SOCIETY OF AUDITORS vs COMPTROLLER and AUDITOR GENERAL OF INDIA

Chartered Accountants Study Circle, the petitioners in W.P. Nos. 12631 and 12479 of 1999, as well as the Society of Auditors, the petitioners

in W.P. Nos. 12480 and 12630 of 1999 are societies registered under the Societies Registration Act, bearing Regn. Nos. 68/80 and 6/1932-33,

respectively.

The petitioners in W.P. Nos. 12479 and 12480 of 1999 seek for a writ of declaration to declare the form of application for Multi Put-pose

Empanelment as published in the Journal of Institute of Chartered Accountants, June, 1999, pp. 74-106 issued by the first respondent as ultra vires

the provisions of Chapter VII of the Chartered Accountants Act, 1949, Chapter X of the Chartered Accountants Regulations, 1988, articles 14,

19(1)(g) and 21 of the Constitution insofar as the petitioners are concerned.

The petitioners in W.P. Nos. 12630 and 12631 of 1999 seek a writ of declaration to declare the form of empanelment to the office of the first

respondent therein as published in the Journal of the Institute of Chartered Accountants, June 1999, pp. 65-72 read with notice issued in the

newsletter of the Southern India Regional Council of the Institute of Chartered Accountants of India, Vol. 25, Part 1, 1-7-1999 at page 7, issued

by the first respondent as ullra vires the provisions of theChartered Accountants Act, 1949, Chapter X of the Chartered Accountants Regulations,

1988, articles 14,19(1)(g) and 21 of the Constitution of India insofar as the petitioners are concerned.

The Chartered Accountants Act, 1949 Income Tax Act was enacted to make provisions for the regulation of the profession of Chartered

Accountants and for that purpose to establish an Institute of Chartered Accountants (''the Institute'').

4.1 The following provisions of the Act are relevant to be mentioned

The terms ''Chartered Accountant'', ''Council'', ''Institute'', ''holder of restricted certificate'' and ''Register'' are defined as follows :

Section 2(1)(b):''chartered accountant'' means a person who is a member of the Institute;

Section 2(1)(c) : ''Council'' means the Council of the Institute;

Section 2(1)(c): ''Holder of a restricted certificate'' means a person holding a permanent or temporary restricted certificate granted by a Provincial

Government under the Restricted Certificates Rules, 1932;

Section 2(1)(e): ''Institute'' means the Institute of Chartered Accountants of India constituted under this Act;

Section 2(1)(g) : ''Register'' means the Register of Members maintained under this Act.

4.2 As per section 2(2), a member of the Institute shall be deemed ''to be in practice'', when individually or in partnership with Chartered

Accountants in practice, he, in consideration of remuneration, received or to be received (i) engages himself in the practice of accountancy; or (ii)

offers to perform or performs services involving the auditing or verification of financial transactions, books, accounts or records, or the preparation,

verification or certification of financial accounting and related statements or holds himself out to the public as an accountant; or (iii) renders

professional services or assistance in or about matters of principle or detail relating to accounting procedure or the recording, presentation or

certification of financial facts or data; or (iv) renders such other services as, in the opinion of the Council, are or may be rendered by a Chartered

Accountant in practice: and the words ''to be in practice'' with their grammatical variations and cognate expressions shall be construed accordingly.

4.3 section 3 provides for the incorporation of the Institute.

4.4 section 5 of the Act divides the members of the Institute into two categories, viz., ''associates'' and ''fellows''. An associate is a person whose

name is entered in the Register and who is entitled to use the letters ''A.C.A.'' A fellow is a person who, after becoming an associate member of

the Institute, and has been in continuous practice in India for at least five years, and who is entitled to use the letters ''F.C.A.''

4.5 section 9 of the Act provides for the constitution of the Council of the Institute for the management of the affairs of the Institute and for

discharging the functions assigned to it under the Act.

4.6 section 17(1) enables the Council to constitute from amongst its members the Committees, such as (i) an Executive Committee: (ii) an

Examination Committee; and (iii) a Disciplinary Committee. That apart, u/s 17(2), the Council may also form such other committees for the

purpose of carrying out the provisions of the Act.

