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CHARTERED ACCOUNTANTS (AMENDMENT) ACT 2006

THE CHARTERED ACCOUNTANTS (AMENDMENT) ACT, 2006
NO. 9 OF 2006
[22nd March, 2006.]
An Act further to amend the Chartered Accountants Act, 1949.
BE it enacted by Parliament in the Fifty-seventh Year of the Republic
of India as follows:-
1.
Short title and commencement.
1.
Short title and commencement.-(1) This Act may be called the
Chartered Accountants (Amendment) Act, 2006.
(2) It shall come into force on such date as the Central Government
may, by notification in the Official Gazette, appoint:
Provided
that different dates may be appointed for different
provisions of this Act and any reference in any such provision to the
commencement
of this Act shall be construed as a reference to the
commencement of that provision.
2.
Amendment of section 2.
2. Amendment of section
2.-In the Chartered Accountants Act, 1949 (38
of 1949) (hereinafter referred to as the principal Act), in section
2,-
(I) in sub-section (1), -
(i) after clause (a), the following
clauses shall be inserted,
namely:-
'(aa) "Authority" means the Appellate Authority constituted under
section 22A;
(aaa) "Board"
means the Quality Review Board constituted under
section 28A;';
(ii) after clause (e), the following clause shall be inserted,
namely:-
'(ea) "notification" means a notification published in the Official
Gazette;';
(iii) after clause (h), the following clauses shall
be inserted,
namely:-
'(ha) "specified" means specified by rules made by the Central
Government under this Act;
(hb) "Tribunal" means
a Tribunal established under sub-section (1) of
section 10B;
(II) in sub-section (2), in the Explanation, for the words "training
of articled clerks", the words "training of articled assistants"
shall be substituted.
3.
Amendment of section 4.
3. Amendment of
section 4.-In section 4 of the principal Act, for
sub-section (3), the following sub-section shall be substituted,
namely: -
"(3)
Every person belonging to any of the classes mentioned in
clauses (ii), (iii), (iv), (v) and (vi) of sub-section (1) shall have
his
name entered in the Register on application being made and
granted in the prescribed manner and on payment of such fees, as may
be
determined, by notification, by the Council, which shall not
exceed rupees three thousand:
Provided that the Council may, with the
prior approval of the Central
Government, determine the fee exceeding rupees three thousand, which
shall not in any case exceed rupees
six thousand.".
4.
Amendment of section 5.
4. Amendment of section 5.-In section 5 of the principal Act, for
sub-section (3), the
following sub-section shall be substituted,
namely:-
"(3) A member, being an associate who has been in continuous practice
in India
for at least five years, whether before or after the
commencement of this Act, or whether partly before and partly after
the commencement
of this Act, and a member who has been an associate
for a continuous period of not less than five years and who possesses
such qualifications
as the Council may prescribe with a view to
ensuring that he has experience equivalent to the experience normally
acquired as a result
of continuous practice for a period of five
years as a chartered accountant shall, on payment of such fees, as
may be determined,
by notification, by the Council, which shall not
exceed rupees five thousand and on application made and granted in
the prescribed
manner, be entered in the Register as a fellow of the
Institute and shall be entitled to use the letters F. C. A. after his
name
to indicate that he is a fellow of the Institute of Chartered
Accountants:
Provided that the Council may with the prior approval
of the Central
Government, determine the fee exceeding rupees five thousand, which
shall not in any case exceed rupees ten thousand.".
5.
Amendment of section 6.
5. Amendment of section 6.-In section 6 of the principal Act,-
(i) for sub-section (2), the following
sub-section shall be
substituted, namely:-
"(2) Every such member shall pay such annual fee for his certificate
as may be determined,
by notification, by the Council, which shall
not exceed rupees three thousand, and such fee shall be payable on or
before the 1st
day of April in each year:
Provided that the Council may with the prior approval of the Central
Government, determine the fee exceeding
rupees three thousand, which
shall not in any case exceed rupees six thousand.";
(ii) after sub-section (2), the following sub-section
shall be
inserted, namely:-
"(3) The certificate of practice obtained under sub-section (1) may
be cancelled by the Council under
such circumstances as may be
prescribed." .
6.
Amendment of section 9.
