PROFESSIONAL MISCONDUCT: WHY YOU SHOULD WORRY?
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.
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