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Petitioner: RAHIM JAN VS Respondent: INSTITUTE OP CHARTERED ACCOUNTANTS AND ANOTHER
Court Name: Lahore High Court Judge(s): Maulvi Mushtaq Hussain Title: RAHIM JAN vs INSTITUTE OP CHARTERED ACCOUNTANTS AND ANOTHER Case No.: Civil Appeal No, 208 of 1970 Writ Petition No, 1551 of 1975 Date of Judgment:1976-06-27 Reported As: PLD 1977 Lahore 1450 Result: Appeal partly allowed
JUDGMENT
JUDGMENT ' Rahim Jan petitioner is a member of the Institute of Chartered Accountants of England and Wales having been so elected in the year 1946. He established his office at Lahore under the name and style "Rahim Jan & Company" and continued to practise as a Chartered Accountant until the 30th of June 1973, when the Pakistan Government appointed him Securities & Exchange Authority of Pakistan. Consequent upon this appointment the petitioner severed his relations with Rahim Jan & Company which was a partnership. As a Chartered Accountant he was also a member of the Institute of Chartered Accountants of Pakistan and despite accepting Government Service) in the capacity mentioned above, he continued to be such a member. Incidentally, the petitioner was founder member of the Institute of Chartered Accountants of Pakistan and served for no less than three years in its first Council. This Council comprise six members elected by its constituents and seven persons nominated by the Central Government as provided by section 9 of the Chartered Accountants Ordinance X of 1961. On the 22nd of February 1974, he was appointed Chairman of the Monopoly Control Authority. 2. The subject of accountancy which had so far been the responsibility of the Ministry of Commerce of the Government of Pakistan, was transferred to the control of the Finance Ministry of that Government On the 9th of Merch, 1974, the petitioner in his capacity as the Securities and Exchange Control Authority was given the control of the Institute of Chartered Accountants of Pakistan. 3. On the 23rd of December 1974, the Institute issued a letter to Mr. Rahim Jan informing him that the Council had held him guilty of professional misconduct under para. 25 of Schedule C of the Chartered Accountant Bye-laws, 1961, for committing on act discreditable to a Chartered Accountant and had resolved to exclude him from the membership of that Institute under Bye-Law
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100 (2) of the Chartered Accountants Bye-Laws, 1951. This letter was signed by one Ataullah as Secretary of the Institute. A photostat of that letter is Annexure 'A'. Hence this writ petition. 4. The facts which led to this expulsion are that services of three articled/audit clerks were terminated by Rahim Jan & Company in the year 1972 in consequence of a theft in its o ce said to have taken place on the 12th of May that year. This led to some demonstrations and incidents which have been classified by the petitioner as ugly and which took place in the office of the firm. The Company was obliged to terminate the services of two more such clerks on account of the disturbances. The action is alleged to have been taken under Bye-laws 75 (A) and 80(A) of the Chartered Accountants Institute. 5. The clerks appealed against this termination to the Council of the Institute which has already been referred to above. Mr. F. Alam is said to have been entrusted with the enquiry and to have given a report, a copy of which was allegedly never supplied to Rahim Jan. It has been contended by the petitioner that the reason for refusing to supply a copy of the report of Mr. F. Alam was that the said gentleman had found in favour of the petitioner. 6, Instead of supplying the copy of the aforesaid report the petitioner was required by the Council to issue no objection certificates to these clerks so that they could find employment with some other Chartered Accountant. Since the petitioner did not issue these no objection certificates the Council proceeded to do so itself. 