6. Amendment of section 9.-In section 9 of the principal Act,-
(i) for sub-section (2), the following sub-section shall be
substituted, namely:-
"(2) The Council shall be composed of the following
persons, namely:-
(a) not more than thirty-two persons elected by the members of the
Institute from amongst the fellows of the Institute chosen in
such
manner and from such regional constituencies as may be specified:
Provided that a fellow of the Institute, who has been found
guilty of
any professional or other misconduct and whose name is removed from
the Register or has been awarded penalty of fine, shall
not be
eligible to contest the election,-
(i) in case of misconduct falling under the First Schedule of this
Act, for a period of
three years;
(ii) in case of misconduct falling under the Second Schedule of this
Act, for a period of six years,
from the completion
of the period of removal of name from the
Register or payment of fine, as the case may be;
(b) not more than eight persons to be
nominated in the specified
manner, by the Central Government.";
(ii) after sub-section (2), the following sub-sections shall be
inserted,
namely:-
"(3) No person holding a post under the Central Government or a State
Government shall be eligible for election to the Council
under clause
(a) of sub-section (2).
(4) No person who has been auditor of the Institute shall be eligible
for election to the Council
under clause (a) of sub-section (2), for
a period of three years after he ceases to be an auditor.".
7.
Substitution of new section
for section 10.
7. Substitution of new section for section 10.-For section 10 of the
principal Act, the following section shall be
substituted, namely:-
"10. Re-election or re-nomination to Council.-A member of the
Council, elected or nominated under sub-section
(2) of section 9,
shall be eligible for re-election or, as the case may be, re-
nomination:
Provided that no member shall hold the
office for more than three
consecutive terms:
Provided further that a member of the Council, who is or has been
elected as President
under sub-section (1) of section 12, shall not
be eligible for election or nomination as a member of the Council.".
8.
Insertion
of new sections 10A and 10B.
8. Insertion of new sections 10A and 10B.-After section 10 of the
principal Act, the following sections
shall be inserted, namely:-
"10A. Settlement of dispute regar- ding election.-In case of any
dispute regarding any election under
clause (a) of sub-section (2) of
section 9, the aggrieved person may make an application within thirty
days from the date of declaration
of the result of election to the
Secretary of the Institute, who shall forward the same to the Central
Government.
10B. Establishment
of Tribunal.-(1) On receipt of any application
under section 10A, the Central Government shall, by notification,
establish a Tribunal
consisting of a Presiding Officer and two other
Members to decide such dispute and the decision of such Tribunal
shall be final.
(2) A person shall not be qualified for appointment,-
(a) as a Presiding Officer of the Tribunal unless he has been a
member of the
Indian Legal Service and has held a post in Grade I of
the service for at least three years;
(b) as a Member unless he has been a
member of the Council for at
least one full term and who is not a sitting member of the Council or
who has not been a candidate in
the election under dispute; or
(c) as a Member unless he holds the post of a Joint Secretary to the
Government of India or any other
post under the Central Government
carrying a scale of pay which is not less than that of a Joint
Secretary to the Government of India.
(3) The terms and conditions of service of the Presiding Officer and
Members of the Tribunal, their place of meetings and allowances
shall
be such as may be specified.
(4) The expenses of the Tribunal shall be borne by the Council.".
9.
Amendment of section 12.
9. Amendment of section 12.-In section 12 of the principal Act,-
(i) in sub-section (3), after the words "he shall be eligible for
re-
election", the words, brackets and figure "under sub-section (1)"
shall be inserted;
(ii) in sub-section (4), -
(a) for the word
"President" occurring at both the places, the words
"President and the Vice-President" shall be substituted;
(b) for the words "charge of his duties", the words
"charge of their
duties" shall be substituted.
10.
Amendment of section 13.
10. Amendment of section 13.-In section 13 of the principal
Act,-
(i) in sub-section (2), after the words "meetings of the Council",
the words "or he has been found guilty of any professional
or other
misconduct and awarded penalty of fine," shall be inserted;
(ii) in the proviso to sub-section (3), for the words "six months",
the words "one year" shall be substituted.
11.
Substitution of new section for section 15.
11. Substitution of new section for section
15.-For section 15 of the
principal Act, the following section shall be substituted, namely:-
"15. Functions of Council.-(1) The
Institute shall function under the
overall control, guidance and supervision of the Council and the duty
of carrying out the provisions
of this Act shall be vested in the
Council.
