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PETITIONER: INSTITUTE OF CHARTERED ACCOUNTANTS

       Vs.

RESPONDENT: L.K. RATNA & OTHERS

DATE OF JUDGMENT21/10/1986

BENCH: PATHAK, R.S. BENCH: PATHAK, R.S. MUKHARJI, SABYASACHI (J)

CITATION:  1987 AIR   71            1986 SCR  (3)1048  1986 SCC  (4) 538        JT 1986   671  1986 SCALE  (2)614  CITATOR INFO :  RF         1992 SC 248  (537)

ACT:      Chartered Accountants  Act,  1949,  ss.  17(3),  21(3), 21(4),  22A  and  First  Schedule  Part  I  clauses  6  &  7 Regulations   11-15-Member   of   Institute   of   Chartered Accountants-Charged with  Misconduct-Disciplinary Committee- Jurisdiction of-Scope of inquiry-Member, Whether entitled to hearing by Council of Institute after Disciplinary Committee submits report.      Sec. 21-Nature  of Proceedings  before the Disciplinary Committee & Council of the Institute-What are-The conclusion of Disciplinary  Committee does  not enjoy  the status  of a ’finding’-Conclusion of  Council is  the first determinative finding-Council-Whether obliged  to  give  reasons  for  its finding.      Administrative    Law-Professional    Body-Charge    of misconduct-Disciplinary  Committee   conducting  inquiry   & submitting   report   to   Council   for   final   decision- Participation  of   members  of  Disciplinary  Committee  in Council deliberations-Principles  of Natural Justice-Whether violated.

HEADNOTE:      The appellant-the Institute of Chartered Accountants of India was  created as  a body  corporate under the Chartered Accountants Act 1949. Its members are Chartered Accountants. The affairs  of the Institute are managed by a body known as the  Council  of  the  Institute  which  is  headed  by  the President. Below  him is  the  Vice-President.  One  of  the Standing Committees  of  the  Council  is  the  Disciplinary Committee. It  consists  of  the  President  and  the  Vice- President ex-officio  of the Council, two members elected by the Committee from its members, and a third member nominated by the Central Government.      Section 21  of the  Act lays  down  the  procedure  for conducting inquiries  relating to cases of misconduct by the members and  the penalty which may be imposed. Sub-s. (1) of s. 21 provides that where 1050 the Council  is prima  facie of  opinion that any member has

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been guilty of any professional or other misconduct it shall refer the  case to  the Disciplinary  Committee which  is to hold an inquiry and report the result to the Council. Sub-s. 4 lays  down that  where the  finding  of  the  Disciplinary Committee is  that a  member has been guilty of professional misconduct it shall afford an opportunity of being heard and may thereafter  make an  order either  to: (a) reprimand the member; or  (b) remove  the name  of  the  member  from  the Register for  such period  not exceeding  five years, or (c) where it  appears to  the Council  that the  case is  one in which the  name of  the member  ought to be removed from the register for a period exceeding five years or permanently or if the  member is  guilty of  misconduct other than any such misconduct as  is referred  to in sub-s. 4, it shall forward the case to the High Court with its recommendations thereon. Section 22A of the Act entitles a member to prefer an appeal to the High Court against an order of the Council.      The respondents-Chartered  Accountants and  members  of the Institute,  were charged  for committing the offences of professional misconduct under clauses 6 & 7 of Part I of the First Schedule  to the  Act, in  that they  had prepared and brought out  a brochure  relating to  Management Consultancy Services,  and   had  sent  out  letters  to  Auditor  Firms appraising them  of its  existence. The  Council  considered their replies and being of the prima facie opinion that they were guilty of professional misconduct referred the cases to the Disciplinary Committee which, after affording a personal hearing to  the respondents,  submitted its  report  to  the Council  opining  that  they  were  guilty  of  professional misconduct. The  Council considered  the  aforesaid  report, and, after  having  found  the  respondents  guilty  of  the misconduct, proposed to remove their names from the register of  members  for  a  period  not  exceeding  five  years  in accordance with  the procedure  laid down  in section 21(4). The respondents were informed that they would be called upon to appear  before  the  Council  to  make  a  representation against the  proposed action  and that the scope of the oral hearing or written representation would be restricted to the penalty proposed.      Aggrieved  by   the  order   of  the   appellant,   the respondents filed Writ Petitions in the High Court. A Single Judge of  the High  Court allowed the petitions, quashed the orders imposing  penalty on the respondents and remanded the cases to the Council for fresh consideration on the finding: (i) that the Council should have given an opportunity to the respondents to represent before it against the report of the Disciplinary Committee;  and (ii)  that the  decision of the Council was 1051 vitiated inasmuch  as the  President, the Vice-President and the two  members of  the Institute, who were also members of the   Disciplinary   Committee,   were   disqualified   from participating in  the proceedings  of the  Council  when  it considered the  report of  the Disciplinary  Committee.  The appeals  filed   by  the  appellant  having  been  summarily rejected by  the Division  Bench, the  Institute appealed to this Court.      Dismissing the appeals of the appellant, this Court, ^      HELD: 1.1 A member accused of misconduct is entitled to a hearing  by the  Council when, on receipt of the report of the Disciplinary  Committee, it  proceeds to find whether he is or is not guilty. [1067D]      1.2 The Council is empowered to find a member guilty of misconduct. The  penalty which  follows is  so harsh that it

