Judgment :- Bhaskar Bhattacharya, J. This is an application for reference under Section 21(5) of the Chartered Accountants Act. The facts giving rise to filing of this reference may be summed up thus: a) The Institute of Chartered Accountants of India (hereinafter referred to as the “Institute”) received a complaint dated 24th May, 2005 from Shri Ranjit Singh (complainant) against Shri Dipak Kumar De Sarkar, a Chartered Accountant, the respondent before us. b) A copy of the complaint was sent to the respondent with a request to send his written statement. The respondent submitted his written statement and the complainant submitted his rejoinder. c) In accordance with the provisions contained in Regulation 12(11) of the Chartered Accountants Regulations, 1988, the above papers containing the complaint, written statement, rejoinder and comments were considered by the Council at its meeting held in May, 2006 at New Delhi. The Council was prima facie of the opinion that the respondent was guilty of professional misconduct and other misconduct and accordingly, referred the case to the disciplinary committee. d) A meeting of the disciplinary committee for the purpose of enquiry was fixed on 9th August, 2006 but was adjourned. Ultimately, the copy of the report of the disciplinary committee was forwarded to the parties and they were informed that the report would be considered by the council and were requested to send their written representation, if any, in the matter. e) On consideration of the report of the disciplinary committee along with the written representation received from the complainant and the respondent, the Council arrived at the following conclusions: “1. to accept the Report of the Disciplinary Committee wherein the Respondent had been held not guilty of professional misconduct under charge nos.1, 2, 6, 7, 8 and 9 falling within the meaning of Clauses (5), (6) and (8) of Part 1 of the Second Schedule to the Chartered Accountants Act, 1949 and; “2. to accept the Report of the Disciplinary Committee to the extent wherein the Respondent was held guilty of professional misconduct under charge nos.3, 4 and 5 falling within the meaning of Clause (7) of Part 1 of Second Schedule read with Sections 21 and 22 of the Chartered Accountants Act, 1949.” f) Consequently, the Council recommended to this Court that the name of respondent should be removed from the register of members for a period of three months. We, therefore, propose to consider the charge Nos.3, 4 and 5 under which the respondent has been found to be guilty by the council and those charges are quoted below: “3) An agreement was made between Mr. D. K. De Sarkar, Sri Subhash Singh and myself. According to this agreement some share certificates and transfer deeds were to be handed over to Subhash Singh after fulfilment of certain conditions. Mr. D. K. De Sarkar handed over the share certificates to Sri Subhash Singh without my consent, and without fulfilling the financial consideration as depicted in the agreement. This was a gross violation of the agreement that was made between Mr. D. K. Sarkar and me. More so consent to act as a mediator/arbitrator while holding the position of auditor constitutes a professional misconduct. (Agreement paperwork is attached as proof. Exhibit C. Point of contention duly highlighted). “4) Mr. D. K. De Sarkar lied to me and claimed that he has handed over the share certificates kept in his custody to Sri Subhash Singh on 6-01-05 by his letter of 28-01-05. In fact Mr. De Sarkar had already handed over the share certificates on 01-02-04, immediately after receipt of my objection letter dated 24-01-04. He tried to conceal his wrongful actions by not addressing my objections in his correspondence. But when the facts were exposed in the E.G.M. of 6-01-05, he made an effort to justify his actions by raising false allegations against me in his letter of 28-01-05. (Copy of the letter and the record from R.O.C. indicating the discrepancy is attached. Exhibit D1, D2, D3 – Letter dated 28-01-05, Exhibit E – Annual Return Submitted in R.O.C. Point of contention duly highlighted). “5) Mr. D. K. De Sarkar wrongfully alleged in his letter dated 28-01-05 that I have failed to substantially establish my objections and thus he is handing over the share certificates to Sri Subhash Singh. Where as the fact is that an E.G.M. was held on 06-01-05 at the request of the majority shareholders. In the meeting both Sri Subhash Singh and Mr. De Sarkar were present. Sri Subhash Singh left the meeting, in a huff when questions were raised about his actions regarding affairs of the company. However the meeting was continued. It was attended by all the shareholders except three. In the meeting both Sri Subhash Singh and Mr. De Sarkar were present. Sri Subhash Singh left the meeting, in a huff when questions were raised about his actions regarding affairs of the company. However the meeting was continued. It was attended by all the shareholders except three. The minutes of the said meeting states that Sri Subhash Singh is the defaulter and Mr. De Sarkar twisted