(2) In particular, and without prejudice to the generality of the
foregoing powers, the
duties of the Council shall include -
(a) to approve academic courses and their contents;
(b) the examination of candidates for enrolment
and the prescribing
of fees therefor;
(c) the regulation of the engagement and training of articled and
audit assistants;
(d) the
prescribing of qualifications for entry in the Register;
(e) the recognition of foreign qualifications and training for the
purposes
of enrolment;
(f) the granting or refusal of certificates of practice under this
Act;
(g) the maintenance and publication of a Register
of persons
qualified to practice as chartered accountants;
(h) the levy and collection of fees from members, examinees and other
persons;
(i) subject to the orders of the appropriate authorities under the
Act, the removal of names from the Register and the restoration
to
the Register of names which have been removed;
(j) the regulation and maintenance of the status and standard of
professional qualifications
of members of the Institute;
(k) the carrying out, by granting financial assistance to persons
other than members of the Council
or in any other manner, of research
in accountancy;
(l) the maintenance of a library and publication of books and
periodicals relating
to accountancy;
(m) to enable functioning of the Director (Discipline), the Board of
Discipline, the Disciplinary Committee and the
Appellate Authority
constituted under the provisions of this Act;
(n) to enable functioning of the Quality Review Board;
(o) consideration
of the recommendations of the Quality Review Board
made under clause (a) of section 28B and the details of action taken
thereon in
its annual report; and
(p) to ensure the functioning of the Institute in accordance with the
provisions of this Act and in performance
of other statutory duties
as may be entrusted to the Institute from time to time.".
12.
Insertion of new section 15A.
12. Insertion
of new section 15A.-After section 15 of the principal
Act, the following section shall be inserted, namely:-
"15A. Imparting education
by Universities and other bodies.-(1)
Subject to the provisions of this Act, any University established by
law or any body affiliated
to the Institute, may impart education on
the subjects covered by the academic courses of the Institute.
(2) The Universities or
bodies referred to in sub-section (1) shall,
while awarding degree, diploma or certificate or bestowing any
designation, ensure that
the award or designation do not resemble or
is not identical to one awarded by the Institute.
(3) Nothing contained in this section
shall enable a University or a
body to adopt a name or nomenclature which is in any way similar to
that of the Institute.".
13.
Substitution
of new section for section 16.
13. Substitution of new section for section 16.-For section 16 of the
principal Act, the following
section shall be substituted, namely:-
"16. Officers and employees, salary, allowances, etc.-(1) For the
efficient performance of its duties, the Council shall-
(a) appoint a Secretary to perform such duties as may be prescribed;
(b) appoint
a Director (Discipline) to perform such functions as are
assigned to him under this Act and the rules and regulations framed
thereunder.
(2) The Council may also-
(a) appoint such other officers and employees as it considers
necessary;
(b) require and take from the
Secretary or from any other officer or
employee such security for the due performance of his duties, as the
Council considers necessary;
(c) prescribe the salaries, fees, allowances of the officers and
employees and their terms and conditions of service;
(d) with the
previous sanction of the Central Government, fix the
allowances of the President, Vice-President and other members of the
Council
and members of its Committees.
(3) The Secretary of the Council shall be entitled to participate in
the meetings of the Council but
shall not be entitled to vote
thereat.".
14.
Amendment of section 17.
14. Amendment of section 17.-In section 17 of the principal
Act,-
(a) in sub-section (1), for clause (iii), the following clause shall
be substituted, namely:-
"(iii) a Finance Committee.";
(b) for sub-sections (2) and (3), the following sub-sections shall be
substituted, namely :-
"(2) The Council may also form such
other committees from amongst its
members as it consider necessary for the purpose of carrying out the
provisions of this Act, and
any Committee so formed may, with the
sanction of the Council, co-opt such other members of the Institute
not exceeding one-third
of the members of the committee as it thinks
fit, and any member so co-opted shall be entitled to exercise all the
rights of a member
of the committee.
(3) Each of the Standing Committees shall consist of the President
and the Vice-President ex officio, and minimum
of three and maximum
of five members to be elected by the Council from amongst its
members.".
15.
Amendment of section 18.
15. Amendment
of section 18.-In section 18 of the principal Act,-
(i) for sub-sections (3), (4) and (5), the following sub-sections
shall be substituted,
namely:-
"(3) The Council shall keep proper accounts of the fund
distinguishing capital from revenue in the manner prescribed.
(4)
The Council shall prepare in the manner prescribed and approve,
prior to the start of the financial year, an annual financial
statement
(the budget) indicating all its anticipated revenues as
well as all proposed expenditures for the forthcoming year.
(5) The annual
accounts of the Council shall be prepared in such
manner as may be prescribed and be subject to audit by a chartered
accountant in
practice to be appointed annually by the Council:
Provided that no member of the Council or a person who has been a
member of the
Council during the last four years or a person who is
in partnership with such member shall be eligible for appointment as
an auditor
under this sub-section:
Provided further that, in the event it is brought to the notice of
the Council that the accounts of the Council
do not represent a true
and fair view of its finances, then, the Council may itself cause a
special audit to be conducted:
Provided
also that, if such information, that the accounts of the
Council do not represent a true and fair view of its finances, is
sent to
the Council by the Central Government, then, the Council may,
wherever appropriate cause a special audit or take such other action
as it considers necessary and shall furnish an action taken report
on it to the Central Government.";
(ii) after sub-section (5),
the following sub-sections shall be
inserted, namely:-
"(5A) As soon as may be practicable at the end of each year, the
Council shall
circulate the audited accounts to its members at least
fifteen days in advance and consider and approve these accounts in a
special
meeting convened for the purpose.
