
B
            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
C     w.e.f. 01.04.1985. Section 44AB provides that every person carrying on
      business, if his total sales, turnover or gross 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
D     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
E     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
F     a member of the Institute in practice shall be deemed to be guilty of
      professional misconduct, if he 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,
G     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.
H     Vs. Institute of Chartered Accountants of India & Anr. was filed before
      THE INSTITUTE OF CHARTERED ACCOUNTANTS                                  855
     OF INDIA v. SHAJI POULOSE [ASHOK BHUSHAN, J.]

the High Court of Madhya Pradesh at Jabalpur, challenging the validity        A
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 that the concerned High        B
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       C
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         D
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 erstwhile Notifications were superseded by               E
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.       F
      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.”                                                                 G
       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:-

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856               SUPREME COURT REPORTS                       [2020] 9 S.C.R.


A           “(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;
            (2)     W.P. (C) No.12963/2017 titled as ‘T.R. Mohan Das vs.
B                   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
C                   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
D                   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.
E                   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.’
F                   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
                    bolero the Hon’ble High Court at Calcutta, and
G           (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
H
      THE INSTITUTE OF CHARTERED ACCOUNTANTS                                    857
     OF INDIA v. SHAJI POULOSE [ASHOK BHUSHAN, J.]

initiated against the writ petitioner for violation of the guidelines dated     A
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
                                                                                B
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 Transfer petition
was filed in this Court by the Institute of Chartered Accountants of India      C
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          D
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            E
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 conflicting judgments of different High Courts
taking different views on the similar guidelines. Further, this Court’s         F
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     G
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             H
858                SUPREME COURT REPORTS                         [2020] 9 S.C.R.


A     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
B     learned counsel for the respondents-writ 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
C     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.
D
      Ankit Gyan                                           Transfer Petitions allowed.




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