P. B. MUKHARJI, J. ( 1 ) THIS is a reference under Section 21 of the Chartered Accountants Act, 1949. The Disciplinary Committee found the Chartered Accountant grossly negligent in the conduct of his professional duties and made the report accordingly on the 8th July, 1961. The report of the Disciplinary Committee then came up before the Council of the Institute of Chartered Accountants of India who after a meeting held on the 14th and 15th September 1961 gave the following decision: "the respondent was guilty of professional misconduct under Section 21 of the Chartered Accountants Act, 1949 read with clause (7) of Part I of the Second Schedule to the Act. It was decided to recommend to the High Court that the respondent may be reprimanded. " ( 2 ) THE matter now has been referred to this Court for final orders under Section 21 (4) and (5) of the Chartered Accountants Act. ( 3 ) THE complaint against the Chartered Accountant in this case is really and in substance two-fold. In the first place, he was supposed to have given the auditor's report on the profit and loss account of the three companies which he audited and specially of a Public Limited Company, called the Bihar Central Agencies Ltd. without showing loan granted by that company to other companies under the same management. In the second place, it is also alleged against the Chartered Accountant that he did not show in his auditor's report the remuneration paid to the Managing Director. This, in short, is the complaint. ( 4 ) THE defence of the Chartered Accountant is, in brief, as follows. Section 295 (3) of the Companies Act, 1956 is not attracted to this loan, but rather Section 295 (2) (b) of that Act because according to Section 11 (6) of the Indian Companies Act, 1913 or Section 27 (3) of the Companies Act, 1956, the change of the name did not affect the rights and obligations of the company. The change of name referred to in this defence of the Chartered Accountant is that formerly Bihar Central Agencies Ltd. was known as Bihar Central Bank Ltd. The original Articles of Association and its change of name have been produced before us and they are directed to be kept on the record. The change of name referred to in this defence of the Chartered Accountant is that formerly Bihar Central Agencies Ltd. was known as Bihar Central Bank Ltd. The original Articles of Association and its change of name have been produced before us and they are directed to be kept on the record. Curiously enough they show that only the word "bank" was omitted and the name was changed to 'agencies' but there was no other alteration in the Articles of Association. It is the Chartered Accountant's case that according to Section 295 (3), the provision of that Section would be applicable as if it was in force when the loan was originally granted, but the loan was not granted by Bihar Central Agencies Ltd. , as stated by the complainant but by Bihar Central Bank Ltd. on which provisions of Section 295 (3) would not have applied had that been in force on the date the loan was originally granted, and such loan was granted by a Bank under the Banking Companies Act in operation at the time of the date of the loan. In short, the defence is Section 370 of the Companies Act. The loan was prior to the coming into force of the Act and therefore Section 370 did not apply. It is only Section 370 of the Companies Act which prevents the Company from making a loan unless it passes a proper resolution. In this connection reliance is also placed on the words 'vide Section 370' appearing in Schedule VI Part I of the Companies Act showing the form of balance sheet and the following words under the column "instructions in accordance with which assets should be made out" namely "debts due from other companies under the same management to be disclosed with the names of the company (vide Section 370)". It is contended as a matter of construction by the Chartered Accountant that this expression "vide Section 370" is only to describe the nature of the loan and not when it was given and by saying "vide section". Parliament intended to draw attention to the scope of loan which was covered. If the loan is given before the passing of the Act it is governed by the earlier Act. If it is afterwards it should be governed by a resolution. Parliament intended to draw attention to the scope of loan which was covered. If the loan is given before the passing of the Act it is governed by the earlier Act. If it is afterwards it should be governed by a resolution. In that the opening words of Section 370 of the Companies Act say: "no Company shall make any loan to etc. " ( 5 ) THE word 'shall' therefore, appears to indicate, according to the Chartered Accountant, a future loan and not a past loan. ( 6 ) THE Disciplinary Committee as well the Council, in our view, were wrong in holding the Chartered Accountant guilty of misconduct on a particular view of the construction of a section of the Companies Act and the words used in the form of instructions in the balance sheet, in Schedule VI, Part I of the Companies Act. A misconduct for which a Disciplinary Committee investigates must be basically a misconduct. It is not necessary nor do we think proper to attempt to make any rigid distinction of the word 'misconduct' under the Chartered Accountants Act and the