(5B) The Council shall cause to be published in the Gazette of India
not later than the 30th day
of September of the year next following,
a copy of the audited accounts and the Report of the Council for that
year duly approved by the Council and copies
of the said accounts
and Report shall be forwarded to the Central Government and to all
the members of the Institute.".
16.
Amendment
of section 19.
16. Amendment of section 19.-In section 19 of the principal Act,-
(i) in sub-section (3), the words "on payment of
such amount as may
be prescribed" shall be inserted at the end;
(ii) for sub-section (4), the following sub-section shall be
substituted,
namely:-
"(4) Every member of the Institute shall, on his name being entered
in the Register, pay such annual membership fee as may
be determined,
by notification, by the Council, which shall not exceed rupees five
thousand:
Provided that the Council may with the
prior approval of the Central
Government, determine the fee exceeding rupees five thousand, which
shall not in any case exceed rupees
ten thousand.".
17.
Amendment of section 20.
17. Amendment of section 20.-In section 20 of the principal Act,
after sub-section (2),
the following sub-section shall be inserted,
namely:-
"(3) If the name of any member has been removed from the Register
under clause
(c) of sub-section (1), on receipt of an application,
his name may be entered again in the Register on payment of the
arrears of
annual fee and entrance fee along with such additional
fee, as may be determined, by notification, by the Council which
shall not
exceed rupees two thousand:
Provided that the Council may with the prior approval of the Central
Government, determine the fee exceeding
rupees two thousand, which
shall not in any case exceed rupees four thousand.".
18.
Substitution of new section for section 21.
18.
Substitution of new section for section 21.-For section 21 of the
principal Act, the following section shall be substituted, namely:-
"21. Disciplinary Directorate.-(1) The Council shall, by
notification, establish a Disciplinary Directorate headed by an
officer
of the Institute designated as Director (Discipline) and such
other employees for making investigations in respect of any
information
or complaint received by it.
(2) On receipt of any information or complaint along with the
prescribed fee, the Director (Discipline)
shall arrive at a prima
facie opinion on the occurrence of the alleged misconduct.
(3) Where the Director (Discipline) is of the
opinion that a member
is guilty of any professional or other misconduct mentioned in the
First Schedule, he shall place the matter
before the Board of
Discipline and where the Director (Discipline) is of the opinion that
a member is guilty of any professional
or other misconduct mentioned
in the Second Schedule or in both the Schedules, he shall place the
matter before the Disciplinary
Committee.
(4) In order to make investigations under the provisions of this Act,
the Disciplinary Directorate shall follow such procedure
as may be
specified.
(5) Where a complainant withdraws the complaint, the Director
(Discipline) shall place such withdrawal before
the Board of
Discipline or, as the case may be, the Disciplinary Committee, and
the said Board or Committee may, if it is of the
view that the
circumstances so warrant, permit the withdrawal at any stage.".
19.
Insertion of new sections 21A, 21B, 21C and 21D.
19. Insertion of new sections 21A, 21B, 21C and 21D.-After section 21
of the principal Act, the following sections shall be inserted,
namely:-
'21A. Board of Discipline.-(1) The Council shall constitute a Board
of Discipline consisting of -
(a) a person with experience
in law and having knowledge of
disciplinary matters and the profession, to be its presiding officer;
(b) two members one of whom
shall be a member of the Council elected
by the Council and the other member shall be nominated by the
Central Government from amongst
the persons of eminence having
experience in the field of law, economics, business, finance or
accountancy;
(c) the Director (Discipline)
shall function as the Secretary of the
Board.
(2) The Board of Discipline shall follow summary disposal procedure
in dealing with all cases before it.
(3)
Where the Board of Discipline is of the opinion that a member is
guilty of a professional or other misconduct mentioned in the First
Schedule, it shall afford to the member an opportunity of being heard
before making any order against him and may thereafter take
any one
or more of the following actions, namely:-
(a) reprimand the member;
(b) remove the name of the member from the Register
up to a period
of three months;
(c) impose such fine as it may think fit, which may extend to rupees
one lakh.
