The Supreme Court of India, in The Council of the Institute of Chartered Accountants of India & Another v. B. Mukherjea, addressed the question of professional misconduct within the meaning of the Chartered Accountants Act, 1949. The judgment revolved around the conduct of the respondent, a chartered accountant who, while serving as a liquidator appointed by the Calcutta High Court for three insurance companies, failed to return company assets, failed to communicate with authorities, and behaved negligently in his official capacity. The High Court had earlier rejected the disciplinary reference, interpreting “professional misconduct” narrowly. However, the Supreme Court reversed this view, expanding the scope of professional misconduct under Sections 21 and 22 of the Act. It held that a liquidator appointed by a court who is a chartered accountant operates in his professional capacity. The Court clarified that “professional misconduct” includes any conduct that renders a person unfit to remain a member of the Institute, whether or not it falls within the express terms of the statutory schedule. The Court ultimately ordered the removal of the respondent’s name from the Register of Chartered Accountants for a period of four years. This landmark decision broadened the interpretive scope of misconduct and reaffirmed the disciplinary authority of the Institute and courts in maintaining ethical standards.

Keywords: Professional misconduct, Chartered Accountants Act, liquidator, disciplinary proceedings, Section 21 and 22, Supreme Court, Calcutta High Court, ICAI, unfit conduct.

B) CASE DETAILS

i) Judgement Cause Title
The Council of the Institute of Chartered Accountants of India & Another v. B. Mukherjea

ii) Case Number
Civil Appeal No. 170 of 1956

iii) Judgement Date
10th September, 1957

iv) Court
Supreme Court of India

v) Quorum
Justices Bhagwati, S.K. Das, and Gajendragadkar

vi) Author
Justice Gajendragadkar

vii) Citation
(1958) 1 SCR 371

viii) Legal Provisions Involved
Sections 2(2), 21, 22 of the Chartered Accountants Act, 1949

ix) Judgments Overruled by the Case (if any)
None explicitly overruled, but the interpretation of misconduct was broadened, overriding the restrictive view taken by Calcutta High Court.

x) Case is Related to which Law Subjects
Corporate Law, Professional Ethics, Administrative Law, Regulatory Law

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

This case emerged from allegations against B. Mukherjea, a member of the Institute of Chartered Accountants of India (ICAI), who was appointed as a liquidator by the Calcutta High Court for three insurance companies. During his tenure, the respondent displayed gross misconduct by failing to maintain communication with the authorities, failing to submit reports on liquidation proceedings, issuing a dishonoured cheque, and retaining cash and securities belonging to the companies even after his removal from office. Following an inquiry by the Council of the ICAI, which found him guilty of misconduct, the matter was referred to the Calcutta High Court under Section 21 of the Chartered Accountants Act, 1949. However, the High Court dismissed the reference on the ground that the misconduct did not constitute “professional misconduct.” The Supreme Court was thus called upon to determine the scope of Sections 2(2), 21, and 22, and to clarify whether misconduct in the capacity of a court-appointed liquidator amounted to professional misconduct.

D) FACTS OF THE CASE

B. Mukherjea was registered as an accountant in 1933 under the Auditors Certificate Rules, 1932. With the enactment of the Chartered Accountants Act, 1949, he became a member of the ICAI from 1st July 1949. In 1950, the Calcutta High Court appointed him as a liquidator for three insurance companies. As a liquidator, he received cash, securities, and documents. However, he failed to perform his duties properly, did not provide required reports, ignored official correspondence, and even issued a cheque that was dishonoured. Consequently, he was removed from the post in 1952 and replaced by another liquidator. Despite repeated requests, he failed to hand over all the assets. A disciplinary complaint was filed, and after inquiry, the ICAI found him guilty of professional misconduct. The ICAI then forwarded the case to the Calcutta High Court under Section 21. The High Court, however, held that the conduct did not constitute professional misconduct under the Act. This led to an appeal to the Supreme Court.

E) LEGAL ISSUES RAISED

i) Whether the conduct of the respondent, while serving as a liquidator, amounted to “professional misconduct” under Sections 21 and 22 of the Chartered Accountants Act, 1949.

ii) Whether misconduct that does not fall within the express provisions of the Schedule under Section 22 can still be actionable.

iii) What is the scope of the High Court’s powers while dealing with a reference under Section 21(3) of the Act.

F) PETITIONER/ APPELLANT’S ARGUMENTS

i) The counsels for Petitioner / Appellant submitted that the respondent’s actions fell squarely within professional misconduct. They argued that acting as a liquidator falls under the definition of “in practice” as per Section 2(2)(iv), which states that rendering other services recognised by the Council constitutes professional practice. Regulation 78 explicitly included the role of liquidator among services chartered accountants could provide. Thus, the respondent was working in a professional capacity.