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may result in his removal from the register of Members for a substantial number  of years.  The removal  of his name from the register  deprives him  of the right to a certificate of practice. In  these circumstances  there is  every reason to presume in  favour of  an opportunity to the member of being heard by  the Council  before it  proceeds to  pronounce him guilty of misconduct. [1063F-G]      2.1 In  the scheme  incorporated in  s. 21  of the  Act there   are   separate   functionaries,   the   Disciplinary Committee, the Council and in certain cases, the High Court. The controlling  authority is  the Council. The Disciplinary Committee plays  a subordinate  role. It conducts an inquiry into the  allegations. Since the inquiry is into allegations of misconduct by the member, it possesses the character of a quasi-judicial  proceedings.   The  Disciplinary   Committee thereafter submits  a report of the result of the inquiry to the  Council.   The  Disciplinary   Committee  is  merely  a Committee of  the Institute,  with a  function  specifically limited by  the provisions  of the  Act. Its conclusions are tentative only.  They cannot  be regarded as ’findings’. The Disciplinary Committee  is not  vested by the Act with power to render any findings. It is the Council which is empowered to find  whether the  member is  guilty of  misconduct.  The finding by  the Council  is the determinative decision as to the guilt  of the  member, and  because it is determinative, the Act requires it to be recorded. [1062C-H]      A responsibility  so grave  as the determination that a member is  guilty of  misconduct, and  the recording of that finding, has  been specifically  assigned by  the Act to the governing body, the Council. It is also 1052 only upon  a finding  being recorded by the Council that the Act moves  forward to  the final  stage of penalisation. The recording  of   the  finding   by   the   Council   is   the jurisdictional spring board for the penalty proceeding which follows. [1062H; 1063A-B]      2.2  The   report  constitutes   the  material   to  be considered by the Council. The Council will take into regard the allegations against the member, his case in defence, the recorded evidence,  and the  conclusions  expressed  by  the Disciplinary  Committee.   The  nature   of   the   function discharged by the Council in rendering its finding is quasi- judicial. A  member whose  conduct has  been the  subject of inquiry by  the Disciplinary Committee ending in conclusions adverse to  him can  legiti-mately entertain an apprehension that the President and the Vice-President of the Council and the  other  members  of  the  Disciplinary  Committee  would maintain the  opinion expressed  by them in their report and would press  the acceptance  of the  report by  the Council. Although the  member has participated in the inquiry, he has had no  opportunity to  demonstrate the  fallibility of  the conclusions  of   the  Disciplinary  Committee.  It  is  the material which  falls within  the domain of consideration by the Council.  It should also be open to the member, to point out to the Council any error in the procedure adopted by the Disciplinary  Committee   which  could   have  resulted   in vitiating the inquiry. [1063B-D]      S. 21(8) arms the Council with power to record oral and documentary evidence, and it is precisely to take account of that eventuality and to repair the error that this power has been conferred.  It cannot,  therefore, be  denied that even though the member has participated in the inquiry before the Disciplinary Committee, there is a range of consideration by the Council  on which  he has  not been heard. He is clearly entitled to  an opportunity  of hearing  before the  Council

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finds him guilty of misconduct. [1063D-E]      3.1 The  finding by  the Council operates with finality in the  proceedings, and  it constitutes  the foundation for the penalty by the Council on him. [1063G-H]      The power to find and record whether a member is guilty of misconduct  has been specifically entrusted by the Act to the entire  Council itself  and not  to a few of its members who constitute the Disciplinary Committee. [1063H; 1064A]      3.2  It   is  the   character  and  complexion  of  the proceeding consi- 1053 dered in conjunction with the structure of power constituted by the  Act which leads to the conclusion that the member is entitled to  a hearing by the Council before it can find him guilty. [1064A-B]      Manek Lal  v. Dr.  Prem Chand, [1957] SCR 575, referred to.      4. There  is no  doubt that there is difference between the provisions  of s.  21(3) and  21(4), in that while in s. 21(4) Parliament  has indicated that an opportunity of being heard should  be accorded to the member, nowhere in s. 21(3) there is  such requirement.  But, that  does not  affect the question. The  textual different  is not decisive. It is the substance of  the matter,  the character of the allegations, the far-reaching  consequences  of  a  finding  against  the member, the  vesting of responsibility in the governing body itself, all  these and kindred considerations enter into the decision of  the question  whether the law implies a hearing to the member at that stage. [1064D-E]      5. There is nothing in Regulation 14 which excludes the operation of  the principle of natural justice entitling the member to be heard by the Council when it proceeds to render its finding. [1065B-C]      The principles of natural justice must be read into the unoccupied interstices  of the  statute unless  there  is  a clear mandate to the contrary. [1065C]      6. There  are cases  where an  order may  cause serious injury as soon as it is made, an injury not capable of being entirely erased  when the  error is  corrected on subsequent appeal. Where  a member  of a  highly respected and publicly trusted profession is found guilty of misconduct and suffers penalty, the  damage to  his professional  reputation can be immediate and  far-reaching. To many a man, his professional reputation is  his most valuable possession. It is often the carefully garnered  fruit of  a long  period of  scrupulous, conscientious and  diligent industry.  It is the portrait of his professional  honour. In  such a  case, after  the  blow suffered  by  the  initial  decision,  it  is  difficult  to contemplate  complete   restitution  through   an  appellate decision. Therefore,  there is  manifest need to ensure that there is  no breach of fundamental procedure in the original proceeding, and  to avoid  treating an  appeal as an overall substitution for the original proceeding. [1066F-H; 1067A-C]      7.1 By  virtue of  s. 17(3)  it is  obligatory that the Disciplinary Committee  should be  composed of the President and the  Vice-President  of  the  Council  and  three  other members of the Council. While that is so, 1054 there is  nothing in the Act to suggest that the meetings of the Council must always be presided over by the President or the Vice-President  and that no meeting can be held in their absence. There  is an  element of flexibility which makes it possible for  the Council  to consider  the  report  of  the Disciplinary Committee  without  the  participation  of  the members of  the  Committee.  Because  of  the  ’flexibility’

