Delhi HC - ICAI can initiate suo motu disciplinary proceedings against its members without a written complaint.

Case: CA Sanjay Jain v Institute of Chartered Accountants of India & Ors

The Delhi High Court recently ruled that the Institute of Chartered Accountants of India (ICAI) can initiate suo motu disciplinary proceedings against its members without a written complaint.

In the absence of a written complaint or allegation, Section 21 of the Chartered Accountants Act, 1949 allows the ICAI to proceed suo moto and unhindered.

According to the Court, the phrase "any information" contained in Section 21 refers to any material or fact that may come to the institute's attention. But Justice Yashwant Varma added that a mere news report cannot justify an investigation.

Justice Varma was dealing with several petitions filed by CAs seeking to quash disciplinary proceedings initiated by the Institute of Chartered Accountants of India (ICAI).

The CAs worked for the firms appointed as Joint Statutory Auditors of Punjab National Bank to review its financial statements in a limited manner. As soon as news broke that Nirav Modi had defrauded the banks of nearly 12,000 crores, the ICAI issued show cause notices to petitioners. These auditors were accused of not complying with various auditing standards.

Petitioners have argued that the ICAI can't initiate suo motu proceedings and that its actions are merely based on news reports.

Judge Varma concluded that news reports merely acted as a catalyst for the ICAI to investigate the massive fraud and to examine whether any members had not complied with auditing standards. Accordingly, the bench dismissed the petitions and said the ICAI is entitled to proceed and can implement the sealed orders.