4.7 section 19 requires the Council to maintain a Register of Members of the Institute, which register as per section 19(2) shall contain the

particulars of every member of the Institute, such as (i) full name, date of birth, domicile, residential and professional address; (it) the date on which

his name is entered in the Register; (iii) his qualifications, (iv) whether lie holds a certificate of practice; and (v) any other particulars which may be

prescribed. The Council, as per section 19(3), shall publish the list of members of the Institute as on the Ist day of April of each year and shall send

a copy thereof to every member of the Institute. Every member of the Institute shall, on his name being entered in the Register, pay such annual

membership fee as may be prescribed.

4.8 section 21 prescribes the procedure to be followed in inquiries relating to misconduct of members of the Institute in case of any alleged

professional misconduct by any member of the Institute.

4.9 section 22 defines the professional misconduct.

4.10 section 10 empowers the Council to make regulations for the purpose of carrying out the objects of the Act and notify the same in the

Gazette of India. A copy of such regulations shall be sent to each member of the Institute. As per section 30(2), in particular, and without prejudice

to the generality of the foregoing power, such regulations may provide for all or any of the following matters

(a) **

(b) the qualifications for the entry of the name of any person in the Register as a member of the Institute;

(c) **

(d) the conditions under which any foreign qualification may be recognised;

(e) the manner in which and the conditions subject to which applications for entry in the Register may be made;

(f) and (g)(h) the particulars to be entered in the Register;

(i) and (j) **

(k) the regulation and maintenance of the status and standard of professional qualifications of members of the Institute;

to (S)**

(1) any other matter which is required to be or may be prescribed under this Act.

4.11 section 30A empowers the Central Government to direct the Council to make any regulations or to amend or revoke any regulations already

made within a specified period and if the Council fails to comply with such directions, the Central Government may make the regulations or amend

or revoke the regulations made by the Council.

4.12 section 30B provides for laying of the regulations before each House of the Parliament.

4.13 Part 1, Part 11 and Part III of the First Schedule to the Act deal with the professional misconduct in relation to Chartered Accountants who

are in practice, in service and that of the members generally, respectively.

4.14 Part 1 of the Second Schedule to the Act deals with the professional misconduct in relation to Chartered Accountants in practice requiring

action by a High Court of which, the following clauses are relevant to be referred to : ''

(1) discloses information acquired in the course of his professional engagement to any person other than his client without the consent of his client;

or otherwise than as required by, any law for the time being in force;

(2) to (4)**

(5) fails to disclose a material fact known to him which is riot disclosed in a financial statement but disclosure of which is necessary to make the

financial statement not misleading;

(6) fails to report a material mis-statement known to him to appear in a financial statement with which he is concerned in a professional capacity;

(7) is grossly negligent in the conduct of his professional duties;

(8) fails to obtain sufficient information to warrant the expression of ail opinion or his expressions are or sufficiently material to negate the

expression of an opinion;

Clause (i) of Part II of the Second Schedule deals with the professional misconduct in relation to members of the Institute generally requiring action

by a High Court, who contravenes any of the provisions of the Act or the regulations made thereunder.

The Council, by exercising its powers u/s 30, framed the Chartered Accountants Regulations, 1988 (Regulations) for the purpose of carrying

out the objects set out in the Act and notified the same in the Gazette. The following regulations are relevant to be referred :

5.1 Regulation 3 provides for the maintenance of the Register of members as per Form No. ''1'' in Schedule A, which register shall contain the

particulars such as Membership Number; R.A. Enrolment No.: Name in full; Date of Birth; Domicile; Residential address; Professional address;

Date of entry in the Register; qualifications; Whether holding a certificate of practice; Date of admission as Fellow; Whether practising

independently, in partnership or employed in a firm of Chartered Accountants in practice; Whether holding a salaried employment, if not in

practice; Change of address, if any and Remarks.

5.2 Regulation 5(1)(b) provides that an associate who desires to be admitted as fellow shall submit an application, as prescribed in Form No. 7 in

Schedule A, by furnishing the particulars such as name; date of birth; qualification; the name of the Chartered Accountant(s) in practice or the firm

of Chartered Accountants in practice under whom the applicant served as an articled Clerk/Audit Clerk; Articles/Audit Registration No.; Details of

practical training; period of residence in India, etc. In case of an associate to be registered as a fellow, he shall comply with the particulars given in

Form ''Y in Schedule A, such as, membership number and date of admission as Associate; Professional address; whether practising independently

or as a partner of a firm of practising members of the Institute, etc.