the facts and alleged that I have failed to raise valid objections. (Letter – Exhibit D1 and minutes of the meeting with narration of the subsequent actions/correspondence – Exhibit F are attached. Point of contention duly highlighted).” The finding of the Council against the respondent in respect of charge Nos.3, 4 and 5 are quoted below: “13.5 In respect to charge no.3, that the Respondent did not perform his duties as a mediator/arbitrator and moreover he held the said position despite being the Auditor of the Company, the Committee noted that the witnesses informed the Committee that as per the Memorandum of Understanding (MOU) they have paid Rs.60 lac to Shri Viswajit Shani i.e. the son of the Complainant and for the balance of Rs.30 lac, they prepared the draft for the said sum but the Complainant did not accept the same on account of some reasons of his own. Further at the time of hearing, the Complainant denied having received the sum of Rs.60 lac either by him or by his son. The Respondent filed the copy of acknowledgement of money received by Shri Vishwajit Shahi and also filed a copy of the handwriting expert’s opinion to prove that the signature on the acknowledgement was of the Vishwajit Shahi. The Committee noted that as per the MOU the money had to be paid to the Complainant and after the full payment only, the share certificate would be transferred and handed over to the Shri Subhash Singh and Shri Subrata Singh, by the Respondent as he was acting as a mediator/arbitrator. The witnesses at the time of hearing submitted that the full payment was not made and further Rs.60 lac was paid to Complainant’s son and not to the Complainant, which had been denied by the Complainant. Further as per the acknowledgement within a month of amount received by Shri Vishwaji Shahi, the Complainant was supposed to issue an acknowledgement receipt for having received the money. Further as per the acknowledgement within a month of amount received by Shri Vishwaji Shahi, the Complainant was supposed to issue an acknowledgement receipt for having received the money. “13.6 The Committee in detail perused the Agreement and MOU and the Committee noted that as per the terms and conditions of MOU the shares were be handed over to the resident Directors only after making the full payment and in case of any dispute all, the parties to the agreement would decide the future course of action. But the Respondent did not follow the terms and condition of the MOU and without ensuring the full payment and without taking the consent of the Complainant i.e. one of the party of the MOU handed over the shares certificate to the resident Directors. In the opinion of the Committee, the Respondent did not act in a professional manner and it appears that he adopted a biased approach towards the Complainant. Further, the Respondent did not file any final acknowledgement receipt of the money received by him as required by the acknowledgement given by the Complainant’s son. Therefore, in the opinion of the Committee the Respondent was guilty of professional misconduct falling within the meaning of Clause 7 of Part 1 of Second Schedule to the Chartered Accountants Act, 1949 under this charge. “13.7 In respect of charges no. 4 & 5, that the Respondent handed over the share certificate to Shri Subhash Singh, the Committee noted that on the basis of documents placed on record and also agreed to by the Respondent, the Respondent had handed over the share certificate to the other Director, Shri Subhash Singh even on nonacceptance of money by the Complainant. Therefore, in the opinion of the Committee, the Respondent had failed to comply with the terms and conditions of the MOU Therefore, in the opinion of the Committee, the Respondent was guilty of professional misconduct falling within the meaning of clause 7 of Part 1 of Second Schedule to the Chartered Accountants Act, 1949 under this charge.” Mr. Therefore, in the opinion of the Committee, the Respondent had failed to comply with the terms and conditions of the MOU Therefore, in the opinion of the Committee, the Respondent was guilty of professional misconduct falling within the meaning of clause 7 of Part 1 of Second Schedule to the Chartered Accountants Act, 1949 under this charge.” Mr. Basu, the learned Senior Advocate appearing on behalf of the Council, has placed before us the entire materials based on which the aforesaid findings were recorded by the council and has submitted that the findings of guilt on the three charges are quite reasonable and having regard to the grave allegations which come within the Second Schedule of the Act, the imposition of penalty recommended by the council was also quite reasonable. Mr. Basu, therefore, prays for affirming the recommendation of the council. Mr. Majumdar, the learned Advocate appearing on behalf of the respondent, has, on the other hand, opposed the aforesaid contention of Mr. Basu and has submitted that so far the charge Nos. 3, 4 and 5 are concerned, those cannot be said to be a professional misconduct at all within the meaning of the Clause 7 of