Chakravatti C.J.
1. This case caused a long argument before us in two stages but really the issue is an extremely simple one. The length of the argument was caused
by the confused manner in which the proceedings had been conducted by and before the Committee of the Institute of Chartered Accountants and
the condition of the paaper-book.
2. The facts are as follows A firm called Messrs Mehar and Company had occasion to apply to the Government of India for a licence to import
safety razor Wades from Germany for the period July-December 1950 According to the Rules relating to Import Licences, an applicant for a
licence was required to furnish, a statement of its past imports duly certified by an auditor. Mehar and Company furnished a statement certified by
the Respondent, Shri N.K. Roy, and the statement included consignments of imports which have been referred to in these proceedings as items 2
and 3. Upon an examination of that statement, the authorities of the Government of India came to feel some suspicion as to its accuracy in view of
the largeness of the imports claimed. They thereupon took steps to verify the items and discovered that the goods referred to in items 2 and 3 had
not, in fact, been imported by Mehar and Company at all, but had been imported by a totally different firm, called Messrs. R. Abraham and
Company, who had, in fact, used those imports in aid of their own application,, for an import licence and obtained a licence on the strength of
those imports.
3. The Chief Controller of Imports thus had a case before him in which the Respondent had given a certificate that the goods referred to in items 2
and 3 had been imported by Mehar and Company, whereas, in fact, they had not been imported by the firm. Naturally, the Chief Controller came
to think that if the Respondent had taken care to verify the entries made in the statement by reference to the documents mentioned in column 3 of
the standard form, he could not have given the certificate which he had, in fact, given. Among the documents mentioned in column 3 are Bills of
Entry and the Chief Controller thought that since the goods concerned had been imported by R. Abraham and Company, the Bills of Entry must
have been in the name of that firm and in so far as the auditor had stated in the report that he had checked and verified the entries contained in the
statement by reference to the. documents mentioned in the standard form, including Bills of Entry, he could not have made a true statement. In
these circumstances, the Chief Controller made a complaint to the Institute of Chartered Accountants against the Respondent out of which the
present proceedings have arisen.
4. The case of the Respondent was that he had, in fact, been shown Bills of Entry relating to items 2 and 3 and that he was at a loss to understand
how the goods covered by those items could have been imported by a different firm or if they had, in fact, been imported by a different firm, how
could he have been shown Bills of Entry relating to them. He seems to have taken steps to put himself into touch with Mehar and Company
immediately and addressed a letter to that firm on January 17, 1951. The affidavit affirmed by the Respondent on March 4, 1952, sets out a long
series of attempts made by the Respondent to contact the firm, all proving unsuccessful, till he was able to establish connection with them in about
June, 1951. In the/ meantime, Mehar and Company had sent a letter to the Secretary of the/'' Ministry of Commerce and Industry in which they
stated that the papers elating to items 2 and 3 had been mislaid. Latter on, they appeared to have changed their case and represented that they
had, in fact, led the auditor to believe that they had imported the goods referred to in items 2 and 3, but had done so in forgetfulness of the fact that
they had only purchased the invoices from agents, but not imported them themselves. They, however, adhered to the view that no Bills of Entry
were placed by them before the auditor and that he had acted merely on their representation without taking care to check the same by reference to
Bills of Entry, as he was required by law to do.
5. The substance of the case made by Mehar and Company, therefore, was that initially they themselves had been at fault in making an incorrect
representation to the auditor,- but that the auditor had been more in fault in not performing his duties in accordance with the requirements of the
statute. Strange though it may seem, it appears that even when proceedings before the Institute of Chartered Accountants were still pending, the
Government of India, according to the evidence of their own witness, Malhautra, accepted the explanation of Mehar and Company, and lifted the
ban which had been imposed on them, whereas they continued to pursue the proceedings against the Respondent. Why, of the two parties
involved in the affair, the firm, which had admittedly made a misrepresentation to the auditor appeared to them to be the snore truthful and virtuous
is not clear.
