Holding

A member must be given an opportunity to be heard by the Council before the Council records a finding of misconduct, and any Council decision reached with the participation of Disciplinary Committee members is invalid as it breaches natural justice.

Summary

The Institute of Chartered Accountants of India referred three members to its Disciplinary Committee for alleged professional misconduct relating to a management consultancy brochure. The Committee held a hearing, found the members guilty and reported its conclusions to the Council, which recorded a finding of guilt and proposed removal from the Register. The members challenged the process, arguing they were denied a hearing by the Council and that Council members who also sat on the Disciplinary Committee were biased. The Supreme Court held that, because the Council’s finding is the decisive determination of guilt and carries severe penalties, the members are entitled to a hearing before the Council records such a finding, and that participation of Disciplinary Committee members in Council deliberations violates the principles of natural justice, rendering the findings void. Consequently, the Court dismissed the Institute’s appeal and upheld the High Court’s order quashing the penalties.

Issues considered

Whether a member of the Institute is entitled to a hearing by the Council after the Disciplinary Committee submits its report.
Whether the Council’s finding of misconduct is vitiated by the participation of members of the Disciplinary Committee (including the President and Vice‑President) in Council deliberations.

Legislation cited

Chartered Accountants Act, 1949s. 17(3), s. 21(3), s. 21(4), s. 22A
Code of Civil Procedure, 1908

Subjects

professional misconductdisciplinary proceedingsnatural justicebiasright to be heardCouncil of InstituteDisciplinary CommitteeChartered Accountants Actadministrative law

Judgment

A

INSTITUTE OF CHARTERED ACCOUNTANTS
v .
L.K. RATNA & OTHERS
B
OCTOBER 21, 1986

[R.S. PATHAK AND SABYASACHI MUKHARJI, JJ.]

Chartered Accountants Act, 1949, ss. 17(3), 21(3), 21(4), 22A
a;,d First Schedule Part I clauses 6 & 7 Regulations 11-15-Member of
Institute of Chartered Accountants-Charged with Misconduct-Disci- c
plinary 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 Commit- D
tee & Council of the Institute-What·are-The conclusion of Disci-
plinary 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 miscon- E
duct-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.
<
The appellant-the Institute of Chartered Accountants of India F
was created as a body corporate under the Chartered Accountants Act
1949. Its members are Chartered Accountants. The affairs of the Insti-
tute 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 G
-. 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. (I) of s. 21 provides that wh~re H

10-19
1050 SUPREME COURT REPORTS [1986] 3 S.C.R.

A the Council is prima facie of opinion that any member has been guilty of
any professional or other misconduct it shall refer the case to the Dis'ci-
plinary Committee which is to hold an inquiry and report the result to
the Council. Suh-s. 4 lays down that where the finding of the Disci-
plinary Committee is that a member has been guilty of professional mis-
conduct it shall afford an opportunity of being heard and may there-
B
.after make an order either to: (a) reprimand the member; or (b) remove
the name of the member from the Register for such period not exceed-
ing 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
c sub-s. 4, it shall forward the case to the High Court with its recommen- ·
dations 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 mis-
D
conduct 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 Manage-
ment 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 profes-
sional misconduct referred the cases 'to the Disciplinary Committee
E
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 accord311ce with the procedure laid down in
F
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 rep-
resentation would be restricted to the penalty proposed.

Aggrieved by the order of the appellant, the respondents filed
G 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 considera-
tion on the fmding: (i) that the Council should have given an opportu-
nity to the respondents to represent before it against the report of the
Disciplinary Committee; and (ii) that the decision of the Council was
H
LC.A. v. L.K. RAINA 1051