5.3 Regulation 185 enables the Council, while publishing the list of members u/s 19(3), to distinguish between the associates and fellows in practice

and between the associates and fellows not in practice.

5.4 Regulation 186 authorises the Council, for the publication of list of members, to call for such information as it considers relevant from the

members and it may also call for additional information as may be required for statistical purposes.

5.5 While Regulation 187 provides that every member in practice shall have a professional address in India in his own charge or in charge of

another member. Regulation 188 provides that all notices required by the Act or the Regulations to be given to the members shall be forwarded by

post to such professional address.

5.6 Regulation 190A bars a Chartered Accountant in practice riot to engage in any other business or occupation other than the profession of

accountancy, except with the permission granted in accordance with a resolution of the Council.

5.7 Regulation 191, however, permits the Chartered Accountants in practice to accept part-time employment such as a liquidator. trustee.

executor, administrator, arbitrator, receiver, adviser or representative for costing, financial or taxation matter, or may take up an appointment that

may be made by the Central Government or a State Government or a court of law or any other legal authority or may act as a secretary in his

professional capacity, provided his employment is not on a salary-cum full time basis. In pursuance of Regulation 191, the Council resolved to

grant general permission to the members with respect to certain part time assignments which are enumerated in Appendix No. 1 to the Regulations.

It is also relevant to refer to sections 29, 30(1), 30(1A) and 31 of the Banking Regulation Act, 1949, which are intended to consolidate the law

relating to banking.

6.1 section 29 contemplates that at the expiration of the calendar year or at the expiration of a period of twelve months, every banking company

whether incorporated in India in respect of business transacted by it and every banking company incorporated outside India in respect of business

transacted business through its branches in India, shall prepare a balance sheet and profit and loss account as on the last working day of the year

or the period, as the case may be.

6.2 section 30(1) of the Banking Regulation Act, 1949, contemplates that the balance sheet and profit and loss accounts prepared in accordance

with section 29 of the Banking Regulation Act, shall be audited by a person duly qualified under any law for the time being in force. Section 30(1

A) of the Banking Regulation Act states that notwithstanding anything contained in any law for the time being in force or in any contract to the

contrary every banking company shall before appointing or re-appointing or removing any auditor or auditors obtain the prior approval of the RBI.

6.3 section 31 of the Banking Regulation Act contemplates that the balance sheet and profit and loss accounts, as referred to in section 29 along

with the report of the auditors, shall be furnished as returns to the RBI within three months from the end of the period to which they refer and the

RBI may extend the said period of three months by a further period not exceeding three months.

6.4 A bare reading of the provisions of sections 29,30(1),30(1 A) and 31 of the Banking Regulation Act makes it clear that the balance sheet and

profit and loss accounts of all banks are subject to scrutiny of the RBI and the same shall be audited by the qualified auditors appointed by the

Reserve bank of India.

Accordingly, at the request of the RBI, the first respondent Institute, for the last fifteen '' years, used to prepare a panel of qualified auditors for

auditing the accounts of the nationalised banks and rural banks and submit such panel every year to the RBI, who, on receipt of such panel,

scrutinise the same and allot audit work of the nationalised banks and rural banks to the qualified auditors as contemplated under sections 29,

30(1),30(1 A) and 31.

It is, therefore, clear that the Register maintained by the Institute u/s 19(1), read with Regulation 3 of the Regulations, the list of Members

published by the Institute u/s 19(3) of the Act read with Regulations 185 and 186 and the empanelment of Chartered Accountants for the purpose

of sections 29, 30(1), 30(1A) and 31 of the Banking Regulation Act are all quite distinct from each other.

It appears that the President of the Institute received a letter dated 25-9-1998 from the RBI, enclosing a representation dated 19-8-1999 from

one Badyala & Co., a firm of Chartered Accountants, explaining the necessity for elimination of bogus firms from the empanelment.

Taking note of the above letter of the RBI alleging mushroom growth of bogus audit firms, the Institute, by exercising their powers under .

Section 17(2) of the Act, constituted a Committee called Professional Development Committee, the second respondent in W.P. Nos. 12479 and

12480 of 1999, to suggest appropriate recommendations to eliminate ail * y malpractice by any members, to weed out the mushroom growth of

bogus firms and to cull out the authenticated and correct information from the Chartered Accountants.