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potential in  the scheme,  the doctrine of necessity, cannot come into play. [1069E-H]      7.2. There  is nothing  in s. 21 of the Act to indicate whether the  members of the Disciplinary Committee should be excluded when the Council enters upon its task. The function of the Disciplinary Committee of holding an inquiry under s. 21(1) of  the Act into the conduct of the member calls for a recording of  evidence by  the Committee.  Its duty does not end there.  It must  consider the  evidence and  come to its conclusions. Section  21(2) of the Act plainly says, it must report "the  result of  its enquiry"  to the Council. In the absence of  express or  implied statutory  intendment to the contrary,  the   members  of   such  a  committee  would  be disqualified from  participating in the deliberations of the Council when  it proceeds to consider the report in order to find whether  the member  is guilty  of misconduct. For that alone would  be consistent  with the  fundamental  principle that justice  must not  only be done but must also appear to be done. [1068B-F]      Re Daneyger  and Alberta Pharmaceutical Association, 17 D.L.R. (3d)  206,  Re  Prescott,  19  D.L.R.  (3d)  446,  Re Merchant and Benchers of the Law Society, 32 D.L.R. (3d) 178 and Law  Socieety of  Upper Ganada v. French, 49 D.L.R. (3d) 1, distinguished.      8. The  Council is  obliged to  give  reasons  for  its finding that  a member  is guilty of misconduct. In fairness and justice,  the member is entitled to know why he has been found guilty. [107 1E-G]      The member has been given a right of appeal to the High Court under  s. 22-A  of the  Act. To  exercise his right of appeal effectively  he must  know the  basis  on  which  the Council has  found him  guilty. Further,  a finding  by  the Council is  the first  determinative finding on the guilt of the member. It is a finding by a Tribunal of first instance. The conclusion  of the Disciplinary Committee does not enjoy the status  of a  "finding". Moreover, the reasons contained in  the   report  by  the  Disciplinary  Committee  for  its conclusion may  or may  not  constitute  the  basis  of  the finding  rendered   by  the   Council.  The   Council  must, therefore, state the reasons for the finding. [1071F-G] 1055      9. Due  recognition should  be given to the fundamental principles and accepted axioms of law. [1070B-C]      [Removal  of   the  anomaly   by  suitable  legislative amendment of s. 17(3) of the Act so that the constitution of the Disciplinary  Committee should  not necessarily  include the President  and the  Vice-President of  the  Council  was suggested by the Court.] [1070B-C]      James Edward  Jeffs and  Others v.  New  Zealand  Dairy Production and  Marketing Board and others, [1967] 1 AC 551, Chandra Bhavan  Boarding and  Lodging Bangalore v. The State of Mysore  and Anr.[1970]  2 SCR  600 and  K.L. Tripathi  v. State  Bank   of  India   and  Others,   [1984]  2  SCC  43, inapplicable.      Leary v.  National Union  of Vehicle Builders, [1971] 1 Ch. 34,  Re Cardinal and Board of Commissioners of Police of City of  Cornwall, [1974]  42 D.L.R.  (3d) 323,  Wisland  v. Medical  Practioners   Disciplinary  Committee,   [1974]   1 N.Z.L.R. 29  and Reid  v. Rowley,  [1977]  2  N.Z.L.R.  472, referred to.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeals Nos. 1911

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and 1912 of 1980.      From the  Judgment and  Order dated  16.4.1980  of  the Bombay High Court in Appeal No. 203 and 205 of 1980.      F.S. Nariman,  Anil B.  Divan, K.K.  Jain, S.K.  Gupta, Promod Dayal, G. Banerjee and A.D. Sanger for the Appellant.      Atul Setalvad,  Atul Rajadhya  and Mrs.  A.K. Verma for the Respondents.      The Judgment of the Court was delivered by      PATHAK,  J.   These  appeals   raise  some  fundamental questions  in   regard  to  the  conduct  and  procedure  of disciplinary   proceedings   taken   under   the   Chartered Accountants Act, 1949. Two of the questions are:           1. "Whether a member of the Institute of Chartered           Accountants of  India is  entitled to a hearing by           the   Council   of   the   Institute   after   the           Disciplinary Committee has sub- 1056           mitted its  report to  the Council  of its enquiry           into allegations of misconduct against the member?           2. When  the  Council  proceeds  to  consider  the           Report  of  the  Disciplinary  Committee,  is  the           proceeding vitiated by the presence of the members           of the  Disciplinary  Committee  who  include  the           President and  the Vice-President  of the  Council           and three other members of it?"      The appellant is the Institute of Chartered Accountants of India  (the "Institute").  The Institute was created as a body corporate  under the  Chartered Accountants  Act,  1949 (the "Act"),  and its members are Chartered Accountants. The affairs of  the Institute are managed by a body known as the Council of the Institute, which is headed by a President and a  Vice-President   below  him.  There  are  three  Standing Committees  of   the  Council,   and  one  of  them  is  the Disciplinary Committee.  The Disciplinary Committee consists of the  President and  the Vice-President  ex-officio of the Council, two  members elected  by  the  Committee  from  its members  and   a  third  member  nominated  by  the  Central Government. Chapter V of the Act contains provisions dealing with cases  of  misconduct  of  members  of  the  Institute. Section 21  provides for  conducting enquiries  relating  to such misconduct  and the penalties which may be imposed, and section 22A  provides for  an appeal by a member against the imposition of  a penalty. As the sections are material, they may be set forth:           S.21.   Procedure   in   inquiries   relating   to           misconduct of members of Institute           (1) Where  on receipt  of information  by, or of a           complaint made  to it,  the Council is prima facie           of opinion  that any  member of  the Institute has           been  guilty   of  any   professional   or   other           misconduct, the  Council shall  refer the  case to           the Disciplinary  Committee, and  the Disciplinary           Committee shall thereupon hold such inquiry and in           such manner as may be prescribed, and shall report           the result of its inquiry to the Council.           (2) If on receipt of such report the Council finds           that the  member of the Institute is not guilty of           any professional  or other  misconduct,  it  shall           record its finding accordingly and direct that the           proceedings shall  be filed or the complaint shall           be dismissed, as the case may be. 1057           (3) If on receipt of such report the Council finds           that the  member of the Institute is guilty of any           professional or  other misconduct, it shall record

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         a finding  accordingly and  shall proceed  in  the           manner laid down in the succeeding sub-section.           (4) Where  the finding  is that  a member  of  the           Institute  has   been  guilty  of  a  professional           misconduct specified  in the  First Schedule,  the           Council shall  afford to the member an opportunity           of being  heard before  orders are  passed against           him on  the case,  and may  thereafter make any of           the following orders, namely:                (a) reprimand the member;                (b) remove  the name  of the  member from the                Register for  such period, not exceeding five                years, as the Council thinks fit:                Provided that where it appears to the Council           that the  case is  one in  which the  name of  the           member ought to be removed from the Register for a           period exceeding  five years  or  permanently,  it           shall not make any order referred to in clause (a)           or clause  (b), but  shall forward the case to the           High Court with its recommendations thereon.           (5) Where  the misconduct  in respect of which the           Council has  found any  member  of  the  Institute           guilty  is   misconduct  other   than   any   such           misconduct as is referred to in subsection (4), it           shall forward  the case to the High Court with its           recommendations thereon.           (6) On  receipt of  any case under sub-section (4)           or subsection (5), the High Court shall fix a date           for the hearing of the case and shall cause notice           of the  date so fixed to be given to the member of           the Institute  concerned, the  Council and  to the           Central Government,  and shall afford such member,           the  Council   and  the   Central  Government   an           opportunity of  being heard,  and  may  thereafter           make any of the following orders namely:                (a) direct  that the proceedings be filed, or                dismiss the complaint, as the case may be; 1058                (b) reprimand the member;                (c)  remove   him  from   membership  of  the                Institute  either  permanently  or  for  such                period as the High Court thinks fit;                (d) refer the case to the Council for further                inquiry and report.           (7)  .............................................           (8) For  the purposes  of any  inquiry under  this           section,  the   Council   and   the   Disciplinary           Committee shall have the same powers as are vested           in  a   civil  court   under  the  Code  of  Civil           Procedure,  1908,  in  respect  of  the  following           matters, namely:                (a) summoning and enforcing the attendance of                any person and examining him on oath;                (b)  the  discovery  and  production  of  any                document; and                (c) receiving evidence on affidavit. 22A. Appeals           (1) Any  member of  the Institute aggrieved by any           order of  the Council  imposing on  him any of the           penalities  referred  to  in  sub-section  (4)  of           Section 21, may, within thirty days of the date on           which the  order is communicated to him, prefer an           appeal to the High Court:                Provided that  the High  Court may  entertain           any such  appeal after  the  expiry  of  the  said