7. The petitioner also claims that in the year 1972, he made certain allegations against Mr. Salim Malik a Vice-President of the Institute regarding encouragement offered to some of the clerks etc. Who had demonstrated in the manner aforesaid. ' As the Securities & Exchange Authority of Pakistan the petitioner found fault with working of the Council and issued notices under section 22 of the Securities & Exchange Ordinance, 1969, to a number of auditors requiring them to "show cause why they should not be penalised for failure to submit returns in respect of beneficial ownership of Securities of Issuers of which they were the officers". These auditors were proceeded against in consequence of these notices. Hamid Chaudhary & Company, Chartered Accountants, Lahore, was one of those who were affected. ' This Mr. Hamid Chaudhary was member of the Council of the Institute on 23rd of December 1974, when the order was passed by the petitioner. It has been further alleged that he was also a member of the Investigation Committee against the petitioner. In a revision application preferred by the company against the orders of the petitioner it was alleged that- "A series of penal actions which the Authority has started against the petitioner is for personal reasons and hence mala fide. Mr. Rahim Jan prior to his appointment as the Authority was a practising Chartered Accountant like the petitioner. As such he developed professional and business rivalry against the petitioner since he lost many important audits to the petitioner. These and other circumstances led to bitter feelings between the petitioner and Mr. Rahim Jan. On assuming office of Authority Mr. Rahim Jan has let loose a string of actions against the petitioner to harass and victimise him only for personal and private reasons." 9. A dispute arose meanwhile between the petitioner and Messrs Rao & Company, Chartered Accountants, Karachi, who complained that they had not been paid the amount of their bill for professional services rendered under orders of the petitioner as SEAP. Rao N. S. Khan, the Head of this. Institute, happened to be Vice-President of the Council of the Institute on 21st of December 1974, when the petitioner was expelled. 10. It has also been submitted that the Institute addressed the Secretary Cabinet and Establishment Division in August 1974, against the petitioner alleging designs to create hatred amongst the ranks of Chartered Accountants and undue interference by SE AP in the affairs of the Institute. This letter was signed by Rao N. S. Khan and Mr. Salim Malik whose names have already found mention in this order.
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11. A show-cause notice was issued to the petitioner on the 20th of August 1974 (Copy Annexure 'B'). This notice required the petitioner to appear personally before the Investigation Committee on 29th of August 1964. It was in respect of acts said to have been committed by Mr. Rahim Jan in 1972 and in February 1973. The first mentioned incident related to the termination of the services of five articled/audit clerks, already referred to above, while the second to the refusal by the petitioner to honour an order requiring him to grant no objection certificates to these delinquents. The notice informed him that section 19 of the Chartered Accountants Ordinance, 1961, Bye-law 99 of the Chartered Accountants Bye-laws, 1961, and Items 24 and 25 of Schedule 'C' of the aforesaid Bye- laws were attracted to the petitioner's case. 12. The petitioner replied to this notice (Annexure 'C') Inter aria, stating that the allegations were very old and suffered from laches 1 he further alleged that malicious and defamatory propaganda had been published against the petitioner in the press for which the Investigation Committee and the ' Institute were responsible wherefore he was of the view that the Committee had lost its impartial character vis-a-vis the petitioner and, therefore, had no right to carry on an investigation against him, He informed them that he had no intention of appearing before this obviously partial investigation Committee. 13. The propaganda carried out in the press is referred to in detail in paragraphs 12, 13, 14 and 15 of the petition. Some of the accusations and counter-accusations are reproduced as under from the newspapers Annexures D, E, F, G and H with the headlines given in them. (Annexure Business Recorder; Thursday August 22, 1974. ?ICAP accused SEAP : plea for end of its control on profession. RECORDER REPORT "The Institute of Chartered Accountants has levelled serious allegations of misuse of power and undue interference against the Securities and Exchange Authority of Pakistan. ' In a representation to the Government of Pakistan submitted earlier this month, the Institute has followed up the allegations with a request to the authorities to transfer the subject of Chartered Accountancy to the main Finance Ministry from the Securities and Exchange Authority of Pakistan . . ... ...... ' The ICAP, in its memorandum to the Cabinet Division, has furnished various reasons for its pleading the proposed transfer most of which happen to be serious charges against the Securities and Exchange Authority of Pakistan. The office of SEAP is