First and Second Schedules given thereunder. The First Schedule gives a list of professional misconduct in relation to Chartered Accountants in practice and in service making a separation between the two. The second Schedule under the Chartered Accountants Act gives the list of professional misconduct in relation to Chartered Accountants in practice requiring action by a High Court, as well as in relation to the members of the Institute generally. Item No. 7 of Part I of the Second Schedule of which the Council has found the Chartered Accountant guilty in this case says that a Chartered Accountant in practice shall be deemed to be guilty of professional misconduct if he is grossly negligent in the conduct of his professional duties. Misconduct cannot be an erroneous interpretation of law. Misconduct implies failure of act honestly and reasonably either according to the ordinary and natural standard or according to the standards of a particular profession but error or misinterpretation of law and specially one view or another over a debatable construction cannot be a ground for the allegation and finding of professional misconduct against a Chartered Accountant. Misconduct implies failure of act honestly and reasonably either according to the ordinary and natural standard or according to the standards of a particular profession but error or misinterpretation of law and specially one view or another over a debatable construction cannot be a ground for the allegation and finding of professional misconduct against a Chartered Accountant. The question raised here is whether Section 370 of the Companies Act applied to future loan or to past loan and the further question is whether the expression "vide Section 370" in the column for instructions for drawing up balance sheet cannot be a ground for misconduct in the facts of this case. They are desirable. They are controversial questions of interpretation. It may be that one view is right. It may be the other view is right. But error in construction is not misconduct in this context. To hold so would mean that many persons, institutions and even Courts of justice are committing misconduct because their views are corrected in the hierarchy of tribunals to which they are subject. It would introduce a dangerous principle to say that even error on debatable and controversial construction of sections and forms in a statute should be enough ground for profession misconduct. ( 7 ) THE next charge against the Chartered Accountant in this case was that he did not disclose the remunerations paid to the Managing Director. Here his defence is that the payment to the Managing Director is provided for in the Articles of Association of the Bihar Central Agencies Ltd. His further defence is that payment to the Managing Director was included in the establishment charges shown in the balance sheet and there was no attempt to conceal such payment from the balance sheet. It was a question of not showing under the proper head as "managing Director's remuneration" and putting it in the establishment charges. There is another defence of the Chartered Accountant on this point and that is that the payment of remuneration to the Managing Director was known to the members and the shareholders as proved by a resolution of approval passed by the members and the shareholders in their meeting held on the 31st March 1953. Therefore, there was and could be no concealment to the shareholders that remuneration was being paid to the Managing Director. Therefore, there was and could be no concealment to the shareholders that remuneration was being paid to the Managing Director. There is considerable force in the defence of the Chartered Accountant on this point. Looking at the practice of this company, Bihar Central Agencies Ltd. it is quite clear that the remuneration to the Managing Director was always included as part of the establishment charges before this particular Chartered Accountant came to the picture and before this controversy and complaint began. The profit and loss account of Bihar Central Agencies Ltd. for the year ending 30th June, 1952 signed and certified by S. K. Ghose and Co. Chartered Accountant and Auditors of this company showed the Directors' remuneration as included within the establishment charges. The company then was in affluent circumstances and was doing business in 1952 and even under the old Companies Act, it was necessary to show the payment of Directors' remuneration in the balance sheet separately but even then nobody thought of complaining and nobody thought of instituting the disciplinary proceedings against the then Chartered Accountant for including the Directors' remuneration under the establishment charges. We find it, therefore, difficult to believe and accept the finding that the respondent Chartered Accountant in this case was guilty of any misconduct within the meaning of Schedule to the Chartered Accountants Act in the facts of this case. After giving a most careful and anxious consideration to the report of the Disciplinary Committee and the order of the Council of the Institute of Chartered Accountants of India, we are unable to accept their finding and their recommendation. ( 8 ) THIS leads us to a very outstanding feature in this reference. The complaint against the Chartered Accountant in