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         period of thirty days, if it is satisfied that the           member was  prevented  by  sufficient  cause  from           filing the appeal in time.           (2) The  High Court  may, on  its  own  motion  or           otherwise, after  calling for  the records  of any           case, revise  any order  made by the Council under           sub-section (2)  or sub-section  (4) of Section 21           and may- 1059                (a) confirm, modify or set aside the order;                (b) impose  any penalty or set aside, reduce,                confirm, or  enhance the  penalty imposed  by                the order;                (c) remit  the case  to the  Council for such                further inquiry  as the  High Court considers                proper in the circumstances of the case; or                (d) pass  such other  order as the High Court                thinks fit:                Provided that  no order  of the Council shall           be modified  or set  aside unless  the Council has           been given  an opportunity  of being  heard and no           order imposing  or enhancing  a penalty  shall  be           passed unless  the person  concerned has also been           given an opportunity of being heard." The Act provides for the framing of Regulations. Regulations 11 to  15 set  forth  the  procedure  for  an  enquiry  into allegations of misconduct.      Messrs A.F.  Ferguson &  Co. ("Ferguson  & Co.")  is  a reputed firm  of Chartered Accountants. The respondent Lalit Kumar Ratna  is a  partner and  the respondents  Ashok Kumar Behl and  P.R. Bhoopatkar  are employees  in the  firm.  All three  are   Chartered  Accountants   and  members   of  the Institute.      In  1967   Ferguson  &  Co.  established  a  Management Consultancy Division.  Ratna was  head of  the Division, and Behl and  Bhoopatkar worked  under him.  On April  15, 1970, Ferguson &  Co. wrote  to the Institute enquiring whether it could send  out letters  to Auditor  Firms apprising them of the existence  of the  Management  Consultancy  Service  and whether it  was forbidden  from doing so by any rules of the Institute. The  Secretary of  the Institute replied that the Council had  appointed a  Sub-Committee for  considering the ethical problems  arising out  of  the  functioning  of  the Institute’s members  in the  area of  Management Consultancy Service  and   the  firm  was  requested  to  wait  for  the recommendations of the Sub-Committee.      On December  8, 1971,  Ratna issued  a circular  to the partners and principals of the firm setting forth guidelines on bringing  the Management Consultancy Service brochures to the attention of their 1060 respective clients.  Meanwhile, Ferguson & Co. also referred the matter  to their  solicitors, and the solicitors advised that making available of printed informative material in the form of  a brochure would not be in contravention of Clauses 6 and  7 in  Part I  of the  First Schedule  to the  Act  or otherwise amount to professional misconduct.      A few  days later  the Council  published an  "exposure draft", setting  forth the  proposals under consideration by the Council  regarding the  regulations and ethical rules in respect of  Management  Consultancy  Services  by  Chartered Accountants, and  invited members  to send their suggestions on the  proposals. It  was  pointed  out  further  that  the recommendations to  be made  by the  Council  would  require appropriate amendments  in Part  I of  the First Schedule to

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the Act  which contained  rules in  respect of  professional misconduct.      Meanwhile, Ratna  had prepared  a brochure  relating to the  Management   Consultancy  Service  to  be  provided  by Ferguson &  Co. It was stated that the brochure was intended for the  use of  the  clients  of  the  firm  who  requested information regarding  such services  and that  it  was  for limited  circulation  only,  the  clients  themselves  being warned of  that  restriction.  On  February  19,  1973,  the Council wrote  to Ferguson and Co. inviting its attention to the brochure  and alleging  that  it  contained  information against  the   firm  under   Section  21  of  the  Chartered Accountants Act  read with  clauses 6 and 7 of Part I of the First Schedule to the Act, and in accordance with Regulation 11(5)  (b)   read  with   Regulation  12  of  the  Chartered Accountants Regulations  1964,  the  firm  was  required  to disclose to the Council the name of the member answerable to the charge  of misconduct. In reply, the firm named Ratna as the member responsible for the brochure.      On April  14, 1973, Ratna submitted a written statement to the  Institute denying that he was guilty of professional misconduct and  he set  forth a  detailed statement  of  the reasons in  support of his stand. The Council considered the matter in  its meeting  of September 13, 14 and 15, 1973 and being of  prima facie  opinion  that  Ratna  was  guilty  of professional   misconduct   referred   the   case   to   the Disciplinary Committee. The Disciplinary Committee consisted of the  President,  S.K.  Gupta,  the  Vice-President,  N.C. Krishnan, two  members of  the Institute,  R.K.  Khanna  and Bansi S.  Mehta and  the Government  nominee, Ganapathi. The Disciplinary Committee gave a personal hearing on January 4, 1974, to  Ratna and  his counsel.  On February 14, 1974, the Disciplinary Committee  submitted its  report to the Council opining 1061 that Ratna  was  guilty  of  professional  misconduct  under clauses 6  and 7  of Part I of the First Schedule to the Act insofar as  he solicited  clients directly or indirectly and also advertised professional attainments of his services. In its meeting  of February 16, 1974 the Council considered the report of  the Disciplinary  Committee and  found that Ratna was guilty  of the  misconduct. In  February 25,  1974,  the Institute wrote  to Ratna  that the  Council had  found  him guilty of  professional misconduct,  as charged, and that it was proposed to remove his name from the Register of Members for a period not exceeding five years in accordance with the procedure laid  down in s. 21(4) of the Act. He was informed that he would be called upon to appear before the Council at its next  meeting but in case he did not wish to be heard in person he  was entitled  to send  a  written  representation against the  proposed action.  He was  required to take note that the  scope of the oral hearing for consideration of the written representation  would be  restricted to  the penalty proposed. Copies of the Report of the Disciplinary Committee and the  findings of  the Council  were forwarded to him. On March 4, 1974, Ratna applied for extension of time to enable him to  make his  representation and the Council granted him time up to April 13, 1974, for that purpose.      It  may   be  stated   at  this   stage  that  parallel proceedings were  taken in  the case of Behl and Bhoopatkar. The brochure  was treated  as information against them also, and on April 14, 1973, they sent their written statements to the Institute.  Their submissions  were  considered  by  the Council, which  being of  opinion that they were prima facie guilty  of   misconduct,  referred   the   matter   to   the