The Committee, after taking note of the fact that in recent times, apart from the banking sector, several other authorities have shown interest in

obtaining panel of auditors from the Institute for carrying out their audit work and other assignments, and the necessity to check the mushroom

growth of bogus audit firms, to arrest malpractice in furnishing false and incorrect particulars by the audit firms and to prepare a panel of genuine

and bona fide firms, in the broader interest of the society at large, decided to prepare a multipurpose empanelment, by way of a composite data

base information, to satisfy the requirements of the R131 and other authorities to facilitate the allotment of audit and other diversified assignments

and, accordingly, recommended a comprehensive application form requiring, all relevant and material details and documents for the multipurpose

empanelment.

The Council, in their meeting held in April and May 1999, approved the recommendations of the second respondent Committee, and invited

the members to apply in a composite format for the purpose of empanelment with all relevant details and documents required therein. The

comprehensive application format was, thus, published in the Journal of the Chartered Accountants of India, June, 1999, and notified the last date

as 31-41999, notifying that no extension of time beyond the aforesaid time-limit would be granted.

The application form consists of five parts.

13.1 Part I contains the basic information such as Code Number, Name of the Concern with status, Firm Registration Number, PAN/GIR No.,

Service-tax Registration Number, Address, Telephone Number, E-mail, etc.

13.2 Part II deals with the relevant information for the purpose of empanelment of auditors for different branches of public sector undertakings,

banks and statutory and central branches of regional and rural banks.

13.3 Part III deals with the information for updating the database of the Institute.

13.4 Part IV enumerates the list of documents to be attached along with the application Form, viz.,

(i) a copy of the latest financial statement of the partnership firm or of the sole proprietary concern or individual, as the case may be;

(ii) a copy of the statement of income forming part of the latest income tax return of the firm /proprietor/individual along with a copy of

acknowledgement;

(iii) a copy of the latest available assessment order for the firm/ proprietor/ individual;

(iv) a copy of the statement of income forming part of the latest income tax return of each of the partners along with a copy of acknowledgement;

(v) a copy of the latest available assessment order for each of the partners; and

(vi) a copy of the partnership deed.

13.5 Part V provides for a declaration to be furnished by the applicant.

That apart, the Committee also enlisted nine discrepancies that were noticed while processing the applications for empanelment during the

previous years, putting the members on notice that the applications would be rejected on account of these discrepancies; viz.

(i) Applications that were not signed in the manner required;

(ii) Applications made by the partners /proprietors on behalf of more than one firm;

(iii) Applications containing incomplete information relating to their establishment /membership number and year of enrolment not given, complete

details of partners /proprietor of the concern not filled in. interest in other partnership firms/sole proprietary concern/ individual practice not

disclosed, applications not in the prescribed format. etc.:

(iv) Applications that were not legible;

(v) Applications that were made by the partners of the firm in their individual names/ proprietary concern''s name in spite of clear instructions that

no partner of a concern shall apply in his individual or proprietary name when he is a partner in a firm and that applications in such cases shall be in

the name of partnership firm only;

(vi) Multiple applications - Different applications made by the members of the same firm and later on requested for withdrawal of one or more of

the same;

(vii) Applications that were received after the last date;

(viii) Applications received from the members whose main occupation was not practice; and

(ix) Applications with incorrect information.

The applicants are also required to take note of the following points carefully, while filling up the form, the relevant of which are referred to as

follows:

(i) to (iv) **

(v) The members/firm should give the particulars in the form on the basis of the constitution of the firm and the staff position as on 1-41999. If the

names of the erstwhile partners are shown, such applications are liable to be rejected.

(vi) In case of the applications by members practising individually, the reference to the proprietor/ concern should be construed as ref erring to

such individual members and all the relevant details should be furnished accordingly.

(vii) The expression ''experience'' mentioned in the form refers to the total experience of the partner/ proprietor in rendering the specific type of

service, also includes such experience gained by him/her while associated with other concerns as partners or proprietor or while practising as an

individual.

(viii) Application should be sent in duplicate under registered post with acknowledgement due or by hand delivery or by courier. In case no

information is to be provided against any column, they should indicate ''NIL'' or ''Not Applicable'' against that column. Under no circumstances

should any column in the application form be left blank.

(ix) Application must be signed by the individual or by the proprietor in the case of a sole proprietary concern and by all the partners of the firm in

the case of a partnership firm.