6. Before the Institute of Chartered Accountants Mehar and Company never appeared. The witness called by the Chief Controller of Imports,
Malhautra, seems to have made an attempt to convince the Committee of the Institute that the case of the firm was true and that sought to be made
by the Respondent was false and in support of that contention to have wanted to rely upon the letter written by Mehar and Company to the
Secretary of the Ministry of Commerce and Industry. The Committee appears to have told Malhautra that the letter could not be put in, unless
some partner of the firm came to prove and produce it, but the letter seems, nevertheless, to have got into the record in some manner or other. Be
that as it may, the position, as it appears from the paper-book, is that the Chief Controller of Imports tried to prove his case against the
Respondent by the evidence of Mehar and Company
7. As I have stated, Mehar and Company never appeared before the Institute, but on behalf of the firm a lawyer appeared and made certain
statements, which, he said, he was making on instructions. It is somewhat surprising that he was at all allowed to make statements of fact, seeing
that on his own showing he had no personal knowledge of anything at all and was merely going to make statements on instructions. It is true that
the lawyer set up some cases of a fire among the papers of Mehar and Company and also a case of their not having produced the Bills of Entry
before the Respondent, by those statements are obviously of no value and not evidence at all, in view of the fact that the maker of the statements
had no personal knowledge of the matters he was sneaking to.
8. The position, as it stood before the Committee, was therefore this; The certificate given by the Respondent was obviously not in accordance
with fact, inasmuch as, whereas according to the certificate the goods covered by items 2 and 3 had been imported by Mehar and Company, they
had, in fact, been imported by a different firm. The next question, therefore, was by what means or for what reason was this inaccuracy caused.
The Respondent''s case was that Bills of Entry relating to those two items had, in fact, been produced before him and if the goods concerned had
really been imported by a different firm, the Bills of Entry produced before him must have been forgeries. The only party who could have
contradicted that statement was Mehar and Company who never came forward to contradict it. The statement and the evidence of the Respondent
thus stood unconstructed. Such being the position as regards direct evidence, the case on the probabilities was also in favour of the Respondent,.
The witness called by the Chief Controller, of Imports, admitted that forgeries, of Bills of Entry were not unknown, and that he himself had come
across quite a large number of instances in his own experience. That being the evidence of, the witness called by the Chief Controller himself, the
position was that not only was the case made by the Respondent not contradicted by Mehar and Company, but it was also a probable case in
view of the fact that forgeries of Bills of Entry were, known and could be committed without their being instantly detected. In that state of the
evidence, the Disciplinary Committee of the Institute came to the conclusion that the complainant had not proved his case and that finding was
subsequently accepted by the Institute.
9. We have been taken through practically every paper in the paper-book and we are of opinion that in view of the state of the evidence which I
have summarised above, the conclusion at which the Institute arrived was the only conclusion possible. Before us the Chief Controller of Imports
tried, at first, to contend that the findings recorded by the Institute should not be accepted, but ultimately the Learned Counsel appearing for him
modified his stand and submitted that his client would be content if there was an expression of opinion by us as regards the necessity of auditors
keeping and maintaining a note of the documents placed before them and examined by them at the time they granted a certificate. As there is really
no opposition before us to the finding of the Institute and as we accept the finding as a proper finding, it is not necessary for me to deal with the
merits of the case any further.
10. Certain observations, however, seem to be called for. The Respondent was naturally asked if he could support his case by reference to any
contemporary documents prepared by himself, such as notes recorded of the inspection made by him of the documents on which he had granted
the certificate. His answer was that he had made and kept no notes. It was represented to be that the system of requiring a certificate by an auditor
was introduced for the purpose of obviating the trouble of the Import authorities themselves verifying the relative documents on the strength of
which a licence was claimed and that the whole meaning and purpose of the Rule was that if an auditor, on whom the Government was prepared to
rely, gave, a certificate in his professional capacity that he had satisfied himself as to the accuracy of the entries contained in the statement he was
sponsoring, no further enquiry would be made. It was represented to us that unless some materials were available to Government for the purpose
of checking that the auditors granted their certificate after examining the documents mentioned in the standard form and unless some indirect
restraint was placed on the auditors themselves by requiring them to make contemporary entries as regards their inspection of such documents, it
would be difficult to continue the system of relying upon the certificate of auditor. Whenever a question arose, the auditor would be able to say that
he had in fact seen all the documents he was required by law to see. We think that the difficulty represented to us is a real one and that to require
an auditor to make and keep an appropriate inspection note is not to require him to do something unduly onerous or not required by considerations
of convenience or public policy. Indeed, even ordinarily, it is, I believe, a practice with the auditors to make and keep inspection notes, just as a
solicitor makes entries regarding services he renders in his Day Book. We, therefore, consider it right to express our opinion that auditors, when
they grant a. certificate in relation to statements furnished to the Import authorities in aid of an application for a licence, should make and keep a
note of the documents which are placed before them and which they inspect.
