Kerala High Court: ICAI Decision Violates CA's 'Right To Practice' Guaranteed Under Article 19(1)(g) of Constitution
The Kerala High Court (HC) on 26 April 2021, in the case titled Joshi John (Petitioner) v. ICAI and Ors. (Respondents) ruled against the Institute of Chartered Accountants of India (ICAI) and held that the professional body not allowing Chartered Accountants (CAs) to register a new firm without settling a dispute with the earlier partnership firm violates the constitutional right to practice a profession.
The single-judge of HC Justice N Nagaresh passed the aforesaid judgment after considering a petition filed by Joshi John. The HC noted, "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."
It added that "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."
The petitioner stated that he was a working partner of a three-member partnership at will and that the other two members were not taking an active role in running the partnership.
He further mentioned in the petition that a dispute arose with the other partners, the petitioner filed an application to ICAI online to dissolve the partnership but the professional body insisted on OTP confirmation by other partners.
The petitioner further alleged that he filed another application to register a new partnership was also not allowed citing the reason that he was in charge of the other partnership. His attempt to register his firm as a sole proprietorship was also denied for the same reason.
Issue before the HC
Whether the ICAI can force a CA to continue in a partnership of CAs even after the dissolution of the Partnership Firm or retirement of the CA, by retaining such an unwilling partner in the Partnership Firm?
While dealing with the aforesaid issue the HC noted that Section 2(b) of the Chartered Accountants Act, 1949 (Act) "Chartered Accountant" means a person who is a member of the Institute incorporated under Section 3 of the Act. A member of the Institute shall be entitled to practice as a Chartered Accountant only if he obtains a Certificate of Practice from the Council of the Institute.
It further noted that 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.
It added that Regulation 190 is intended only to regulate the Trade name or Firm name of Chartered Accountants. Regulation 190(1) mandates approval of Firm name and 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.
The Court said that "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."
The Court concluded that the decision of the 1st respondent-Institute not to recognize 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.
While allowing the writ petition, the HC directed that "The 1st respondent shall recognize 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 1strespondent may permit the respondents 2 and 3 to re-constitute the firm, if they so desire and are eligible."