held by Rahim Jan, who himself is a Chartered Accountant. ' The memorandum enumerates various instances of "misuse of powers" and "undue interference by the SEAP in the affairs of the Institute", like asking for submissions of proceeding of the Council and its important committees asking for "certain personal information about a particular firm the principal partner of which happened to be a member of the Council and a professional rival of the firm previously owned by Rahim Jan", and asking for the informations relating to the investigation cases processed by the ICAP during the past five years ' The memorandum also cites various instances of "non-cooperation with the Institute", as alleged delay in disbursement of grant-in-aid to the ICAP for expenditure involved in conducting classes and courses and running the "library". (Annexure 'El Business Recorder Karachi; Friday August 23, 1974. Office held by Rahim fan RECORDER REPORT "The present Chairman of the SEAP Rahim Jan, assumed this office in July, 1973. He was appointed Chairman of the Monopoly Control Authority sometime in February, 1974
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' The profession of accountancy was transferred by the Cabinet Division from the Ministry of Finance in February 1974 and the Finance placed it under the S134P on March 13, 1974, ICAP affairs In a mess, officials living beyond means, says Rahsm Jan. RECORDER REPORT "The Chairman of the Securities and Exchange Authority of Pakistan Rahim Jan, feels that the affairs of the Institute of Chartered Accountants are in a mess which could be cleared only after fresh elections to the Council of the Institute. ' The SEAP Chairman said that after assuming office, SEAP, being himself of the same profession he had been very keen to see that the Institute of Chartered Accountants of Pakistan enjoyed an august position in the eyes of trade and industry. . . . . CHARGES "Giving reasons for his dissatisfaction with the management of the Institute Rahim Jan said the ICAP since its establishment, in 1960 had a retired Section Officer of the Central Government as its secretary, who was not a member of the profession. . . . . ' He said he had also heard reports that many boys were given certificates by the institute, who knew nothing about accountancy. ' According to other reports reaching him, he said an official of the ICAP had 2 bunglows and one commercial building in Karachi, one bungalow in Karachi, one bungalow in Lahore and one in Jhang and yet another was under construction in Islamabad. He had been to England several times on his own expenses though he drew a meagre salary." (Annexure 'F) Business Recorder Monday August 26, 1974. ICAP representation against SEAP. "Following is the text of the representation made by the Institute of Chartered Accountants of Pakistan against the Securities and Exchange Authority of Pakistan. Addressed to the Secretary, Cabinet Division, Government of Pakistan, Vaqar Ahmed, it was first reported in Business Recorder in its issue of August 22, 1974. '(1) Undue interference by SEAP in the affairs of the Institute. (2) Cases of non-cooperation with the Institute. (3) Misuse of powers by the SEAP. (4) Cases of victimisation of professional rivals. (5) Position of Mr. Rahim A. Jan vis-a-vis his connection with Messrs Rahim Jan & Co. Chartered Accountants. (6) Attempts for creating disunity among the Rank of Chartered Accountants. (7) Involvement of Mr. Rahim Jan In complaints against breach of professional Ethics : (8) Disrespect to Council and flouting its instructions. ' While we have no ground to disagree with the decision of the Govern, went to transfer the subject from the Minister of Commerce to Ministry of Finance, we in view of the foregoing facts, have strong objection and agitate against placing the institute and its affairs under the SE4P which unlike the past arrangement apart from not being main wing of the Ministry is also headed by a person whose conduct and behaviour has been the subject of severe criticism. We humbly submit that if the things are to be saved from going from bad to worse, urgent remedial measures are absolutely inevitable and we earnestly appeal to you for issue of immediate orders withdrawing the subject of Chartered Accountancy from the SEAP and placing it under the control of the main Finance Ministry." (Annexure 'G') The Leader Saturday, August 31, 1974. ICAP to take action against Rahim Jan. "The Council of the Institute of Chartered Accountants of Pakistan is considering action against Mr. Rahim Jan, a member of the Institute, says a press release of the Institute.