Part 1 of the Second Schedule. According to Mr. Majumdar, acts of holding of the share and delivery of the same to one of the parties, were done by his client not in discharge of his duties as a Chartered Accountant but as an Arbitrator or Mediator and any person could be invested with such a duty. According to Mr. Majumdar, in order to hold a person guilty of professional misconduct within the meaning of the Act, it must be established that such Act was and could be done only by a Chartered Accountant in course of his professional duty as a chartered accountant and in no other capacity. Mr. Majumdar points out that for doing the aforesaid acts done by his client, which he was entrusted to do by virtue of an agreement, it was not necessary that the person concerned should be a Chartered Accountant. Simply because, Mr. Majumdar continues, the respondent is a Chartered Accountant, for such wrong decision, even if it is assumed to be so, he cannot be held to be guilty of professional misconduct. Mr. Simply because, Mr. Majumdar continues, the respondent is a Chartered Accountant, for such wrong decision, even if it is assumed to be so, he cannot be held to be guilty of professional misconduct. Mr. Majumdar, therefore, prays for setting aside the findings of guilt of professional misconduct and dropping of the proceedings on the aforesaid ground. In support of such contention, Mr. Majumdar relies upon the following decisions: 1. Reliance Natural Resources Ltd. Vs. Reliance Industries Ltd, reported in 2010 (7) SCC 1 ; 2. Institute of Chartered Financial Analyst of India Vs. Council of Institute of Chartered Accountants in India, reported in 2007 (12) SCC 210 = AIR 2007 SC 2091 ; 3. M/s. Siddeshwari Cotton Mills (P) Ltd Vs. Union of India and another, reported in AIR 1989 SC 1019 ; 4. Chief Controller of Exports, New Delhi, Complainant Vs. G.P. Acharya, reported in AIR 1964 Cal 178 ; 5. Sunderdas Thakersey and Bros., Complainants Vs. P. K. Mukherji, reported in AIR 1966 Cal 468 ; 6. S. Ganesan, Complainant Vs. A. K. Joscelyne, reported in AIR 1957 Cal 33 ; 7. Union of India by the Dept. of Company; Law Administration, Ministry of Commerce and Industry Vs. R.N. Rajam Iyer and another, reported in AIR 1964 Mad 398 . Therefore, the only question that falls for determination in this Reference is whether in this case, the respondent can be held to be guilty of professional misconduct within the meaning of Clause 7 of Part 1 of Second Schedule to the Chartered Accountants Act, 1949 read with Section 21(5) of the Act as charged by the Council. In order to appreciate the above question, it will be profitable to refer to the provisions contained in Sections 21 and 22 of the Act and the Schedules annexed thereto which are quoted below: “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. (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 a finding accordingly and shall proceed in the manner laid down in the succeeding sub-sections. (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. (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 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 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 filled, or dismiss the complaint, as the case may be; (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) Where it appears to the High Court that the transfer of any case pending before it to another High Court, will promote the ends of justice or tend to the general convenience of the parties, it may so transfer the case, subject to such conditions, if any, at it thinks fit to impose, and the High Court to which such case is transferred shall deal with it as if the case had been forwarded to it by the Council. ExplanationI.—In this section “High Court” means the highest civil court of appeal, not including the Supreme Court, exercising jurisdiction in the area in which the person whose conduct is being inquired into carries on business, or has his principal place of business at the commencement of the inquiry: Provided that where the cases relating to two or more members of the Institute have to be forwarded by the Council to different High Courts, the Central Government shall, having regard to the ends of justice and the general convenience of the parties, determine which of the High Courts to the exclusion of others shall hear the cases against all the members. Explanation II.—For the purposes of this section “member of the Institute” includes a person who was a member of the Institute on the date of the alleged misconduct although he has ceased to be a member of the Institute at the time of the inquiry (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 (5 of 1908), in respect of the following matters, namely:— (a) summoning and enforcing the attendance of any erson and examining him on oath; (b) the discovery and production of any document; and (c) receiving evidence on affidavit. 22. Professional misconduct defined.