PROFESSIONAL MISCONDUCT: WHY YOU SHOULD WORRY?

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SHUBHAM BUDHIRAJA[1]



 

INTRODUCTION TO THE PROFESSION OF COMPANY SECRETARIES

The very basic rationale for having a separate qualified company law professional was not merely to ensure the compliance of management and board system but also to ensure check on Interest of all the stakeholders attached to a company. I.e. consumers, vendors, authorities, Investors, creditors. This role was added with more responsibilities when the economy transformed to market economy from a regulated economy. The foreign investors to place their exchange into the Indian sectors needed a reliable pre-check and thus there arises a very much need to have a professional who is skillful to certify the risk-free Investment proposals & outcomes thereof. With this background, Parliament enacted The Company Secretaries act, 1980 through which the profession of company secretaries were given a statue stamp. The act conferred formation of Institute of Company Secretaries of India which is a statutory body entrusted with regulation of profession of company secretaries in a manner which benefit the economy as a whole.

ACT IN NUTSHELL

The act is a small compilation of 40 sections divided into 10 chapters with 2 schedules. The act is last amended in year 2006.  Chapter I is mere preliminary, Chapter II covers Incorporation of Institute and members thereof. Chapter III is specific to central council & its composition covering section 9 to section 18; Chapter IV is Register of Members covering Section 19 & Section 20. Chapter V is the most operative part covering Section 21 to 22E and having the subject matter Professional Misconduct.  Chapter VI deals with composition of Regional council. Chapter VII covers penalties for various violations and having coverage of Section 24 to 29 where Section 29 asks for sanction of Central Govt. or council in order to prosecute any person under this act. Chapter VIIA covers Quality review board. Section 30 which provides appeal against order of Council or Disciplinary committee to the High Court omitted by 2006 act and at present there is no statutory appeal available. Thus, the Writ remedy is the only option provided the essential of administrative law duly made out by the aggrieved person such as – order based on irrelevant consideration, violation of principles of Natural Justice. Section 39 is the grund norm through which council derive its power to regulate the profession for business as set out in section itself. These regulations are in nature of a subordinate legislation and therefore cannot go beyond the parent act.

PROFESSIONAL MISCONDUCT

First Schedule & Second Schedule covers in detail the elements and grounds of professional misconduct. First Schedule have 4 parts where Part I deals with Practicing members, Part II with in employment members, Part III with members in general and Part IV with other misconduct of members in general. Second Schedule have 3 parts where Part I deals with Practicing members, part II with in employment members and Part III with members in general. First Schedule deals with lighter misconduct and Second Schedule deals with grave misconduct. The complaint u/s 21 can be made in form I to Director (Disciplined) who frames prima facie opinion of professional misconduct. This is as equivalent to taking cognizance but not subject to same principles of criminal jurisprudence. If he finds the case of First schedule then he may refer it to Board of Disciplined and if he find the case of Second schedule then he may refer it to Disciplinary committee for final disposal of case. Exercise of Due-Diligence is the only defense to professional misconduct. The procedure has to involve itself with principles of natural Justice. The decision of Disciplinary committee is independent of criminal prosecution and the proceeding of Disciplinary committee is civil in nature which based on prepondence of probability and not beyond the reasonable doubt. The answer to it is found in Section 3 of Evidence act which outline facts proved, disproved and not proved.

 

Following are the instances of professional misconduct as decided by Disciplinary committee

 

ICSI/DC/NI/01/2018

Certified AOC-4 but forget to attach cash flow is a professional misconduct but if GNL-2 filed then not guilty because assumed no intentional error on part of professional.


ICSI/ DC/175/2015

Company Secretary issued a compliance certificate on basis of records made available by company. He did not even visit to registered office of company where he should have atleast check statutory registers.  Inexperience in any profession is no answer or no defense for a professional misconduct. The person is a company law professional and he should have known the difference between redeemable preference shares and deposits. He is guilty of professional misconduct.


ICSI/ DC/ 289/ 2015

MGT 14 filed for disclosure of Interest of director on which It was alleged that it was based on old AOA and not new. It was held that new AOA were not in public domain as on date of certification by CS and therefore he is not guilty because he has observed due diligence.


ICSI/DC/172/2013

X showing himself as CS of a company even before he becomes CS of company. He sending letters, documents to stakeholders, etc. | It is not only professional misconduct but also impersonation and defraud.


ICSI/DC/395/2017

The Professional certified the forms without giving observation of violation of law and therefore it is a professional misconduct on his part.


ICSI/DC/320/2015

The Professional in its status report to the company omitted the charge of R.s. 7, 00,000. The same report relied upon by Bank. The complaint of professional misconduct filed for the reason that had the bank know the charge; the bank would have sanction less loan amount. The professional misconduct failed because complaint fails to show how bank would have differed if report be otherwise.

 

CONCLUSION

The Profession of Company Secretaries is silver lining between corporate and its stakeholders. The role is of 360 degree bird eye view with no place of omission or errors. The reason for the concept of professional misconduct is not just to improve the overall f functioning of profession and but also to give fruitful results to economy so that corporate frauds can be controlled

This work is an expression of original literary merit of the author. It has the essence of skills, labor and minimum creativity and therefore this work is protected through provisions of Copyright act, 1957. The author reserves its exclusivity w.r.t., inter-alia, right to reproduction of this work.

This work is meant only for academic purpose and therefore the author takes no responsibility w.r.t. any legal opinion so derived from it.


[1] Associate Company Secretary& Final Year Law Student from Faculty of Law, University of Delhi

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