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' The decision was taken at a special meeting of the Council called to consider statement of Mr. Rahim Jan against the Institute published in a section of press. ' In this statement Mr. Rahim Jan had levelled wild charges against the institute describing it as 'ICAP affairs in a mess'. The Council of the . Institute has taken cognizance of this uncalled for statement from a member of the Institute and is considering appropriate action against him. ' The Council is also perturbed on the publication of the text of its confidential communication between ICAP and the Government, and would like to clarify that it is not involved in the publication of its representation in the press and does not encourage such publicity of its affairs, the press release added." (Annexure H) Business Recorder, Sunday September 1, 1974. ICAP to take action against Rahim Jan. RECORDER REPORT "The Institute of Chartered Accountants of Pakistan intends to take action against SE AP Chief Rahim Jan, according to a press release of the ICAP issued by H. A. Dagia, who styles himself as the Director Public Relations, Research and Publications of the Institute." 14. The petitioner has, on the grounds already referred to above, claimed that the action taken against him has been motivated by malice and personal animus of Rao N. S. Khan, Messrs Hamid Chaudhry and Salim Malik in particular and the Council in general. He, therefore, prays that the orders be declared to be without lawful authority, null and void and of no legal effect. 15. In reply, the Institute has submitted that the decision to exclude Mr. Rahim Jan from the partnership of the Institute was taken after a thorough probe into the charges against him by an Investigation Committee which offered him full and adequate opportunity to explain his conduct by appearing personally or through attorney, which Mr. Rahim Ian did not avail of. It has been submitted that by so doing he has disentitled himself to any relief. 16. The resume of facts given above thus brings out the following facts of this case- (I) Mr. A. Hamid Chaudhry and Mr. Majid Chaudhry of the firm Messrs Hamid Chaudhry & Company, Chartered Accountants were persons aggrieved against the petitioner because he had been instrumental in the imposition of a fine of Rs, 1,88,000 on their Company of Chartered Accountants. It has, however, been stated that Mr. A. Hamid Chaudhry though a member of the Investigation Committee, did not participate in the proceedings and in fact withdrew from that (ii) that Rao N. S. Khan had a quarrel with the petitioner with regard to the payment of the fees to the firm that the Institute of Chartered Accountants of Pakistan had been addressing the Central Government against the petitioner making serious allegations and requesting the Government to take away the Institute from his control ; (iv) that Rao N. S. Khan and Mr. Salim Malik were the signatories to this detailed letter making allegations against the partiality of the petitioner and alleging victimization of the Institute by him I (v) that the meeting of the Council which took the decision to expel the petitioner was attended by six members of whom two are those who had been made the subject-matter of the allegations by the petitioner (vi) the Institute is of the view that the Investigation Committee and the Council alone constitute the lawful Tribunal to deal with the case and in the absence of a power to exclude a member from acting under any of these parties, the rule of natural justice would give way to the rule of necessity. 17. The facts narrated above which are admitted by the Institute do not leave any manner of doubt in my mind that it could not with equanimity be asserted that the gentlemen against whom the petitioner had made allegations could be called unbiased and impartial Judges in a cause to which he was a party. I may go a step further and say that the allegations levelled under the signatutures of the two gentlemen noted above on behalf of the Institute were enough to disqualify them from conducting any enquiry against the petitioner.
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' In paragraph 69 at page 83 of Volume I of Halsbury's Laws of England (Fourth Edition) it has been unambiguously laid down "It is unnecessary to establish the presence of actual bias, although the Courts are not precluded from entertaining such an allegation. It is enough to establish a real likelihood that in the circumstances of the case an adjudicator will be biased. Alternatively, it may be sufficient to establish that a reasonable person acquainted with the outward appearance of the situation would have reasonable grounds for suspecting bias." ' There could hardly be a more appropriate, pronouncement on the question. 18. Learned counsel referred to White and others v. Kizych (1) in support of his contention that since he was a member of the Institute he was subject to having his conduct investigated by the Council, he could not agitate against such action having been taken against him. This submission is not supported by this case for the facts are wholly different. In that case, an appeal lay to the Federation against the conclusions reached by the general meeting which, of course, is not the case here. In the present cage the original order has been passed by the final authority and it has not been demonstrated to me that it could be subjected to a challenge In any domestic form. (1) (1951) 2 All E R 435 19. On the facts of that particular case, the learned Judges came to the conclusion that even if all the members of the Committee were biased, they would not be disqualified from taking action against the person over whom they had jurisdiction. I am afraid I cannot see eye to eye with the learned Judges who decided that case and my reasons follow. 