—For the purposes of this Act, the expression “professional misconduct” shall be deemed to include any act or omission specified in any of the Schedules, but nothing in this section shall be construed to limit or abridge in any way the power conferred or duty cast on the Council under sub-section (1) of Section 21 to inquire into the conduct of any member of the Institute under any other circumstances. Schedule 1 [See Sections 21(4) and 22] Part I Professional misconduct in relation to chartered accountants in practice A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he— (1) allows any person to practise in his name as a chartered accountant unless such person is also a chartered accountant in practice and is in partnership with or employed by himself; (2) pays or allows or agrees to pay or allow, directly or indirectly, any share, commission or brokerage in the fees or profits of his professional business, to any person other than a member of the Institute or a partner or a retired partner or the legal representative of a deceased partner; Explanation.—In this item “partner” includes a person residing outside India with whom a chartered accountant in practice has entered into partnership which is not in contravention of Item (4) of this Part. (3) accepts or agrees to accept any part of the profits of the professional work of a lawyer, auctioneer, broker or other agent who is not a member of the Institute; (4) enters into partnership with any person other than a chartered accountant in practice or a person resident without India who but for his residence abroad would be entitled to be registered as a member under clause (v) of sub-section (1) of Section 4 or whose qualifications are recognised by the Central Government or the Council for the purpose of permitting such partnerships, provided that the chartered accountant shares in the fees or profits of the business of the partnership both within and without India; (5) secures, either through the services of a person not qualified to be his partner or by means which are not open to a chartered accountant, any professional business; (6) solicits clients or professional work either directly or indirectly, by circular, advertisement, personal communication or interview or by any other means; (7) advertises his professional attainments or services, or uses any designation or expressions other than chartered accountant on professional documents, visiting cards, letter heads or sign boards, unless it be a degree of a University established by law in India or recognised by the Central Government or a title indicating membership of the Institute of Chartered Accountants or of any other institution that has been recognised by the Central Government or may be recognised by the Council; (8) accepts a position as auditor previously held by another chartered accountant or a restricted State auditor without first communicating with him in writing; (9) accepts an appointment as auditor of a company without first ascertaining from it whether the requirements of Section 2[225] of the Companies Act, 1956 (1 of 1956), in respect of such appointment have been duly complied with; (10) charges or offers to charge, accepts or offers to accept in respect of any professional employment fees which are based on a percentage of profits or which are contingent upon the findings or results of such employment, except in cases which are permitted under any regulations made under this Act; (11) engages in any business or occupation other than the profession of chartered accountants unless permitted by the Council so to engage: Provided that nothing contained herein shall dis-entitle a chartered accountant from being a director of a company, unless he or any of his partners is interested in such company as an auditor; (12) accepts a position as auditor previously held by some other chartered accountant or a restricted State auditor in such conditions as to constitute under-cutting; (13) allows a person not being a member of the Institute or a member not being his partner to sign on his behalf or on behalf of his firm, any balance-sheet, profit and loss account, report or financial statements. PART II Professional misconduct in relation to members of the Institute in service A member of the Institute (other than a member in practice) shall be deemed to be guilty of professional misconduct, if he being an employee of any company, firm or person— (a) pays or allows or agrees to pay directly or indirectly to any person any share in the emoluments of the employment undertaken by the member; (b) accepts or agree s to accept any part of fees, profits or gains from a lawyer, a chartered accountant or broker engaged by such company, firm or person or agent or customer of such company, firm or person by way of commission or gratification; (c) discloses confidential information acquired in the course of his employment except as and when required by law or except as permitted by the employer. PART III Professional misconduct in relation to members of the Institute generally A member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he— (1) includes in any statement, return or form to be submitted to the Council any particulars knowing them to be false; (2) not being a