(4) The Director (Discipline)
shall submit before the Board of
Discipline all information and complaints where he is of the opinion
that there is no prima facie
case and the Board of Discipline may, if
it agrees with the opinion of the Director (Discipline), close the
matter or in case of
disagreement, may advise the Director
(Discipline) to further investigate the matter.
21B. Disciplinary Committee.-(1) The Council
shall constitute a
Disciplinary Committee consisting of the President or the Vice-
President of the Council as the Presiding Officer
and two members to
be elected from amongst the members of the Council and two members to
be nominated by the Central Government from
amongst the persons of
eminence having experience in the field of law, economics, business,
finance or accountancy:
Provided that
the Council may constitute more Disciplinary Committees
as and when it considers necessary.
(2) The Disciplinary Committee, while
considering the cases placed
before it shall follow such procedure as may be specified.
(3) Where the Disciplinary Committee is of
the opinion that a member
is guilty of a professional or other misconduct mentioned in the
Second Schedule or both the First Schedule
and the Second Schedule,
it shall afford to the member an opportunity of being heard before
making any order against him and may
thereafter take any one or more
of the following actions, namely: -
(a) reprimand the member;
(b) remove the name of the member from
the Register permanently or
for such period, as it thinks fit;
(c) impose such fine as it may think fit, which may extend to rupees
five lakhs.
(4) The allowances payable to the members nominated by the Central
Government shall be such as may be specified.
21C.
Authority, Disciplinary Committee, Board of Discipline and
Director (Discipline) to have powers of civil court.-For the purposes
of an inquiry under the provisions of this Act, the Authority, the
Disciplinary Committee, Board of Discipline and the Director
(Discipline)
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 person and
examining him on oath;
(b) the discovery
and production of any document; and
(c) receiving evidence on affidavit.
Explanation.-For the purposes of sections 21, 21A, 21B,
21C and 22,
"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.
21D. Transitional provisions.-All complaints pending before
the
Council or any inquiry initiated by the Disciplinary Committee or
any reference or appeal made to a High Court prior to the
commencement
of the Chartered Accountants (Amendment) Act, 2006,
shall continue to be governed by the provisions of this Act, as if
this Act had not been amended by the Chartered Accountants
(Amendment) Act, 2006.'.
20.
Substitution of new section for section 22.
20. Substitution of new section for section 22.-For section 22 of
the principal
Act, the following section shall be substituted,
namely:-
'22. Professional or other misconduct defined.-For the purposes of
this
Act, the expression "professional or other misconduct" shall be
deemed to include any act or omission provided 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 Director
(Discipline)
under sub-section (1) of section 21 to inquire into the
conduct of any member of the Institute under any other
circumstances.'.
21.
Substitution of new sections for section 22A.
21. Substitution of new section for section 22A.-For Section 22A of
the principal Act,
the following sections shall be substituted,
namely:-
"22A. Constitution of Appellate Authority.-(1) The Central Government
shall,
by notification, constitute an Appellate Authority consisting
of-
(a) a person who is or has been a judge of a High Court, to be
its
Chairperson;
(b) two members to be appointed from amongst the persons who have
been members of the Council for at least one full
term and who is not
a sitting member of the Council;
(c) two members to be nominated by the Central Government from
amongst persons
having knowledge and practical experience in the
field of law, economics, business, finance or accountancy.
(2) The Chairperson and
other members shall be part-time members.
22B. Term of office of Chairperson and members of Authority.-(1) A
person appointed as
the Chairperson shall hold office for a term of
three years from the date on which he enters upon his office or until
he attains
the age of sixty-five years, whichever is earlier.
(2) A person appointed as a member shall hold office for a term of
three years
from the date on which he enters upon his office or until
he attains the age of sixty-two years, whichever is earlier.
22C. Allowances
and conditions of service of Chairperson and members
of Authority.-The allowances payable to, and other terms and
conditions of service
of, the Chairperson and members and the manner
of meeting expenditure of the Authority by the Council and such other
authorities
shall be such as may be specified.
22D. Procedure to be regulated by Authority.-(1) The office of the
Authority shall be at Delhi.
(2) The Authority shall regulate its own procedure.
(3) All orders and decisions of the Authority shall be authenticated
by an officer
duly authorised by the Chairperson in this behalf.
22E. Officers and other staff of Authority.-(1) The Council shall
make available
to the Authority such officers and other staff members
as may be necessary for the efficient performance of the functions of
the
Authority.
(2) The salaries and allowances and conditions of service of the
officers and other staff members of the Authority shall
be such as
may be prescribed.
