Kerala High Court rules against ICAI on Retired CA ‘s Right to Practice
IN THE HIGH COURT OF KERALA AT ERNAKULAM
The Relevant Text of the Order as follows :
25. Though in pursuance of the interim directions of this Court, the 1st respondent has permitted the petitioner to register a new sole proprietary Firm ‘Joshi John & Co.’, the problem faced by the petitioner is that he continues to be described as Managing Partners of ‘R. Menon & Co.’ at one address and sole proprietors of ‘Joshi John & Co.’ in a different address. It offends Section 27 of the Act, 1949. Furthermore, it causes hurdles in the way of the petitioner to apply for multi purpose empanelment to obtain audit assignments of Banks and Public Sector Undertakings.
26. It is clear from the Scheme and provisions of the Act, 1949 that the Act is not intended to register the partnerships of Chartered Accountants or regulate inter se relations or disputes between partners. The Regulation 190 is intended only to regulate the Trade name or Firm name of Chartered Accountants. The Regulation 190(1) mandates approval of Firm name and the Regulation 190(7) mandates communication to the Council, of changes in the particulars of a Firm. The Registration and regulation of a partnership Firm of Chartered Accountants, like any other partnerships therefore are to be governed by the Indian Partnership Act, 1932.
27. It is not disputed that ‘M/s. R. Menon and Associates’ is a partnership at will. Section 43 of the Indian Partnership Act, 1932 provides that when a partnership is ‘at will’, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. The Firm is dissolved as from the date mentioned in the notice and if no date is so mentioned, as from the date of communication of the notice. Ext.P4 is the dissolution notice sent by the petitioner and the date of dissolution mentioned therein is 20.12.2019. Therefore, as per Section 43 of the Indian Partnership Act, the Firm ‘M/s. R. Menon and Associates’ should ordinarily be treated as dissolved from that date.
28. However, in this writ petition, the respondents 2 and 3 initially took a stand that they have objection in dissolution of the partnership, but if the petitioner makes an application for retirement, the respondents 2 and 3 will give their endorsement, without prejudice to the right of the parties for resorting to adjudication process for resolution of partnership claims. Accordingly, the petitioner submitted application for retirement. But the respondents 2 and 3 have gone back from their undertaking and have submitted before the Court that they cannot approve retirement of the petitioner without settling claims of the continuing partners.
29. Section 32(1)(c) of the Indian Partnership Act, 1932 provides that a partner may retire, where the partnership is at will, by giving notice in writing to all other partners of his intention to retire. The petitioner has given notice of his retirement to respondents 2 and 3 and in view of Section 32(1)(c), the petitioner stands retired from the partnership namely ‘R. Menon and Associates’.
30. The legal position under the Indian Partnership Act being so, the 1st respondent-Institute cannot take a stand that they will not recognise such retirement for the purpose of Regulation 190 of the Chartered Accountant Regulations. As stated earlier, the Regulation 190 is intended for the limited purpose of approving the trade name or Firm name of a Chartered Accountant or a Firm and for maintaining Register of Offices and Firms, for that purpose.
31. It has to be noticed that the Chartered Accountants Act does not empower the Council to adjudicate inter se dispute between members of the Institute or disputes between partner-members of a Firm, unless those disputes fall within the ambit of Chapter V of the Act, 1949. Though the decision of the Council to evolve a mechanism of Alternate Dispute Resolution (ADR) to resolve inter se disputes between their members/Firms is laudable, availability of such ADR mechanism cannot be a reason not to record the current status of a Chartered Accountant in a Firm, in the registers maintained under Regulation 190.
32. Non-recording of such retirement in the Registers, will have serious adverse consequences on a Chartered Accountant. It can be seen from the facts of this case, in spite of retirement from ‘M/s. R. Kumar and Associates’, the petitioner is shown as the Chartered Accountant having charge of the said Firm. The petitioner has now started a proprietary firm ‘Joshi John & Co.’, of which also he is in charge. As per Section 27 of the Act, 1949 where a Chartered Accountant has more than one office in India, each one of such offices shall be in the separate charge of a member. Due to the partnership dispute, the petitioner is forced to violate Section 27 of the Act, 1949.
33. The forcible continuance of the petitioner, as a partner of a Firm which is loaded with partnership disputes, has civil consequences also on the petitioner. As per the general decisions taken by the Council, the Council will not only record in their registers that the partnership is under dispute, but will communicate the said fact C & A.G. and Reserve Bank of India, while furnishing the particulars of a Firm for empanelment of Bank/C&AG audits. Such recording and communication will indeed affect the chances of the petitioner to get audit assignments.
34. The decision of the 1st respondent-Institute not to recognise and record the retirement of the petitioner from ‘M/s. R. Kumar and Associates’ will therefore cause unnecessary and unwarranted hindrance to the professional advancement of the petitioner. It will offend the fundamental right of the petitioner to practice a profession freely, guaranteed to him under Article 19(1)(g) of the Constitution of India. The petitioner is therefore entitled to reliefs, in this writ petition.
The writ petition is therefore allowed. The 1st respondent is directed to recognise the retirement of the petitioner from the Firm ‘M/s. R. Kumar and Associates’. The 1st respondent shall remove the name of the petitioner from the list of partners of ‘M/s. R. Kumar and Associates’ maintained under Regulation 190 of the Chartered Accountants Regulations, 1988. The 1st respondent may permit the respondents 2 and 3 to re-constitute the Firm, if they so desire and are eligible. These directions are without prejudice to the right of the petitioner and respondents 2 and 3 to get their claims in respect of the partnership, adjudicated through appropriate legal proceedings.