fellow styles himself as a fellow; (3) does not supply the information called for, or does not comply with the requirements asked for, by the Council or any of its Committees._ Schedule 2 [See Sections 21(5) and 22] PART I Professional misconduct in relation to chartered accountants in practice requiring action by a High Court A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he— (1) discloses information acquired in the course of his professional engagement to any person other than his client, without the consent of his client or otherwise than as required by any law for the time being in force; (2) certifies or submits in his name or in the name of his firm a report of an examination of financial statements unless the examination of such statements and the related records has been made by him or by a partner or an employee in his firm or by another chartered accountant in practice; (3) permits his name or the name of his firm to be used in connection with an estimate of earnings contingent upon future transactions in a manner which may lead to the belief that he vouches for the accuracy of the forecast; (4) expresses his opinion on financial statements of any business or any enterprise in which he, his firm or a partner in his firm has a substantial interest, unless he discloses the interest also in his report; (5) fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary to make the financial statement not misleading; (6) fails to report a material mis-statement known to him to appear in a financial statement with which he is concerned in a professional capacity; (7) is grossly negligent in the conduct of his professional duties; (8) fails to obtain sufficient information to warrant the expression of an opinion or his exceptions are sufficiently material to negate the expression of an opinion; (9) fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances; (10) fails to keep money of his client in a separate banking account or to use such moneys for purposes for which they are intended PART II Professional misconduct in relation to members of the Institute generally requiring action by a High Court A member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he— (i) contravences any of the provisions of this Act or the regulations made thereunder; (ii) is guilty of such other act or omission as may be specified by the Council in this behalf, by notification in the Gazette of India.” (Emphasis supplied by us). A plain reading of the aforesaid provisions indicates that for the purpose of the Act, the expression "professional misconduct includes an act or omission specified in the Schedules to the Act. In the case before us, the Council has found the respondent guilty under Cause 7 of the Second Schedule i.e. is grossly negligent in the conduct of his professional duties; In our opinion, in order to hold the respondent guilty under the aforesaid charge, it must be established that the alleged act or omission on the part of the respondent relates to his professional duty as a Chartered Accountant. In the case before us, he was made an arbitrator or mediator by the parties and the duty cast upon him as such arbitrator could be done by any person and it is not necessary that only a Chartered Accountant can do such duties. It is true that the respondent was an auditor of the company with which the parties were connected and for acting as such auditor, the parties had confidence in him and that was probably the reason for making him the arbitrator. In such circumstances, even if we accept the contention of Mr. Basu, the learned Advocate appearing on behalf of the Council, that he did not act fairly as such arbitrator, in our opinion, such betrayal of confidence reposed in him did not come with the purview of professional misconduct. The duties conferred upon the respondent by virtue of the agreement between the parties were not the duties of a Chartered Accountant and thus, in this case, by no stretch of imagination the alleged act or omission could be brought within the purview of the Clause 7 of Second Schedule indicated above. In order to attract the aforesaid clause, the act or omission must be in connection with the duties cast upon a Chartered Accountant in such capacity which no person other than a Chartered Accountant can perform. In the case before us, thus even without entering into the question whether the respondent performed his duties imposed upon him by the agreement reasonably or without any negligence, we are of the view that the breaches alleged do not come within the purview of the expression “professional misconduct”. The Council has found the respondent guilty only on the aforesaid charge and no other. The Council has found the respondent guilty only on the aforesaid charge and no other. Thus, we hold that the respondent is not at all guilty of any professional misconduct as charged under Clause 7 of the Second Schedule and consequently, we answer the reference by holding that no action is called for against the respondent. In the facts and circumstances, there will be, however, no order as to costs.