22F. Resignation and removal of Chairperson and members.-(1) The
Chairperson or a member may, by notice
in writing under his hand
addressed to the Central Government, resign his office:
Provided that the Chairperson or a member shall,
unless he is
permitted by the Central Government to relinquish his office sooner,
continue to hold office until the expiry of three
months from the
date of receipt of such notice or until a person duly appointed as
his successor enters upon his office or until
the expiry of term of
office, whichever is earlier.
(2) The Chairperson or a member shall not be removed from his office
except by
an order of the Central Government on the ground of proved
misbehaviour or incapacity after an inquiry made by such person as
the
Central Government may appoint for this purpose in which the
Chairperson or a member concerned has been informed of the charges
against
him and given a reasonable opportunity of being heard in
respect of such charges.
22G. Appeal to Authority.-(1) Any member of the
Institute aggrieved
by any order of the Board of Discipline or the Disciplinary Committee
imposing on him any of the penalties referred to in sub-section (3)
of section
21A and sub-section (3) of section 21B, may within ninety
days from the date on which the order is communicated to him, prefer
an
appeal to the Authority:
Provided that the Director (Discipline) may also appeal against the
decision of the Board of Discipline
or the Disciplinary Committee to
the Authority, if so authorised by the Council, within ninety days:
Provided further that the Authority
may entertain any such appeal
after the expiry of the said period of ninety days, if it is
satisfied that there was sufficient cause
for not filing the appeal
in time.
(2) The Authority may, after calling for the records of any case,
revise any order made by the
Board of Discipline or the Disciplinary
Committee under sub-section (3) of section 21A and sub-section (3) of
section 21B and may-
(a) confirm, modify or set aside the order;
(b) impose any penalty or set aside, reduce, or enhance the penalty
imposed by the order;
(c) remit the case to the Board of Discipline or Disciplinary
Committee for such further enquiry as the Authority considers proper
in the circumstances of the case; or
(d) pass such other order as the Authority thinks fit:
Provided that the Authority shall give
an opportunity of being heard
to the parties concerned before passing any order.".
22.
Amendment of section 24A.
22. Amendment of
section 24A.-In section 24A of the principal Act,
sub-section (3) shall be omitted.
23.
Amendment of section 26.
23. Amendment of
section 26.-In section 26 of the principal Act, for
sub-section (2), the following sub-section shall be substituted,
namely:-
"(2)
Any person who contravenes the provisions of sub-section (1)
shall, without prejudice to any other proceedings, which may be taken
against him, be punishable on first conviction with a fine not less
than five thousand rupees but which may extend to one lakh rupees,
and in the event of a second or subsequent conviction with
imprisonment for a term which may extend to one year or with fine not
less ten thousand rupees but which may extend to two lakh rupees or
with both.".
24.
Insertion of new Chapter VIIA.
24. Insertion
of new Chapter VIIA.-After Chapter VII of the principal
Act, the following Chapter shall be inserted, namely:-
"CHAPTER VII A
QUALITY
REVIEW BOARD
28A. Establishment of Quality Review Board.-(1) The Central
Government shall, by notification, constitute a Quality
Review Board
consisting of a Chairperson and ten other members.
(2) The Chairperson and members of the Board shall be appointed from
amongst the persons of eminence having experience in the field of
law, economics, business, finance or accountancy.
(3) Five members
of the Board shall be nominated by the Council and
other five members shall be nominated by the Central Government.
28B. Functions
of Board.-The Board shall perform the following
functions, namely:-
(a) to make recommendations to the Council with regard to the
quality
of services provided by the members of the Institute;
(b) to review the quality of services provided by the members of the
Institute including audit services; and
(c) to guide the members of the Institute to improve the quality of
services and adherence
to the various statutory and other regulatory
requirements.
28C. Procedure of Board.-The Board shall meet at such time and place
and follow in its meetings such procedure as may be specified.
28D. Terms and conditions of services of Chairperson and members of
Board and its expenditure.-(1) The terms and conditions of service of
the Chairperson and the members of the Board, and their allowances
shall be such as may be specified.
(2) The expenditure of the Board shall be borne by the Council.".
25.
Insertion of new section
29A.
25. Insertion of new section 29A.-After section 29 of the principal
Act, the following section shall be inserted, namely:-
"29A.
Power of Central Government to make rules.-(1) The Central
Government may, by notification, make rules to carry out the
provisions of this Act.