(x) If any member is a common member or partner in more than one firm, it must be ensured that the application for empanelment should be made

in respect of only one firm in which the member wants to be empanelled. If the application is sent in respect of more than one firm where any one

of the members is common, the applications for all the firms are liable to be rejected.

(xi) * *

(xii) No partner of a firm shall apply in his individual name/proprietary firm''s name when he/ they is/are partner(s) in a firm. The application in such

cases shall be in the name of the partnership firm only. However, if a member is not a partner in any partnership firm, the application may be made

by the sole proprietary firm or in his individual name if his main occupation is professional practice.

(xiii) Only a member of the Institute, whose main occupation has been treated as the practice of the profession of accountancy, is entitled to apply.

Similarly, a firm can apply only if it has at least one partner whose main occupation has been treated as the practice of the profession of

accountancy. Members who are in whole-time employment in firms of Chartered Accountants or with a practising Chartered Accountant are not

entitled to apply.

(xiv) **

(xv) The member/firm should ensure to quote the correct Unique Code No. In case of any mistake in the Unique Code No., the application is

liable to rejection.

(xvi) No request for any change in the particulars supplied in the form would be entertained.

(xvii) Mere submission of the application form to the Institute does not ensure that the name of the applicant will be placed on the panel. The

Institute reserves the right to use the information received from the members for any purpose in the interest of the profession, in addition to

submitting the same to appropriate authorities. The Institute also reserves the right to call for any further information or explanations from the

member(s) concerned to verify the correctness of the particulars furnished in the application form. The allotment of audits or other assignments

would be done by the authorities on the basis of multivariate criteria which are confidential and the Institute does not interfere in the allotment of the

assignments. Members are advised not to correspond directly with the authorities on matters relating to empanelment.

That apart, the application form contains Annexures A to R to be enclosed therewith. Of the said Annexures, the following are relevant to be

referred to :

16.1 Annexure A deals with the details of the partners and their respective main occupation as well as number of hours devoted for audit work per

week, etc.

16.2 Annexure B deals with the details of paid Chartered Accountant employees in the concern. The applicant should furnish information such as

name, membership number, year of enrolment, date of beginning of continuous employment in the concern, whether ACA or FCA, are they in

service on full-time basis or part-time basis, usual place of residence and signature. The signatures should correspond to those in the Institute''s

records.

16.3 Annexure G calls for the details of indebtedness to Public Sector Banks/Regional Rural Banks (for amounts exceeding Rs. 1,000, including

outstandings in respect of credit cards).

16.4 Annexure H deals with the details of Directorship in Public Sector Banks and Regional Rural Banks.

16.5 Annexure J deals with the particulars of professionals employed in the firm other than the Chartered Accountants, who may be classified as

per the respective areas of specialisation, e.g., cost accountants, lawyers, engineers, etc.

16.6 Annexure K calls for the details relating to previous experience of the applicant concern and partners /proprietor (only those who have signed

the Audit Report /Conducted the Audit) as statutory auditor of companies other than the Government Companies and Banks and Insurance

Companies and such particulars should be only in respect of assignments handled during the preceding eight years.

16.7 Annexure L deals with the previous experience of the concern and Partners /Proprietor (only those who have signed the Audit Report/ 1

Conducted the Audit as statutory Auditor of Head/Central Office(s) or Branches of Insurance Companies and such particulars should be given

only in respect of assignments handled during the preceding eight years.

16.8 Annexure ''A'' calls for the details relating to the experience as Concurrent/Internal Auditor of Head/Central Office/Branches of Insurance

Companies of the Concern and Partners/ Proprietor (only those who have signed the Audit Report/ Conducted the Audit) and such particulars

should be given only in respect of assignments handled during the preceding three years.

16.9 Annexure N deals with the previous experience in rendering professional services to Government Companies and the details of the partners/

proprietors who have signed the audit report/rendered the relevant service.

The applicants are further required to declare that the information furnished by them in Annexures (A) to (R) is complete and correct as on 1-

4-1999 and that no separate application for any of the branches or associate concern having common partner or proprietor had been made and

that they have not infringed any of the terms and conditions prescribed therein; and that their applications are liable to be rejected in case of any

infringement of the terms and conditions. If the statement made or information furnished are not correct, it would render them liable for disciplinary

action under the Act and the Regulations framed thereunder; they should not accept any audit or any other assignment allotted on the basis of the

information furnished if the application form is accepted but the firm is not in existence at the time of audit; and that the signatures should

correspond to those in the Institute''s records.