~ vitiated inasmuch as the President; the Vice-President and the two A
members of the Institute, who were also members of the Discipiinary
Committee, were disqualified from participating in the proceedingS of
the Council when it considered the report of the Disciplinary Commit-
' tee. The appeals filed hy the appellant having been summarily rejected
by the Division Bench, the Institute appealed to this Court.
B
Dismissing the appeals of the appellant, this Court,
"
~. HELD: 1.1 A member accused of misconduct is entitled to a bear-
• ing by the Council when, on receipt of the report of the Disciplinary
~r Committee, it proceeds to find whether he is or is not guilty. I1067D I
c
1.2 The Council is empowered to find a member guilty of miscon-
duct. 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
righ~ to a certificate of practice. In these circumstances there is every
D
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 ins. 21 of the Act there are sepa-
rate functionaries, the Disciplinary Committee, the Council and in cer-
E
lain cases, the High Court. !fhe 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 o'f
1< misconduct by the member' it possesses the character of a quasi-judicial

r
..,.
proceedings. The Disciplinary Committee thereafter submits a report of
the result of the inqniry to the Council. The Disciplinary Committee is
merely a Committee of the Institute, with a function specifically limited
F
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 miscon-
duct. The rmdlng by the Council is the determinative decision as .to the
G
guilt of the member, and because it is determinative, the Act requires it
to be recorded. I1062C-H]
-~
A responsibility so grave as the determination that a member is
guilty of misconduct, and the recording of that finding, has been specifi-
cally assigned by the Act to the governing body, the Council. It is also H
jl

1052 SUPREME COURT REPORTS [1986) 3 S.C.R.

A 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 pro-
ceeding which follows. [1062H; 1063A-B I

2.2 The report constitutes the material to be considered by the
B 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 fmding is quasi-judicial. A
member whose conduct has been the subject of inquiry by the Disci-
I
'
plinary Committee ending in conclusions adverse to him can legiti- p
mately entertain an apprehension that the President and the Vice-
c President of the Council and the other members of the Disciplinary
Committee would maintain the opinion expressed by them in their re-
port ali.d 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 Disci-
D plinary 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. [10638-D) J.
E S. 21(8) arms the Council with power to record oral and docu-
mentary 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 con-

F
sideration 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
l
of misconduct. [1063D-EJ' }

3.1 The finding by the Council operates with finality in the pro-
ceedings, and it constitutes the foundation for the penalty by the
Council on him. I I063G-H)
G
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 Disci-
plinary Committee. I I063H; 1064A]

1-l 3.2 It is the character and complexion of the proceeding consi-
•
LC.A. v. L.K. RAINA 1053

dered in conjunction with the structure of power constituted by the Act A
)·
which leads to the conclusion that the member is entitled to a hearing by
the Council before it can find him guilty. [1064A-B)

ManekLa/v. Dr. Prem Chand, [1957) SCR575, referred to.
B
4. 'There is· no doubt that th•re is difference between the provi-
. sions 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
~'T substance of the matter,. the character of the allegations, the far-
reaching consequences of a finding against the member, the vesting of. c
responsibility in the governing body itself, all these and kindred consi-
derations enter into the decision of the question whether the law implies a
hearing to the member at that stage. I 10640-E)
...
5. There is nothing in Regulation 14 which excludes the operation
D
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 in-
terstices of the statute~ss there is a clear mandate to 1hecontrary. [1065C)
)>-
t
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 err,or is corrected on subsequent appeal. Where a member of a
< highly respected and publicly trusfei"profession is found guilty of mis-
conduct and suffers penalty, the damage to his professional reputation
~- can be immediate and far-reaching. To many a man, his professional
F
reputation is his most \'.aluable po_ssession. 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 con-
template complete restitution through an appellate decision. Therefore,
there is manifest need to'ensure that there is no breach of fundamental
procedure iu the original proceeding, and to avoid treating an appeal as G
an. overall substitution for the m;iginal proceeding. I J066F-H; J067A-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,
H
1054 SUPREME COURT REPORTS [1986] 3 S.C.R.