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Disciplinary Committee. On January 4, 1974, the Disciplinary Committee granted  a full  personal  hearing  to  these  two respondents, who were represented by counsel. As in the case of Ratna,  the Disciplinary Committee made its report to the Council  that   these  two   respondents  were   guilty   of professional misconduct  under clauses  6 and 7 of Part I of the First  Schedule to  the  Act,  and  in  its  meeting  on February 16,  1974 the  Council held them guilty accordingly and proposed  the same penalty as in Ratna’s case. They were also invited  to appear  in person  or  to  make  a  written representation  against  the  penalty  proposed  before  the Council.      Ratna now  filed W.P.  No. 426  of 1974  and  Behl  and Bhoopatkar filed  W.P. No.  428 of 1974 in the High Court of Bombay. The  Writ Petitions  were allowed  by Lentin,  J  by separate orders dated March 3, 1980, on the finding that the Council should  have given  an opportunity to the members to represent before it against the report of the Disci- 1062 plinary Committee and that the President, the Vice-President and the two members of the Institute who were members of the Disciplinary Committee  were disqualified from participating in the  proceedings of  the Council  when it  considered the report of  the  Disciplinary  Committee,  and  that  as  the decision of the Council was consequently vitiated the orders imposing penalty  on the  respondents were  quashed and  the case remanded  to the  Council for  fresh consideration. The Institute appealed to a Division Bench of the High Court and the appeals  have been summarily rejected by separate orders dated April 16, 1980.      It is apparent that in the scheme incorporated in s. 21 of  the   Act  there   are   separate   functionaries,   the Disciplinary Committee,  the Council  and, in certain cases, the High  Court. The  controlling authority  is the Council, which is  only logical for the Council is the governing body of the Institute. When the Council receives information or a complaint alleging  that a member of the Institute is guilty of misconduct,  and it  is prima facie of opinion that there is substance  in the  allegations it  refers the case to the Disciplinary Committee.  The Disciplinary  Committee plays a subordinate  role.   It  conducts   an  inquiry   into   the allegations.  Since  the  inquiry  is  into  allegations  of misconduct by  the member,  it possesses  the character of a quasi-judicial  proceeding.   The   Disciplinary   Committee thereafter submits  a report of the result of the inquiry to the  Council.   The  Disciplinary   Committee  is  merely  a Committee of  the Institute,  with a  function  specifically limited by the provisions of the Act. As a subordinate body, it reports  to the  Council, the  governing body. The report will contain  a statement  of the  allegations, the  defence entered by  the member,  a record  of the  evidence and  the conclusions upon  that material.  The  conclusions  are  the conclusions of  the Committee. They are tentative only. They cannot be regarded as ’findings’. The Disciplinary Committee is not  vested by the Act with power to render any findings. It is  the Council  which is  empowered to  find whether the member is  guilty of  misconduct. Both s. 21(2) and s. 21(3) are clear  as to  that. If  on receipt  of  the  report  the Council finds  that the  member is not guilty of misconduct, s. 21(2)  requires it to record its finding accordingly, and to direct  that  the  proceedings  shall  be  filed  or  the complaint shall  be dismissed.  If, on  the other  hand, the Council finds  that the  member is  guilty of misconduct, s. 21(3) requires  it to  record  a  finding  accordingly,  and thereafter to  proceed  in  the  manner  laid  down  in  the

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succeeding subsections. So the finding by the Council is the determinative decision  as to  the guilt  of the member, and because it  is determinative  the  Act  requires  it  to  be recorded. A responsibility so grave as the determina- 1063 tion  that  a  member  is  guilty  of  misconduct,  and  the recording of that finding, has been specifically assigned by the Act  to the  governing body,  the Council.  It  is  also apparent that  it is  only upon  a finding being recorded by the Council that the Act moves forward to the final stage of penalisation. The recording of the finding by the Council is the jurisdictional  springboard for  the penalty  proceeding which follows.      Now when it enters upon the task of finding whether the member is  guilty of  misconduct, the  Council considers the report submitted  by the  Disciplinary Committee. The report constitutes the  material to  be considered  by the Council. The Council  will take  into regard  the allegations against the member,  his case  in defence, the recorded evidence and the conclusions  expressed by  the  Disciplinary  Committee. Although the  member has participated in the inquiry, he has had no  opportunity to  demonstrate the  fallibility of  the conclusions of  the Disciplinary  Committee. It  is material which falls  within  the  domain  of  consideration  by  the Council. It  should also be open to the member, we think, to point out  to the Council any error in the procedure adopted by the  Disciplinary Committee  which could have resulted in vitiating the  inquiry. S. 21(8) arms the Council with power to record oral and documentary evidence, and it is precisely to take  account of that eventuality and to repair the error that this  power seems  to have  been conferred.  It cannot, therefore,  be  denied  that  even  though  the  member  has participated  in   the  inquiry   before  the   Disciplinary Committee, there  is a range of consideration by the Council on which he has not been heard. He is clearly entitled to an opportunity of  hearing before  the Council finds him guilty of misconduct.      At  this  point  it  is  necessary  to  advert  to  the fundamental character of the power conferred on the Council. The Council  is  empowered  to  find  a  members  guilty  of misconduct. The  penalty which  follows is  so harsh that it may result in his removal from the Register of Members for a substantial number  of years.  The removal  of his name from the Register  deprives him  of the right to a certificate of practice. As  is clear  from s.  6(1) of  the Act, he cannot practice without  such  certificate.  In  the  circumstances there is every reason to presume in favour of an opportunity to the  member of  being heard  by  the  Council  before  it proceeds to  pronounce upon  his guilt. As we have seen, the finding  by  the  Council  operates  with  finality  in  the proceeding,  and  it  constitutes  the  foundation  for  the penalty imposed  by the  Council  on  him.  We  consider  it significant that  the power  to find  and record  whether  a member  is   guilty  of  misconduct  has  been  specifically entrusted by the 1064 Act to  the entire  Council itself  and not  to a few of its members who constitute the Disciplinary Committee. It is the character and  complexion of  the proceeding  considered  in conjunction with  the structure  of power constituted by the Act which  leads us  to the  conclusion that  the member  is entitled to  a hearing by the Council before it can find him guilty. Upon the approach which has found favour with us, we find no  relevance in  James Edward  Jeffs and others v. New Zealand Dairy  Production and  Marketing Board  and  others,