They also emphasized that the definition of misconduct under Section 22 is inclusive and not exhaustive. It allows inquiry into any act that, in the opinion of the Council, renders a person unfit to remain a member, even if the act is not explicitly listed in the Schedule.

Further, they challenged the High Court’s limited approach, asserting that it had failed to appreciate its broad powers under Section 21(3), which allows it to adopt any course necessary to do justice, including reappraisal of findings or referring matters back for fresh inquiry. The Attorney General, appearing for the appellants, strongly criticized the High Court’s dismissal based on technicalities and urged the Supreme Court to uphold the disciplinary framework envisaged by the Act.

G) RESPONDENT’S ARGUMENTS

i) The counsels for Respondent submitted that misconduct in the capacity of a court-appointed liquidator could not be considered professional misconduct under the Act. They argued that the conduct was not related to core accountancy services like audit, certification, or taxation and therefore fell outside the professional purview defined in the Act.

They contended that since the Council had not found the respondent guilty of misconduct outside professional capacity, the High Court could not independently make such a finding. They relied on judicial precedents, including G.M. Oka, In re ([1952] 22 Comp Cas 168), where it was held that false evidence by a chartered accountant acting as a witness did not warrant disciplinary proceedings.

Furthermore, they cited Haseldine v. Hosken ([1933] 1 KB 822), to argue that a professional’s personal conduct—even if questionable—should not attract professional penalties unless it involved duties arising from professional engagements.

H) RELATED LEGAL PROVISIONS

i) Section 2(2)(iv), Chartered Accountants Act, 1949
Defines “in practice” to include services like acting as liquidator, trustee, etc., as recognized by the Council. Link

ii) Section 21, Chartered Accountants Act, 1949
Empowers the Council to inquire into misconduct and refer findings to the High Court. Link

iii) Section 22, Chartered Accountants Act, 1949
Defines misconduct to include acts in the Schedule and retains Council’s broader discretion. Link

iv) Regulation 78
Enumerates services deemed professional, including work as a liquidator.

I) JUDGEMENT

a. RATIO DECIDENDI

i) The Court held that the respondent was acting in a professional capacity as a liquidator appointed by court. According to Section 2(2)(iv) and Regulation 78, such work constitutes professional service rendered by a chartered accountant. Thus, his conduct was professional misconduct.

The Supreme Court held that Section 22 is inclusive and allows disciplinary action for acts not specified in the Schedule. It emphasized that any conduct which renders a member unfit to remain in the profession qualifies as misconduct under Section 21, regardless of whether it is listed in the Schedule.

The Court clarified that the High Court has wide powers under Section 21(3) to do justice, including reconsidering findings or sending the matter back for further inquiry.

b. OBITER DICTA

i) The Court commented that professional standards must be interpreted dynamically, not rigidly. Rigid interpretations of misconduct limit the Act’s objective of professional regulation. Courts must uphold the broader ethical framework envisioned by such statutes.

c. GUIDELINES 

• Misconduct under the Act is not confined to the Schedule in Section 22; any act that renders a person unfit qualifies.

• High Court’s powers under Section 21(3) are broad and allow reassessment of findings or further inquiry.

• Chartered Accountants performing court-appointed roles remain within the scope of professional accountability.

J) CONCLUSION & COMMENTS

This judgment plays a pivotal role in reinforcing accountability within professions governed by statutory bodies. By recognizing that professional misconduct extends beyond routine professional engagements, the Supreme Court has bolstered public trust in regulatory oversight. It appropriately held that a court-appointed liquidator’s duties fall within the ambit of professional responsibilities under the Chartered Accountants Act, 1949. The ruling also rectified the overly technical approach of the High Court and emphasized substantive justice. The case clarifies that disciplinary jurisdiction must be interpreted expansively to fulfill the law’s regulatory intent and professional integrity. The penalty imposed—a four-year removal from the Register—also sends a strong message that ethical breaches in fiduciary positions will be dealt with strictly.

K) REFERENCES

a. Important Cases Referred

1. G.M. Oka, In re, [1952] 22 Comp Cas 168

2. Haseldine v. Hosken, [1933] 1 KB 822

3. Krishnaswamy v. Council of ICAI, AIR 1953 Mad 79

b. Important Statutes Referred

1. Chartered Accountants Act, 1949, Sections 2(2), 21, 22

2. Chartered Accountants Regulations, Regulation 78

3. Auditors Certificate Rules, 1932