A 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
B of the Committee. Because of the 'flexibility' potential in the scheme,
the doctrine of necessity, cannot come into play. [!069E-HJ
.,\
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

c
Council enters upon its task. The funetion of the Disciplinary Commit-
tee 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
·r>r
does not end there. It must consider the evidence and come to its conclu-
sions. 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 statu- ~
tory intendment to the contrary, the members of such a committee
would be disqualified from participating in the deliberations of the
D
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-FJ
~
Re Daneyger and Alberta Pharmaceutical Association, 17 D.L.R.
E
(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 Society of Upper Ganada
v. French, 49 D.L.R. (3d) 1, distinguished.
>
8. The Council is obliged to give reasons for its fmding that a
F
member is guilty of misconduct. In fairness and justice, the member is ~ l>
. .
entitled to know why he' has been found guilty. I107 IE-GI
T
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
G
the guilt of the member. It is a finding by a Tribunal of first instance.
j.,.,
The conclusion of the Disciplinary Committee does not enjoy the status
of a "finding". Moreover, the reasons contained in the report by the
)I..
Disciplinary Committee for its conclusion may or may not constitute the
basis of the finding rendered by the Council. The Council must, there-
• fore, state the reasons for the finding. I1071F-G I
H
LC.A. v. L.K. RATNA (PATHAK, J.] 1055

9. Due recognition should be given to the fundamental principles A
and accepted axioms of law. I1070B-C I

[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 •B
the Council was suggested by the Court. I I1070B-C]

James Edward Jeffs and Others v. New Zealand Dairy Production
and Ma.rketing Board and others, [1967] 1 AC 551, Chandra Bha-
van Boarding and Lodging Bangalore v. The State of Mysore and •Anr.
I1970] 2 SCR 600 and K. L. Tripathi v. State Bank of India and Others,
I1984I I sec 43, inapplicable. c
Leary v. National Union of Vehicle Builders, [1971] l Ch. 34, Re
\
Cardinal and Board of Commissioners of Police of City of Cornwall,
[1974] 42 D.L.R. (3d) 323, Wis/and v. Medical Practioners Disciplinary
Committee, [1974] l N.Z.L.R. 29 and Reid v. Rowley, [1977] 2 D
N.Z.L.R. 472, referred tq. ·

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos.
1911 and 1912 of 1980.

From the Judgment and Order dated 16. 4.1980 of the Bombay E
: 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.O. Sanger for the Appellant.

·I Atul Setalvad, Atul Rajadhya and Mrs. A.K. Verma for the
F
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 G
taken under the Chartered Accountants Act, 1949. Two of the ques-
tions are:

l. "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- H
1056 SUPREME COURT REPORTS [1986) 3 S.C.R.

A mitted its report to the Council of its e.nquiry into allega-
tions 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 Commit-
B
tee 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
c 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 Com-
mittee. The Disciplinary Committee consists of the President and the
Vice-President ex-officio of the Council, two members elected by the
D
Committee from its members and a third member nominated by the
Central Government. Chapter V of the Act contains provisions deal- , I
ing 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 I
by a member against the imposition of a penalty. As the sections are,
E
material, they may be set forth:

S.21. Procedure in inqmnes relating to misconduct of'
members of Institute >
( 1) Where on receipt of information by, or of a complaint l
F 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
G 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
H
shall be dismissed, as the case may be.
I

LC.A. v. L.K. RATNA (PATHAK, J.J 1057

(3) If on receipt of such report the Council finds that the A
member of the Institute is guilty of any professi~nal or
other misconduct, it shall record 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 B
been guilty of a professional misco~duct 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:
c
(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:
D
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 --:our! with its recommendations thereon. E·

< (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 sub-
section (4), it shall forward the case to the High Court with
its recommendations thereon, F

(6) On receipt of any case under sub-section (4) or sub-
section (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 G
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
H
complaint, as the case may be;
1058 SUPREME COUR:r REPORTS 11986] 3 S.C.R.

A (b) reprimand themember;

(c) remove him from membership of the Institute
either penhanently or for such period as the High
Court thinks fit;
B
(d) refer the case to the Council for further inquiry and
report.

(7)
,.....,....
..