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[1967] 1  AC 551 cited on behalf of the appellant. The Court made observations  there of  a general  nature and indicated the  circumstances  when  evidence  could  be  recorded  and submissions of  the parties heard by a person other than the decision making  authority. Those  observations can  have no play in a power structure such as the one before us.      Our  attention  has  been  invited  to  the  difference between the  terms in  which s. 21(3) and s. 21(4) have been enacted and,  it is  pointed out,  that while  in  s.  21(4) Parliament has  indicated that an opportunity of being heard should be  accorded to the member, nowhere in s. 21(3) do we find such  requirement. There is no doubt that there is that difference between  the two  provisions. But,  to our  mind, that does not affect the question. The textual difference is not decisive.  It  is  the  substance  of  the  matter,  the character of  the allegations, the far-reaching consequences of  a   finding  against   the  member,   the   vesting   of responsibility in  the governing  body itself, all these and kindred  considerations  enter  into  the  decision  of  the question whether  the law implies a hearing to the member at that stage.      Learned counsel  for the  appellant relies  on  Chandra Bhavan Boarding  and Lodging,  Bangalore  v.  The  State  of Mysore and  Anr., [1970]  2 SCR  600, where this Court found that the  procedure adopted  by the  Government in  fixing a minimum wage  under s.  5(1) of  the Minimum Wages Act, 1948 was not  vitiated merely  on the  ground that the Government had failed  to constitute  a committee  under s. 5(1) (a) of that Act.  Reference was also made to K.L. Tripathi v. State Bank of  India  and  Others,  [1984]  1  SCC  43  where  the petitioner complained  of a  breach  of  the  principles  of natural justice  on the  ground that  he was  not  given  an opportunity to  rebut the  material gathered in his absence. Neither case  is of  assistance to  the  appellant.  In  the former, the Court found that reasonable opportunity had been given to  all the  concerned parties to represent their case before the  Government  made  the  impugned  order.  In  the latter, the  Court held  that no  real  prejudice  had  been suffered by  the complainant  in the  circumstances  of  the case. 1065      It is  next pointed out on behalf of the appellant that while Regulation  15 requires  the Council, when it proceeds to act  under s.  21(4), to  furnish to the member a copy of the  report   of  the   Disciplinary  Committee,   no   such requirement  is   incorporated  in   Regulation   14   which prescribes what  the Council  will do  when it  receives the report of  the Disciplinary  Committee. That,  it  is  said, envisages  that   the  member   has  no   right  to  make  a representation before  the Council against the report of the Disciplinary Committee.  The contention  can be  disposed of shortly. There  is nothing  in Regulation  14 which excludes the operation  of the principle of natural justice entitling the member  to be  heard by  the Council when it proceeds to render its  finding. The  principles of natural justice must be read  into the  unoccupied  interstices  of  the  statute unless there is a clear mandate to the contrary.      It is  then urged  by learned counsel for the appellant that the  provision of an appeal under s. 22-A of the Act is a  complete  safeguard  against  any  insufficiency  in  the original proceeding  before  the  Council,  and  it  is  not mandatory that  the member  should be  heard by  the Council before it  proceeds to  record its  finding. Section 22-A of the Act  entitles a  member to  prefer an appeal to the High Court against  an order  of the  Council imposing  a penalty

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under s.  21(4) of  the Act.  It  is  pointed  out  that  no limitation has  been imposed on the scope of the appeal, and that an  appellant is entitled to urge before the High Court every ground  which was available to him before the Council. Any insufficiency,  it is  said, can  be cured  by resort to such appeal. Learned counsel apparently has in mind the view taken in  some cases  that an  appeal provides  an  adequate remedy  for  a  defect  in  procedure  during  the  original proceeding. Some of those cases are mentioned in Sir William Wades erudite  and classic  work on "Administrative Law" But as that  learned author  observes, "in principle there ought to be  an observance  of natural  justice  equally  at  both stages", and           "if natural  justice  is  violated  at  the  first           stage, the  right of  appeal is not so much a true           right of  appeal as  a corrected  initial hearing:           instead of  fair trial  followed  by  appeal,  the           procedure is  reduced to  unfair trial followed by           fair trial." And he  makes reference to the observations of Megarry J. in Leary v.  National Union  of Vehicle  Builders, [1971] 1 Ch. 34. Treating  with another aspect of the point, that learned Judge said:           "If one  accepts the  contention that  a defect of           natural justice 1066           in the  trial body can be cured by the presence of           natural justice  in the  appellate body,  this has           the result of depriving the member of his right of           appeal from  the expelling  body. If the rules and           the law  combine to give the member the right to a           fair trial  and the right of appeal, why should he           be told  that he  ought to  be satisfied  with  an           unjust trial and a fair appeal? Even if the appeal           is treated  as a  hearing de  novo, the  member is           being stripped  of his  right to appeal to another           body from  the effective  decision to expel him. I           cannot think  that natural justice is satisfied by           a process  whereby an  unfair  trial,  though  not           resulting in  a valid expulsion, will nevertheless           have the  effect of  depriving the  member of  his           right of appeal when a valid decision to expel him           is subsequently  made. Such a deprivation would be           a powerful result to be achieved by what in law is           a mere  nullity; and it is no mere triviality that           might be  justified on  the  ground  that  natural           justice  does  not  mean  perfect  justice.  As  a           general rule, at all events, I hold that a failure           of natural  justice in  the trial  body cannot  be           cured by  a sufficiency  of natural  justice in an           appellate body."      The view  taken by  Megarry, J.  was  followed  by  the Ontario High  Court in  Canada in  Re Cardinal  and Board of Commissioners of  Police of  City  of  Cornwall,  [1974]  42 D.L.R. (3d)  323. The  Supreme  Court  of  New  Zealand  was similarly  inclined   in  Wislang   v.  Medical  Practioners Disciplinary Committee,  [1974] 1 N.Z.L.R. 29 and so was the Court of  Appeal of  New Zealand in Reid v. Rowley, [1977] 2 N.Z.L.R. 472.      But perhaps  another way  of looking at the matter lies in examining  the consequences  of the initial order as soon as it  is passed.  There are  cases where an order may cause serious injury  as soon as it is made, an injury not capable of being  entirely erased  when the  error is  corrected  on subsequent appeal.  For instance,  as in  the present  case,