(2) In particular, and without prejudice
to the generality of the
foregoing powers, such rules may provide for all or any of the
following matters, namely:-
(a) the manner
of election and nomination in respect of members to
the Council under sub-section (2) of section 9;
(b) the terms and conditions
of service of the Presiding Officer and
Members of the Tribunal, place of meetings and allowances to be paid
to them under sub-section
(3) of section 10B;
(c) the procedure of investigation under sub-section (4) of section
21;
(d) the procedure while considering the
cases by the Disciplinary
Committee under sub-section (2), and the fixation of allowances of
the nominated members under sub-section
(4) of section 21B;
(e) the allowances and terms and conditions of service of the
Chairperson and members of the Authority and the
manner of meeting
expenditure by the Council under section 22C;
(f) the procedure to be followed by the Board in its meetings under
section 28C; and
(g) the terms and conditions of service of the Chairperson and
members of the Board under sub-section (1) of section
28D.".
26.
Amendment of section 30.
26. Amendment of section 30.-In section 30 of the principal Act,-
(a) in sub-section (1), the
words " and a copy of such regulations
shall be sent to each member of the Institute" shall be omitted.
(b) in sub-section (2),-
(i) in clause (g), the words "the Council and" shall be omitted;
(ii) in clause (j), for the word "clerks" occuring at both the
places,
the word "assistants" shall be substituted;
(iii) in clause (r), the word " and" shall be inserted at the end;
(iv) clause (s), shall
be omitted.
27.
Substitution of new section for section 30B.
27. Substitution of new section for section 30B.-For section 30B of
the principal Act, the following section shall be substituted,
namely:-
"30B. Rules, regulations and notifications to be laid before
Parliament. Every rule and every regulation made and every
notification issued under this Act shall be laid, as soon as may be
after
it is made or issued, before each House of Parliament, while it
is in session, for a total period of thirty days which may be
comprised
in one session or in two or more successive sessions, and
if, before the expiry of the session immediately following the
session
or the successive sessions aforesaid, both Houses agree in
making any modification in the rule, regulation or notification, or
both
Houses agree that the rule, regulation or notification should
not be made or issued, the rule, regulation or notification, shall
thereafter have effect only in such modified form or be of no effect,
as the case may be; so, however, that any such modification
or
annulment shall be without prejudice to the validity of anything
previously done under that rule, regulation or notification.".
28.
Insertion of new sections 30C, 30D and 30E.
28. Insertion of new sections 30C, 30D and 30E.-After section 30B of
the principal
Act, the following sections shall be inserted, namely:-
"30C. Power of Central Government to issue directions.-(1) In the
event of
non-compliance by the Council of any provisions of this Act,
the Central Government may give to the Council such general or
special
directions as it considers necessary to ensure compliance
and the Council shall, in the discharge of its functions under this
Act,
comply with such directions.
(2) If, in the opinion of the Central Government, the Council has
persistently made default in giving
effect to the directions issued
under sub-section (1), it may, after giving an opportunity of being
heard to the Council, by notification,
dissolve the Council,
whereafter a new Council shall be constituted in accordance with the
provisions of this Act with effect from
such date as may be decided
by the Central Government:
Provided that the Central Government shall ensure constitution of a
new Council
in accordance with the provisions of this Act within a
period of one year from the date of its dissolution.
(3) Where the Central Government has issued a notification
under sub-
section (2) dissolving the Council, it shall, pending the
constitution of a new Council in accordance with the provisions
of
this Act, nominate any person or body of persons not exceeding five
members to manage the affairs and discharge all or any of
the
functions of the Council under this Act.
30D. Protection of action taken in good faith.-No suit, prosecution
or other legal proceeding
shall lie against the Central Government or
the Council or the Authority or the Disciplinary Committee or the
Tribunal or the Board
or the Board of Discipline or the Disciplinary
Directorate or any officer of that Government, Council, Authority,
Disciplinary Committee,
Tribunal, Board, Board of Discipline or the
Disciplinary Directorate, for anything which is in good faith done or
intended to be
done under this Act or any rule, regulation,
notification, direction or order made thereunder.
30E. Members, etc., to be public servants.-The
Chairperson, Presiding
Officer, members and other officers and employees of the Authority,
Disciplinary Committee, Tribunal, Board,
Board of Discipline or the
Disciplinary Directorate shall be deemed to be public servants
within the meaning of section 21 of the
Indian Penal Code (45 of
1860).".
29.
Substitution of new Schedules for First Schedule and Second Schedule.
29. Substitution of new
Schedules for First Schedule and Second
Schedule.-For the First Schedule and the Second Schedule to the
principal Act, the following
Schedules shall be substituted, namely:-
'THE FIRST SCHEDULE
[See sections 21 (3), 21A(3) 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 practice 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 him;
(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, or a member of any other
professional
body or with such other persons having such
qualifications as may be prescribed, for the purpose of rendering
such professional services
from time to time in or outside India.