(8) For the purposes of any inquiry under this section·, the I '.
c 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
D person and examining him on oath;
.,
(b) _the discovery and production of any document;
and

(c) receiving evidence on affidavit.
E
, 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
F 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 period of thirty days, if it
is satisfied that the member was prevented by sufficient
G 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-
H
'
LC.A. v. L.K. RATNA IPATHAK,J.l 1059

(a) confirm, modify or set aside the order; A

(b) impose any penalty or set aside, reduce, confirm,
or enhance the penalty imposed by the order;

(c) t~mit the case to the Council forsuch further in- 8
quiry as the High Court considers proper in the circum-
stanc~s of the case; or

(d) pass such otherorder 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 c
opportunity of being heard and no order imposing or
enhancing a penalty shall be passed unless the person con-
cerned has also been given an opportunity of being heard."

The Act provides for the framing of Regulations. Regulations 11 to 15
D
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. Bhoopat-
E
kar 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
F
Institute enquiring whether i( 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 aris-
ing out of the functioaing of the Institute's members in the area of
G
Management Consultancy Service and the firm was requested to wait
for the recommendations ofthe 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 Consuliancy Service brochures to the attention of their H
1060 SUPREME COURT REPORTS [1986] 3 S.C.R.

A respective clients. Meanwhile, Ferguson & Co. also referred the ~
matter to their solicitors, and the solicitors advised that making avail-
able 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.
B
A few days later the Council published an "exposure draft",
setting forth the proposals under consideration by the Council regard-
ing 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 \ ·
c appropriate amendments in Part I of the First Schedule to the Act
which contained rules in respect of professional misconduct.

Meanwhile, Raina 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
D
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 Fergu-
son 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
E
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. Jn reply, the firm
named Ratna as the member responsible for the brochure.
F On April 14, 1973, Ratna submitted a written statement to the
Institute d611ying 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 Commit-
G tee. The Disciplinary Committee consisted of the President, S. K.
Gupta, the Vice-President, N.C. Krishnan, two members of the Insti--
tute, R.K. Khanna and Bansi S. Mehta and the Government nominee,
Ganapathi. The Disciplinary Committee gave a personal hearing on
January 4, 1974, to Raina and his counsel. On February 14, 1974, the
Disciplinary Committee submitted its report to the Council opining
H
I.C.A'. v. L.K. RATNA (PATHAK, J.) 1061

that Ratna was guilty of professional misconduct under clauses 6 and 7 A
~
of Part I of the First Schedule to the Act insofar as he solicited clients
directly or indirectly \md also advertised professional attainments of
his services. In its meeting of February 16, 197 4 the Council con-
sidered the report of the Disciplinary Committee and found that Ratna
was guilty of the misconduct. In February 25, 1974, the Institute wrote B
to Ratna that the Council had found him guilty of professional miscon-
~
duct, 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 ins. 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 c
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 Com-
mittee and the findings of the Council were Jorwarded fo him. On
March 4, 1974, Ratn_a applied for extension of time to enable him to D
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 E
written statements to the Institute. Their submissi9ns were considered
by the Council, ·which being of opinion that they were prima facie
gµilty of misconduct; referred the matter to the Disciplinary Commit-
' tee. On January 4, 1974, the Disciplinary Committee granted a full
personal hearing to these two respondents, who were represented by
1 counsel. As in the case of Ratna, the Disciplinary Committee made its
report to the Council that these two respondents were guilty of profes-
F

sional 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 Raina's
case. They were also invited to appear in person or to make a written
representation against the penalty proposed before the Council. G
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- H
1062 SUPREME COURT REPORTS ll986J 3S.C.R.

A 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 Commit-
tee, and that as the decision of the Council was consequently vitiated
the orders imposing penalty on the respondents were quashed and the
B
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
c Council and, in certain cases, the High Court. The controlling autho-
rity is the Council, which is only logical for the Council is the govern-
ing body of the Institute. When the Council receives information or a
complaint alleging that a member of the Institute is guilty of miscon-
duct, and it is prima facie of opinion that there is substance in the
allegations it refers the case to the Disciplinary Committee. The Disci-
D
plinary 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 proceed-
ing. 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
E
limited by the provisions of the Act: As a subordinate body, it reports
to the Council, the governing body. The report will contain a state-
ment of the allegations, the defence entered by the member, a record
of the evidence and the conclusions upon that material. The conclu-
sions are the conclusions of the Committee. They are tentative only.
They cannot be regarded as 'findings'. The Disciplinary Committee is
F
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 \
misconc)uct. Both s. 21(2) ands. 21(3) are clear as to that. If on receipt
of the report the Council finds that the member is not guilty of miscon-
duct, 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.
G
lf, 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 succeeding sub-
sections. So ihe finding by the Council is the determinative decision as
to the guilt of the member, and because it is determinative the Act
H requires it to be recorded. A responsibility so grave as the determina-
l.C.A. v. L.K. RA1NA [PATHAK, J.[ 1063
\ A
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. B