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where a  member of  a highly  respected and publicly trusted profession  is   found  guilty  of  misconduct  and  suffers penalty, the  damage to  his professional  reputation can be immediate and  far-reaching. "Not  all the King’s horses and all  the   King’s  men"   can  ever  salvage  the  situation completely, notwithstanding  the widest scope provided to an appeal. To  many a  man, his  professional reputation is his most  valuable  possession.  It  affects  his  standing  and dignity among  his fellow  members in  the  profession,  and guarantees the  esteem of  his clientele.  It is  often  the carefully garnered fruit of a long period of scrupulous, 1067 conscientious and  diligent industry.  It is the portrait of his professional honour. In a world said to be notorious for its blase  attitude towards  the noble  values of an earlier generation, a  man’s professional  reputation is  still  his most sensitive  pride.  In  such  a  case,  after  the  blow suffered  by  the  initial  decision,  it  is  difficult  to contemplate  complete   restitution  through   an  appellate decision. Such  a case  is unlike  an action  for  money  or recovery of  property, where  the  execution  of  the  trial decree may  be stayed pending appeal, or a successful appeal may result  in refund  of the  money or  restitution of  the property, with  appropriate compensation  by way of interest or  mesne  profits  for  the  period  of  deprivation.  And, therefore, it  seems to us, there is manifest need to ensure that there  is no  breach of  fundamental procedure  in  the original proceeding,  and to  avoid treating an appeal as an overall substitute for the original proceeding.      Upon the  aforesaid considerations,  we are of definite opinion that a member accused of misconduct is entitled to a hearing by the Council when, on receipt of the report of the Disciplinary Committee, it proceeds to find whether he is or is not  guilty. The  High Court  is, therefore, right in the view on this point.      Accordingly, the  respective findings  of  the  Council that Ratna, Behl and Bhoopatkar are guilty of misconduct are vitiated and  must be  quashed.  Consequently,  the  penalty imposed on each of them is also liable to be quashed.      Our decision  on the  first question  is sufficient  to dispose of  these appeals.  But the  appellant is anxious to obtain our  opinion on  the second  question also  as, it is said, the  question is  bound to arise in future in cases of disciplinary proceedings.  As it  was one  of the  points on which the  High Court  allowed the writ petitions, and as we have already  heard full  agrument on  it, we proceed now to consider the point.      The question  is whether the respective findings of the Council holding  the three  members guilty of misconduct can be said  to be  vitiated by  bias because the members of the Disciplinary Committee participated in those proceedings. As has been  pointed out,  s. 17  of the  Act  provides  for  a Disciplinary Committee,  consisting of the President and the Vice-President ex-officio  of the  Council, who  will be the Chairman and  Vice-Chairman respectively of the Disciplinary Committee, and  three other  members of  the Council, two of them 1068 being elected by the Council to the Committee, and the third being nominated  by the  Central Government from amongst the persons nominated  to the Council by the Central Government. Therefore,  all   the  five   members  of  the  Disciplinary Committee are drawn from the Council.      Now the  Council is  vested with  power under  s. 21 to find whether  the member  is guilty  of misconduct. There is

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nothing in  s. 21  of the  Act, however, to indicate whether the members of the Disciplinary Committee should be excluded when the  Council enters  upon its  task. The answer must be found from the general scheme of the Act and the fundamental principles of law.      There can  be no  dispute  that  the  function  of  the Disciplinary Committee  of holding an enquiry under s. 21(1) of the  Act into  the conduct  of the  member  calls  for  a recording of  evidence by  the Committee.  Its duty does not end there.  It must  consider the  evidence and  come to its conclusions. As  s. 21(2)  of the  Act plainly says, it must report "the  result of  its enquiry"  to the Council. In the absence of  express or  implied statutory  intendment to the contrary, it  appears to  us that  the  members  of  such  a Committee would  be disqualified  from participating  in the deliberations of  the Council  when it  proceeds to consider the report  in order to find whether the member is guilty of misconduct. For  that alone  would be  consistent  with  the fundamental principle that justice must not only be done but must also  appear to  be done.  The nature  of the  function discharged by  the Council in rendering its finding is quasi judicial, and  we are  reminded of  the observations of this Court as far back as Manek Lal v. Dr. Prem Chand, [1957] SCR 575.           "It  is  well  settled  that  every  member  of  a           tribunal that  is called  upon to  try  issues  in           judicial or  quasi-judicial  proceedings  must  be           able to  act judicially;  and it is of the essence           of judicial  decisions and judicial administration           that judges  should be  able to  act  impartially,           objectively and  without any  bias. In  such cases           the test  is  not  whether  in  fact  a  bias  has           affected the judgment; the test always is and must           be whether  a litigant  could reasonably apprehend           that a  bias  attributable  to  a  member  of  the           tribunal might  have operated  against him  in the           final decision  of the  tribunal. It  is  in  this           sense that  it is often said that justice must not           only be done but must also appear to be done." 1069      We must  remember that  the  President  and  the  Vice- President of  the Council  and  3  members  of  the  Council compose the  Disciplinary Committee.  The President  and the Vice-President do  certainly hold  significant status in the meetings of the Council. A member whose conduct has been the subject of  enquiry by  the Disciplinary Committee ending in conclusions adverse  to him  can legitimately  entertain  an apprehension that  the President  and the  Vice-President of the Council  and  the  other  members  of  the  Disciplinary Committee would  maintain the  opinion expressed  by them in their report  and would  press for  the  acceptance  of  the report by  the Council. To the member whose conduct has been investigated  by  the  Committee,  the  possibility  of  the Council disagreeing  with the  report in the presence of the President and  the Vice-President  and the  other members of the Committee  would so  rather remote.  His fears  would be aggravated by  the circumstance  that  the  President  would preside over  the meeting  of the Council, and would thus be in  a   position  to   control  and  possibly  dominate  the proceedings during  the meeting.  We do  not doubt  that the President and  the Vice-President,  and also the three other members  of  the  Disciplinary  Committee,  should  find  it possible  to  act  objectively  during  the  decision-making process of  the  Council.  But  to  the  member  accused  of misconduct,  the  danger  of  partisan  consideration  being