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 person who is not a member of the Institute:
Provided that
nothing herein contained shall be construed as
prohibiting a member from entering into profit sharing or other
similar arrangements,
including receiving any share commission or
brokerage in the fees, with a member of such professional body or
other person having
qualifications, as is referred to in item (2) of
this Part;
(4) enters into partnership, in or outside India, with any person
other
than a chartered accountant in practice or such other person
who is a member of any other professional body having such
qualifications
as may be prescribed, including a resident 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;
(5) secures, either through the services of a person who is not an
employee of such chartered
accountant or who is not his partner or
by means which are not open to a chartered accountant, any
professional business:
Provided
that nothing herein contained shall be construed as
prohibiting any arrangement permitted in terms of items (2), (3) and
(4) of this Part;
(6) solicits
clients or professional work either directly or
indirectly by circular, advertisement, personal communication or
interview or by
any other means:
Provided that nothing herein contained shall be construed as
preventing or prohibiting-
(i) any chartered accountant
from applying or requesting for or
inviting or securing professional work from another chartered
accountant in practice; or
(ii)
a member from responding to tenders or enquiries issued by
various users of professional services or organisations from time to
time
and securing professional work as a consequence;
(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 of India or of any other
institution that has been recognised by the Central Government
or may
be recognised by the Council:
Provided that a member in practice may advertise through a write up,
setting out the services
provided by him or his firm and particulars
of his firm subject to such guidelines as may be issued by the
Council;
(8) accepts a
position as auditor previously held by another
chartered accountant or a certified auditor who has been issued
certificate under
the Restricted Certificate Rules, 1932 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 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 as permitted under any regulation
made under this Act;
(11) engages in any business or occupation
other than the profession
of chartered accountant unless permitted by the Council so to engage:
Provided that nothing contained herein
shall disentitle a chartered
accountant from being a director of a company (not being a managing
director or a wholetime director)
unless he or any of his partners
is interested in such company as an auditor;
(12) allows a person not being a member of the Institute
in
practice, 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-
(1) pays or allows
or agrees to pay directly or indirectly to any
person any share in the emoluments of the employment undertaken by
him;
(2) accepts
or agrees 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.
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) not being a fellow of the Institute, acts as a fellow of the
Institute;
(2) does not supply the information called for, or does not comply
with the requirements asked for, by the Institute,
Council or any of
its Committees, Director (Discipline), Board of Discipline,
Disciplinary Committee, Quality Review Board or the
Appellate
Authority;
(3) while inviting professional work from another chartered
accountant or while responding to tenders or enquiries
or while
advertising through a write up or anything as provided for in items
(6) and (7) of Part I of this Schedule, gives information knowing it
to be false.
PART IV
Other 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 other misconduct, if he-
(1) is held guilty by any civil or criminal court for an offence
which is punishable
with imprisonment for a term not exceeding six
months;
(2) in the opinion of the Council, brings disrepute to the
profession or the
Institute as a result of his action whether or not
related to his professional work.
THE SECOND SCHEDULE
[See sections 21 (3), 21B
(3) 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) discloses information acquired in the course of his
professional engagement to any
person other than his client so
engaging him, 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 enterprise in which he, his firm, or a partner in
his firm has a
substantial interest;
(5) fails to disclose a material fact known to him which is not
disclosed in a financial statement,
but disclosure of which is
necessary in making such financial statement where he is concerned
with that financial statement in a
professional capacity;
(6) fails to report a material misstatement known to him to appear
in a financial statement with which he
is concerned in a professional
capacity;
(7) does not exercise due diligence, or is grossly negligent in the
conduct of his professional
duties;
(8) fails to obtain sufficient information which is necessary for
expression of an opinion or its 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 moneys of his client other than fees or
remuneration or money
meant to be expended in a separate banking
account or to use such moneys for purposes for which they are
intended within a reasonable
time.
PART II
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) contravenes any of the provisions of this Act or the
regulations
made thereunder or any guidelines issued by the Council;
(2) being an employee of any company, firm or person, discloses
confidential
information acquired in the course of his employment
except as and when required by any law for the time being in force or
except
as permitted by the employer;
(3) includes in any information, statement, return or form to be
submitted to the Institute, Council
or any of its Committees,
Director (Discipline), Board of Discipline, Disciplinary Committee,
Quality Review Board or the Appellate
Authority any particulars
knowing them to be false;
(4) defalcates or embezzles moneys received in his professional
capacity.
PART III
Other 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 other misconduct, if he is held guilty by any
civil or criminal court for an offence which is punishable with
imprisonment for a term exceeding six months.'.
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T. K. VISWANATHAN,
Secy. to the Govt. of India.
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