Now when it enters upon the t.ask 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 alle-
gations against the member, his case in defence, the recorded evidence
and the conclusions expressed .by the Disciplinary Committee. c
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 D
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 Com- E
mittee, 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 fundan1ental charac-
ter of the power conferred on the Council. The Council is empowered F
to find a member 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 certifi-
cate. In the circumstances there is 'every reason to presume in favo~ 'G
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 consti-
tutes the foundation for the penalty imposed by the Council on him.
We consider it significant that the power to fmd and record whether a
member is guilty of misconduct has been specifically entrusted by the H.
1064 SUPREME COURT REPORTS (1986] 3 S.C.R.

A Act to the entire Council itself and not to a few of its members who
constitute the Disciplinary Committee. It is the character and comple-
xion 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
B
relevance in James Edward Jeffs and others v. New Zealand Dairy
Production and Marketing Board and others, (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 ·r-,..
than the decision making authority. Those observations can have no I
c 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 <(f being heard should be accorded to the member,
D
nowhere ins. 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 allega-
tions, the far-reaching t;onsequences of a finding against the member,
the vesting of responsibility in the governing body itself, all these and
E
kindre.d 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 mi Chandra Bhavan
Boarding and Lodging, Bangalore v. The State of Mysore and Anr.,
F
I1970] 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 l 1 SCC 43 where the petitioner complained of
a breach of the principles of natural justice on the ground that he was
G
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
H had been suffered by the complainant in the circumstances of the case.
LC.A. v. I..K. RATNA [PATHAK, J.] 1065

·It is next pointed out on behalf of the appellant that while Regu- A
~ lation 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 Commit~ee. That, it is said, envisages that the
B
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 i::,,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 un-
~1
occupied interstices of the statute unless there is a clear mandate to c
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,
D
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 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
t the original proceeding. Some of those cases are mentioned in Sir
1· William Wades erudite and classic work on "Administrative Law"
F
But as that learned author observes, "in principle there ought to be an
observance of natural justice equally at both stages", and
-4,
"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
G
procedure is reduced to unfair trial followed by fair trial."

And he makes reference to the observations of Mcgarry J. in Leary v.
.J... National Union of Vehicle Builders/ [1971) 1 Ch. 34. Treating with.
another aspect of the point, that learned Judge said:
H
"If one accepts the contention that a defect of natural justice
. 1066 SUPREME COURT REPORTS [1986] 3 S.C.R.
A 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
B told that he ought to be satisfied with an unjusttrial 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 b.y a process
whereby"' an unfair trial, though not resulthtg in a valid
expulsion, will nevertheless have the effect of depriving the
c 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 lnere
nullity; and it is no mere triviality that might be justified on
the ground that natural justice does not mean perfect
D justice. As a general rule, at all even'ts, 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 Mcgarry, J. was followed by the Ontario High Court
in Canada in Re Cardinal and Board of Commissioners of Police of
E 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 Reidv. Rowley, [1977] 2 N.Z.L.R. 472.

But perhaps another way of looking at the matter lies in examin-
F ing the consequences of the initial order as soon as it is passed. There
are bses 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 cor-
rected on subsequent appeal. For instance, as in the present case,
where a member of a highly respected and publicly trusted profession
is found guilty of misconduct and suffers penalty, the damage to his
G professional reputation can be immediate·and far-reaching. "Not all
the King's horses and. all the King's men" can ever salvage the situa-
tion completely, notwithstanding the widest scope provided to an
appeal. To many· a man, his professional reputation is his most valu-
able possession. It affects his standing and dignity among his fellow
members in the profession, and guarantees the esteem of his clientele.
H It is often the carefully garnered fruit of a long period of scrupulous,
LC.A. v. L.K. RATNA [PATHAK, J.] 1067

conscientious and diligent industry. It is the portrait of his professional A·
honour. In a world said to be notorious for its blase attitude towards
the noble values of an earlier generation, a man's professional reputa-
tion 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 B
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 c
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, D
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
E
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 F
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
G
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 H
1068 SUPREME COURT REPORTS (1986] 3 S.C.R.