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accorded to the report would seem very real indeed.      The objection  on the  ground of  bias would  have been excluded  if   the  statute  had  expressed  itself  to  the contrary. But  nowhere do we find in the Act any evidence to establish such  exclusion. It  is true  that by virtue of s. 17(3) it  is  obligatory  that  the  Disciplinary  Committee should be  composed of  the President and the Vice-President of the Council and three other members of the Council. While that is  so, there is nothing in the Act to suggest that the meetings of  the council must always be presided over by the President or  the Vice-President, and that no meeting can be held in  their absence.  We find  that Regulation 140 framed under the  Act contemplates that the Council may meet in the absence  of   the  President  and  the  Vice-President,  and provides that  in their  absence a member elected from among the members  who are  present should  preside. There  is  an element of  flexibility which  makes  it  possible  for  the Council to consider the report of the Disciplinary Committee without the  participation of  the members of the Committee. Because of  the ’flexibility’  potential in  the scheme, the doctrine of  necessity, to  which reference has been made on behalf of  the Institute,  cannot come  into play.  We  must admit that  it does  appear anomalous that the President and the Vice-President  of the  Council should  be disabled from participating in a meeting of the 1070 Council because they are bound by statute to function as the Chairman  and   the  Vice-Chairman   of   the   Disciplinary Committee, and  were it  not for  the factor  of flexibility which we  see in the scheme, we would have been compelled to the conclusion  that the  Act implies  an exclusion  of  the doctrine of bias. But as we have observed, no such exclusion is implied  by the  scheme of  the Act  or  its  policy.  We suggest the  removal of  the anomaly by suitable legislative amendment of s. 17(3) of the Act so that the constitution of the Disciplinary  Committee should  not necessarily  include the President  and the  Vice-President of the Council. It is only appropriate that due recognition should be given to the fundamental principles and accepted axioms of law.      Learned counsel for the Institute relies on Re Dancyger and Alberta  Pharmaceutical Association, 17 D.L.R. (3d) 206; Re Prescott, 19 D.L.R. (3d) 446; Re Merchant and Benchers of the Law Society. 32 D.L.R. (3d) 178 and the majority opinion in Law  Society of  Upper Canada v. French, 49 D.L.R. (3d) 1 in support  of the  contention  that  participation  by  the members of  the Disciplinary  Committee does not vitiate the proceedings of the Council. The principal basis on which the Canadian courts  proceeded in  upholding the validity of the meeting  of  the  parent  body,  despite  the  participation therein of the members of the Disciplinary Committee, lay in this that  the entire proceeding, that is to say the enquiry by the  Committee and  the subsequent  consideration of  its report by  the parent body, constituted a single proceeding, and had  to be  distinguished from a case where the decision by a  subordinate body  was  assailed  in  appeal  before  a superior authority. This distinction, it seems to us, can be of little assistance if full play is given to the maxim that no man  shall be  a Judge in his own cause. We are impressed by the  soundness of the minority opinion pronounced by that learned and  distinguished  Judge,  Laskin,  C.J.C.  in  Law Society of  Upper Canada  v. French  (supra) decided  by the Supreme Court of Canada. He observed:           "I do  not think that the issue herein falls to be           decided according  to whether  the proceedings  in           Convocation are  or amount  to an appeal or are or

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         amount to  a review  under a  two-stage scheme  of           inquiry   into    allegations   of    professional           misconduct.  No  doubt,  characterization  of  the           proceedings as  an appeal  may lend  weight to the           contention of  the appellant  solicitor,  but  the           principle underlying  his position rises above any           such  formalistic   approach.  The   principle  is           immanent in  the ancient maxim nemo judex in causa           sua, expressed by Coke in Dr. Benham’s case (1610)           8. Co. Rep. 113b, 77E.R. 646." 1071      The conclusion  reached by us has not been an easy one. The authorities  on the  subject have  oscillated  from  one extreme to the other, and an analysis of the cases points at times to  some rather slender element in the mosaic of facts which has  influenced the  outcome.  There  is  good  reason ultimately for  adopting a  liberal view,  for as  has  been observed  by  the  late  Professor  S.A.  De  Smith  in  his ’Judicial Review of Administrative Action’ Fourth Edition p. 261:           "..... a  report will normally include a statement           of findings  and  recommendations,  which  may  be           controverted before the parent body; and in such a           case the  participation of  members  of  the  sub-           committee in  the final decision may be of dubious           validity. The  problem is not merely one of strict           law; it is also one of public policy."      Accordingly, we  concur with  the High  Court that  the finding of  the Council  holding the respondents Ratna, Behl and Bhoopatkar  guilty of  misconduct  is  vitiated  by  the participation of the members of the Disciplinary Committee.      Before we  conclude, we  may refer  to  a  third  point raised before  us, the  point being  whether the  Council is obliged to  give reasons  for its  finding that  a member is guilty of  misconduct. It seems to us that it is bound to do so. In  fairness and justice, the member is entitled to know why he  has been  found guilty.  The case  can be so serious that it can attract the harsh penalties provided by the Act. Moreover, the member has been given a right of appeal to the High Court  under s.  22-A of the Act. To exercise his right of appeal  effectively he  must know  the basis on which the Council has  found him  guilty. We  have already pointed out that a  finding by  the Council  is the  first determinative finding on  the guilt  of the  member. It  is a finding by a Tribunal  of   first  instance.   The  conclusion   of   the Disciplinary Committee  does  not  enjoy  the  status  of  a "finding". Moreover,  the reasons contained in the report by the Disciplinary Committee for its conclusion may or may not constitute the basis of the finding rendered by the Council. The Council  must, therefore,  state  the  reasons  for  its finding.      The  appeals   fail  and  are  dismissed,  but  in  the circumstances of the case we make no order as to costs. M.L.A.                                    Appeals dismissed. 1072