this case was initiated by the Registrar of Companies, Bihar. The complaint is dated 14th October, 1960. At the date of the complaint the Company was already in liquidation and there was a Liquidator. The Liquidator does not make the complaint. The Registrar of Joint Stock Companies took into his head to make this complaint, long after many opportunities that the Registrar had under the Companies Act to take steps and correct the irregularities, even if any, as he seemed to think. The Managing Director of this Company was one R. Prasad who died on the 23rd May 1959. The Registrar of Joint Stock Companies took into his head to make this complaint, long after many opportunities that the Registrar had under the Companies Act to take steps and correct the irregularities, even if any, as he seemed to think. The Managing Director of this Company was one R. Prasad who died on the 23rd May 1959. He wrote a letter to the Registrar of Companies, Bihar as early as the 16th May 1957 stating:"the Managing Director has become invalid and there is none to look after the affairs of the company. Besides this the company stopped doing business since 1949 and is practically defunct for all intents and purposes. As the Company has already stopped doing business since a very long time and there is no intention even now to start doing business, may we have the indulgence to request you to very kindly strike the name of the company off the register under Section 560 of the Indian Companies Act, 1956. " ( 9 ) NOW this particular Registrar of Companies, Bihar who is now so anxious to pursue the auditor of this Company never took any step and did not even answer this letter of the 16th May 1957. He did not strike off the name of the Company at that time. He did not make any enquiry even under Section 234 of the Companies Act which gives the Registrar power to call for information or explanation and to make an enquiry and, if necessary, even to report to the Central Government. The Registrar of Joint Stock Companies had all these auditors' reports of the years ending 30th June 1958 all this time and that was when the Managing Director was alive. The Registrar of Companies of Bihar did not raise his little finger against anybody. He did not take steps to strike the name of the Company off the register as requested. He did not take steps against the Director or the Managing Director of the Company concerned. He did not institute any enquiry as he should have done under Section 234 of the Indian Companies Act. He did not take steps to strike the name of the Company off the register as requested. He did not take steps against the Director or the Managing Director of the Company concerned. He did not institute any enquiry as he should have done under Section 234 of the Indian Companies Act. He only wakes up on the 14th October 1960 to make the complaint when the Managing Director had died, when he knew that the Company was defunct and when he knew that this Chartered Accountant against whom he was proceeding and complaining was only auditing what was a company in name but not doing business and that on the magnificent remuneration of Rs. 50/- a year which has never been paid by the company to him. To add to this strange part of the drama which the Registrar of Companies has enacted, it is necessary to state that the Company in fact was wound up by a voluntary resolution as early as on the 25th December 1955 whereby it was resolved unanimously: "that the Company be wound up voluntarily inasmuch as there is none to run it on and the present Managing Director is incapacitated in his present state of health to attend to his onerous duties. " and it was resolved unanimously. "that Shri Narayan Prasad e appointed as liquidator on the company on such a remuneration as may be mutually agreed upon between him and the management. " ( 10 ) THIS resolution was before the Registrar of Companies, Bihar and is marked Ex. 17 in the present proceedings. After having wound up the Company there is another resolution on the 30th April 1956 purporting to cancel the resolution for winding up. It is inexplicable how and under what Company law a resolution winding up a company, even though voluntarily, and appointing a Liquidator could be again cancelled and the company revived. The Company of course, in fact, never did revive. In spite of all this knowledge which the Registrar of Companies possessed all the time, at the relevant time he took no steps. He thought fit to pursue the Auditor after the Company has gone into liquidation after the Managing Director had died and when he knew that the company really had done no business. In spite of all this knowledge which the Registrar of Companies possessed all the time, at the relevant time he took no steps. He thought fit to pursue the Auditor after the Company has gone into liquidation after the Managing Director had died and when he knew that the company really had done no business. In fact, there is no proof on record of there being any prejudice to any Director or any shareholder or to anybody. The Register of Companies did not pursue the really guilty persons, the Directors of the Companies concerned and I do not quite see how his passion for correcting the company administration led him to pursue the auditor and not the real persons. The Registrar of