A 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.
B
Now the Council is vested with power under s. 21 to find whether
the member is guilty of misconduct. There is 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. ,.
c
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 Com-
mittee. 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
D
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
E · 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 render-
ing its finding is quasi judicial, and we are reminded of the obser-
vations of this Court as far back as Manek Lal v. Dr. Prem Chand,
[1957] SCR575.
F
"It is well settled that every member of a tribunal that is
·called upon to try issues in judicial or quasi-judicial pro-
ceedings 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
G
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 trib'unal might
have operated against him in the final decision of the tri-
bunal. It is in this sense that it is often said that justice must
H not only be done but must also appear to be done."
l.C.A. v. L.K. RATNA IPA1HAK, J.J 1069

>- We must remember that the President and the Vice-President of
the Council and 3 members -of the Council compose the Disciplinary
A"

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 entertajn ·an
apprehension that the President and the Vice-President of the Council B
).. 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 con-
· duct has been investigated by the Committee, the possibility of the
~T Council disagreeing with the repori in the presence of the President
and the Vice-President and the other members of the Committee c
would so rather remote. His fears would be aggravated by the circum-
stance that the President would preside over the meeting of the
--1 Council, and would thus be in a-position to control and possibly domi-
nate the proceedings during the meeting.' We do not d.oubt that the
President and the Vice-President, and also the three other members of
the Disciplinary Committee, should find it possible .to act objectively D
during the decision-making process of the Council. But to the member
accused of misconduct, the danger of partisan consideration being
accorded to the report wo11ld 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 E
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,
.1 there is nothing in. the Ac.t to suggest that the meetings of the council
F
must always be presided over by the President or the Vice-President,
_., and that no meeting can be held in their absence. We find t.hat Regula-
tion 140 framed under the Act contemplates that the Council may
meet in the absence of the President and the Vice-President, and pro-
vides 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 G
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 beeri 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
H
Council should be disabled from participating in a meeting of the
1070 SUPREME COURT REPORTS [1986] 3 S.C.R.

A 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 h&ve
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
B 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. ..I'-
Learned counsel for the Institute relies on Re Dancyger and
c 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
D 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 considern-
tion of its report by the parent body, constituted a single proceeding,
E and had to be distinguished from a case where the decision by a subor-
dinate body was assailed .in appeal before a superior authority. This
distinction, it seems to us, can be of little assistance iffull 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
F 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 amount to a review under
a two-stage scheme of inquiry into allegations of profes-
G sional misconduct. No doubt, characterization of the pro-
ceedings 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 nenw judex in
causa sua, expressed by Coke in Dr. Benham 's case ( 1610)
H 8. Co. Rep. 113b, 77 E.R. 646."
LC.A. v. L.K. RATNA (PATHAK, J.J 1071

The conclusion reached by us has not been an easy .one. The A
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 out-
. come: There is good reason ultimately for adopting a liberal view, for
I as has been observed by the late Professor S.A. De Smith in his 'Judi-
B
l cial Review of Administrative Action' Fourth Edition p. 261:
I
" ...... a report will normally include a statement of find-
ings and recommendations, which may be controverted be-
fore 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 c
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 ,
D
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
E
know ·why he has been found guilty. The case can be so serious that it
can attn\ct 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
1 already pointed out that a finding by the Council is'the first determina-
tive finding on the guilt of the member. It is a finding by a Tribunal of
F
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. TJie
Council must, therefore, state the reasons for its finding.
G
The appeals fail and are dismissed, but in the circumstances of
the case we make no order as to costs .
•.J..

M.L.A. Appeals dismissed. H