11. The second matter which calls for some observations from us is, one which relates to the proceedings before the Disciplinary Committee. It
appears that as business is now conducted by that Committee, it is quite common for its membership to change from, sitting to sitting. In this very
case we find certain members sitting on a certain day and some of them being replaced by others on the next day and the final report not being
signed by a member who attended and took a very prominent part during the major part of the proceedings. It appeared to us extremely curious
and even improper that anything like that should happen, but we were referred to Rule 62B of the Rules framed by the Institute which was said to
warrant such procedure. Rule 62B merely provides that no business shall be transacted at a meeting of a Standing Committee unless there are
present at least three members, including the President or in his absence the Vice-President. It was said that the Disciplinary Committee was also a
Standing Committee and therefore it could lawfully transact business if only three members, including the President or the Vice-President were
present. I do not think that the objection to a complaint being heard and tried by a tribunal of a variable and varying composition is at all answered
by Rule 62B. The rule of a quorum may conveniently and not improperly be applied to such meetings of the Standing Committee as deal with
administrative matters. It can have no reference to meetings at which judicial or semi-judicial business is transacted. It appears to me to be quite
improper that when the reputation and probably the professional existence of an auditor is in peril and the Committee is considering a charge made
against him and hearing evidence, the personnel of the tribunal should change from day to day, so that some of the members would not hear a part
of the evidence at all and thus come to form their opinion on a partial consideration of the relevant materials. Under the ordinary legal procedure,
whenever the presiding Judge is transferred or becomes otherwise unavailable, the proceedings are commenced de novo. I do not think that the
proceedings before the Disciplinary Committee of the Institute are in any way less serious, or that to those proceedings the rule of the Judge who
gives the ultimate verdict being required to hear the whole of the evidence, does not apply. It is hoped that these observations would be borne in
mind in future, in the interest not only of auditors arraigned before the Institute, but of the good name and efficiency of the Institute itself, not to
speak of natural justice.
12. The third matter on which I find myself compelled to make some observations is the slovenliness with which the paper-book has been
prepared. When the case came first to be heard by us we discovered to our amazement that some of the most important papers were not included
in it and even of the papers included, the originals in many cases were not before the Court.. This deficiency relates to the composition of the
paper-book. As regards what is actually contained in the paper-book, again, we found that it was disfigured by inexcusable errors, and in certain
cases by large omissions with the result that the document or paper concerned was perfectly unintelligible. It cannot be proper on the part of any
solicitor to place before the Court a paper-book which suffers from such deficiencies. We hope that a repetition of such defects will not be seen by
us in future.
13. A complaint was made by Mr. Kar that under the system now prevailing, the Institute included in the paper-book whatever papers it chose
and the parties, particularly the Union of India, got no opportunity for making suggestions of their own. He thought that a system of something like
settling the index should be introduced. It appears to us to be reasonable that when a paper-book is prepared for use by this Court in a matter in
which several parties are interested, all those parties should have an opportunity of suggesting what papers will be relevant and should find place in
the paper-book. That is the ordinary rule followed in common legal procedure and we hope that the Institute will take the necessary steps for
framing some rule or introducing some practice which will enable all parties to make suggestions as to the contents of the paper-book.
14. Reverting to the merits of the case, we accept the findings of the Institute and in view of the nature of that finding, no further action is obviously
called for.
15. Each party will bear its own costs in these proceedings.
16. S.R. Das Gupta, J.
16. I agree.