Companies is a responsible officer and he should responsibly perform the duties with which he is charged, specially under the Companies Act under which he has to act and he should not be too anxious to try to look outside his own particular Act and proceed against professional people under an Act for regulating professions such as the Chartered Accountants Act. It is not intended to say nor does this Court say that the Registrar of Companies is not a competent person to make a complaint under the Chartered Accountants Act against an auditor. He certainly can and in appropriate cases he should. But this is neither an appropriate case nor even a case where he should have at all complained without taking even the steps that he is statutorily required to take against a company and their Directors under the Indian Companies Act. To complete the picture it also remains inexplicable why this particular auditor was pursued by the Director and the other auditor who committed the same mistake of not separately showing the remuneration paid to the Managing Director. ( 11 ) COMING now to the Council of the Institute of Chartered Accountants and the role that it played in conducting the enquiry and coming to its finding by itself and through its Disciplinary Committee it is necessary to add a few observations. Before the whole machinery of Disciplinary Committee with its powers of investigation is let loose against a member of the Institute, it is only fair that the Council should, with care and interest, examine at least the source of complaint and the time when the complaint is being made. Before the whole machinery of Disciplinary Committee with its powers of investigation is let loose against a member of the Institute, it is only fair that the Council should, with care and interest, examine at least the source of complaint and the time when the complaint is being made. They would in many cases reveal whether it is at all necessary for the Disciplinary Committee or the Council to waste all its funds and moneys, its machinery and its resources to discipline its members, and in many such cases the Council may not be satisfied on the bona fides of the complaint or the source from which it comes. If the Council and the Disciplinary Committee had applied their minds at any stage to find out why (a) the Registrar is making a complaint against a defunct company which had ceased to do business (b) why it was done so late and not earlier (c) why the Registrar did not take steps against the Directors of the other companies concerned and (d) why he did not take steps to make necessary enquiries under Section 234 of the Companies Act which he was required to do in a case like this, then they would have found out that much of their labours were uncalled for. Secondly, the record again of the Disciplinary Committee does not show in this case that the evidence was taken of any one on solemn affirmation or on oath. Various conversations between the members inter Secondary Education and general discussions have crept into the record what was intended to be a record of deposition. This Court would like to draw again the pointed attention of the Council and the Disciplinary Committee that their record of deposition of witnesses should be more carefully drawn up and evidence, both documentary and oral, should be carefully recorded with indication who is producing what document and who is proving what document. Nothing appears in this record which satisfies any of these elementary tests of a record of deposition. The conversation inter Secondary Education between the members of the Disciplinary Committee need not at all find place in the record of deposition and should not as a rule find any place there. Nothing appears in this record which satisfies any of these elementary tests of a record of deposition. The conversation inter Secondary Education between the members of the Disciplinary Committee need not at all find place in the record of deposition and should not as a rule find any place there. Exchange between a particular member of the Disciplinary Committee and the parties or their counsel represented before them may find a place if relevant but then it should be indicated clearly that that is so and should not be confused with the deposition part or the evidence part of actual witnesses giving evidence on particular point or points. We find here that a Solicitor's note or a Solicitor's legal opinion on what is gross negligence has been exhibited and marked as an exhibit in this case. We do not think it should have been done by the Disciplinary Committee. Thirdly the charge against a professional man like a Chartered Accountant should be carefully drawn up giving a fair idea of what the charge is against a professional man. If there is no charge, then it is not for the Disciplinary Committee to make general or roving investigation on some other points and hold him guilty on that ground. ( 12 ) FOR these reasons, we set aside the findings of the Disciplinary Committee and the Council of the Institute of Chartered Accountants in this case. We do not accept the recommendation of the Council that the Chartered Accountant should be reprimanded in this case. We hold that he has not been guilty of any misconduct. There will be no order as to costs. Reference application set aside.