Yogeshwari Kumari v. Instt of Chartered Accountants of India & Anr

MANMOHAN, J. SEPTEMBER 13, 2010

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* HIGH COURT OF DELHI AT NEW DELHI Judgment Reserved on: 12th July, 2010 % Judgment Pronounced on: 13th September, 2010 + LPA 455/2010 YOGESHWARI KUMARI ..... Appellant Through: Mr. Vibhu Bhakhru, Mr. A.K. Mishra and Ms. Reshmi Rea Sinha, Advocates. versus THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA & ANR ..... Respondents Through: None. CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE MANMOHAN 1. Whether reporters of the local papers be allowed to see the judgment?Yes 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes DIPAK MISRA, CJ Questioning the legal acceptability and the substantiality of the order dated 19.3.2010 passed by the learned Single Judge in W.P.(C) No.2828/2008, the present intra-court appeal has been filed under Clause 10 of the Letters Patent. The appellant is the daughter of late Highness Maharana Bhagwat Singhji Mewar who was the promoter of two companies, namely, Lake Palace Hotels & Motels Pvt. Ltd. (LPHM) and Lake Shore Palace Hotels Pvt. Ltd. (LSPH). LSPH holds 49% equity shares in LPHM. The appellant is a shareholder of LSPH as well as LPHM and, therefore, claims to be interested in the affairs and management of both the said companies. The respondent no.2, a Chartered Accountant, is the auditor of LPHM. 2. The appellant – petitioner (hereinafter referred to as "the appellant") filed a Company Petition No.1/1991 in the High Court of Rajasthan at Jodhpur under Sections 397 and 398 of the Companies Act, 1956 (for short "the 1956 Act"). On 23.11.1994, the company court appointed Maharaj Kumar Raj Singhji and Maharaj Kumar Samar Singhji as Directors of LSPH as there was a deadlock in the Board of Directors of LSPH between its Directors, namely, the appellant and her brother Sh. Arvind Singh Mewar. The said order came to be assailed before the Division Bench in three separate appeals and while the matter was pending before the Division Bench, a settlement was arrived at which was reduced to a Memorandum of Understanding dated 25.8.1999 and was signed by both of them. In terms of the settlement arrived at, all the appeals were disposed of. On 12.4.2005, the appellant filed Company Petition No.32/2005 under Sections 397 and 398 of the 1956 Act before the Company Law Board contending, inter alia, that the appointment of the respondent No.2 as the Director of the company was contrary to the circular No.14/51/62-PR of the Department of Company Affairs and sought a declaration that any business conducted at the meeting of the Board of Directors attended by the respondent No.2 was bad in law and should not be implemented. 3. The Company Law Board disposed of the petition holding that the respondent No.2 had been appointed as per the settlement which was accepted by the High Court of Rajasthan at Jodhpur and, therefore, it was obligatory on the part of the appellant to approach the High Court. The order passed by the Company Law Board came to be assailed before the High Court by filing separate appeals. She also filed two separate company applications. 4. As the facts are unfurled, in September, 2005, the appellant filed a complaint under Section 21 of the Chartered Accountants Act, 1949 (for brevity "the CA Act") against the respondent No.2 before the Council of the Institute of Chartered Accountants of India (ICAI) alleging that the respondent No.2 had violated the code of conduct of Chartered Accountants as formulated by the ICAI as well as the circular No.14/51/62-PR of the Department of Company Affairs. It was alleged that the partnership firm of the respondent No.2 was the statutory auditor of LPHM which was a subsidiary of LSPH and, therefore, while continuing to be an auditor of LPHM, he could not have acted as a Director of LSPH. It was urged that the said continuance constituted "professional misconduct" as specified in the First and Second Schedules to the 1956 Act. On the said complaint, comments were invited by the ICAI from the respond