20. It was held by the eminent Jurist Lord Denning in Breen v. A. E. (I) "If the rules set up a domestic body and give it a discretion, it is to be implied that the discretion must be exercised fairly. Even though its functions are not judicial or quasi-judicial but only administrative, still it must act fairly and should it not do so the Court can review its decisions." 21. Reference was also made to Maclean v. Workers Won (2). The ratio of that case is that a domestic tribunal is bound to act honestly and in good faith. Can it be said in the present case that despite the strained relations between some members of the Council and the petitioner, and the venomous propaganda which was being carried on, on both sides, good faith could be attributed to the Council. It is, therefore, clear that the duty to act fairly is there even in the case of tribunals which are purely administrative in character. 22. We are, however, concerned with a case of different nature. Here the tribunal was acting "quasi judicially" and not "administratively" for it was held in Reg v. Kent Police Authority (3) by Lord Denning M. R. t "I am clearly of opinion that the decisions leading to compulsory retirement are of a judicial character and must conform to the rules of natural justice." This was a case pertaining to a policeman. By his compulsory retirement he was to lose his job and his salary. In the present case Mr. Rahim Jan is a Chartered Accountant and the Council has by the impugned order removed him from the register of members maintained by it which takes away from him the right to practice as a Chartered Accountant in his capacity as a member of the Institution. Here, therefore, the Council was under a duty to act at least quasi judicially and the dictum of Breen's case will be applicable with re-doubled force. 23. In Law v. Chartered Institute of Patent Agents (4) which arose out of the proceedings against Patent Agent, it was held :- "A person who has a judicial duty to perform, is disqualified from performing it if he has a bias which renders him otherwise than an impartial judge, or if he has so conducted himself in relation to the matters to be investigated, as to lead a reasonable man to suspect that he may have such a bias. I confess I am quite unable to understand the attitude of an association formed for the
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protection of the honour of a profession, which so far from assisting its members to repel an attack (which after all may be an unjust one) allows itself and its resources to be used to conduct the attack, and if possible to secure a conviction." (1) (1971) 2 Q B 175 (2) (1929) All E It 468 (3) (1971) 2 Q B 662 (4) (1919)2 Ch. 276 24. By the rules of a society it was provided that the District Chief Ranger who was the head of the society "shall preside at" certain meetings, including those of certain judicial tribunal constituted by the rules. In Dickson v. Edwards and others (1) it was held by the High Coutt of Australia on appeal from the Supreme Court of Victoria that :- ' But if he is not merely a formal party, but is in substance an individual complaining of an offence against himself, then I think very different considerations apply. Then it becomes his own cause, not in a technical sense, but substantially It is said the District Chief Ranger did not take any part in the proceedings. I am willing to give the fullest credit to that, but I do not think it is material. He was a member of the tribunal that tried the case ; he was present when it was heard, and, applying the ordinary rules, I cannot say that his being there did not vitiate the proceedings altogether?' ' The High Court held that the whole proceedings were invalid by reason of the presence of the District Chief Ranger on the tribunal, that the expulsion was ineffectual, and that the member was entitled to a declaration. This case is on all fours with the one before me. Two of the members of the Council named above did positively have a grievance against the petitioner and their mere presence on the committee was enough to have vitiated the entire proceedings. 25. Coming nearer home, I may refer to Major Muhammad Nawaz v. Pakistan (2) where it was held :- "In this case, an enquiry was held with which the petitioner was not associated no evidence was held by either party ; the Enquiry Officer acted upon the basis of an ex parte preliminary enquiry held by an enemy of the petitioner ; and the findings arrived at by him were placed before the President who had only one side of the picture before him and that too had been painted by a person who had a long history of open enmity towards the petitioner. The President was not even informed that the petitioner had protested against the appointment of the Enquiry Officer whose findings were being placed before him. It was, therefore, a case where there was only one version before the President and that too of biased person. . . . ' When a public authority is directed under a law to make an "enquiry" and the competent authority has to take action on the basis of its report and recommendation it cannot carry out a grotesque caricature of it but, on the contrary, lass to conduct it in a manner which does not violate the basic rules of natural justice. One of these rules, of course, is that there shall be a fair enquiry into the truth of the alleged facts. If it is held by a biased person, the element of fairness is bound to disappear and with it will vanish the validity of the…
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