Similarly, the Comptroller and Auditor General of India (''C&AG), the first respondent in W.P. Nos. 12630 and 12631 of 1999, a

constitutional authority appointed by the President at India, by a warrant issued under article 148 of the Constitution of India, while discharging his

duties under article 149 of the Constitution, read with section 619(3) of the Companies Act, is empowered to appoint auditors for auditing the

accounts of the Government Companies and Public Sector Undertakings and also empowered to direct the manner in which the accounts of such

Government Companies and Public Sector Undertakings shall be audited by the auditors so appointed by the C&AG.

The C&AG, accordingly, invited applications in the prescribed format, from the Chartered Accountants for the purpose of empanelment of

auditors for allotment of audit work of the Government Companies and Public Sector Undertakings, as required u/s 619(3) and published the

application form at pages 65 to 72 in the June 1999 issue of Journal of the Institute of Chartered Accountants of India, requiring the chartered

accountants to furnish similar details and documents as required by the Institute.

The last date for submitting the filled in application forms to the C&AG was 7th July, 1999 and the applications should be in the prescribed

format. If the application forms are not supported with specific documentary, evidence, they are liable to be rejected summarily and no

correspondence will be entertained in that regard. Firms already empanelled must also send their particulars in the prescribed format, enclosing the

attested true copies of the certificates as well as other documents required under the application form. The firms which are already empanelled, but

do not send their particulars afresh are liable to be suspended from the panel and they are not eligible to be empanelled afresh and, consequently,

the audits, if any, allotted to the existing firms which are under the panel but which do not fulfil an '' v of the criteria for the empanelment would be

withdrawn.

20.1 The notification also prescribed the eligibility criteria for empanelment in Special Regions, such as, Jammu & Kashmir, Orissa, North-Eastern

States, Sikkim, Andaman Nicobar Islands and Lakshadweep Island, as well as other regions anywhere in the country. The eligibility criteria are as

follows :

Special Regions:

(i) Sole Proprietorship Firms- Sole proprietorship firm whose proprietor is an FCA and is engaged full-time with the firm.

(ii) Partnership Firms - Partnership firms ''with at least one full-time partner who should be an FCA.

Anywhere in the country:

Partnership firms with at least two full-time partners, one of whom should be an FCA.

OR

Partnership firms with at least two FCA partners (of whom at least one should be a full-time partner based in India) and 20 full-time Chartered

Accountant employees in India.

20.2 The following guidelines have been framed for allotment of audit

(a) The ranking of the firms would be decided, inter alia, on the basis of only full-time partners in case of partnership firms or full time Sole

Proprietors in case of Sole Proprietorship firms.

(b) The status of partners/CA employees of a firm will be reckoned as on 1-4-1999.

(c) The allotment of audits of public sector undertakings would be done according to the ranking of the firm which will be based on the aggregate

point-score. Points have been given for the experience of the firm; for the partners of the firm; for the long association of the partners; and for the

employees of the firm.

(d) The selection of statutory auditors for the audit of major public sector undertakings falling in sectors specified in the Annexure to the

Application Form would be done through a judgmental process taking into consideration the firm''s seniority, number of partners/ number of

Chartered Accountant employees in the firm and the experience of the firm in the requisite areas as given in the Annexure-

20.3 The application form also clearly states that in case if two or more firms have partners in common only, one of the firms would be considered

for empanelment. While determining the ranking of the empanelled firm no point will be given on account of partners shared with other (sister)

firms. The application also provides columns to mention the details of the technically qualified employees, viz., Engineers, Cost Accountants,

Lawyers, Valuers, Surveyors and also the non-technical staff and their qualifications. The applicants should also give the particulars indicating the

name of the company audited, whether it is a public limited company or a private limited company, the turnover of the company, nature of

business, years of audit, etc.

Thereafter, in the letter dated 1-7-1999 issued in the Southern India Regional Council of (lie Institute of Chartered Accountants, Vol. 25,

published in July 1999, the C & AG required the attested true copies of the following documents :

(a) Latest Income Tax returns of the firm as well as of the partners,

(b) Latest partnership deed, and

(c) Latest financial statement of the firm along with its schedules.

The petitioners complain that the details and the documents required to be furnished as per the comprehensive application forms, notified by,

the Institute and C & AG referred to above, have no nexus to the object of preparing a multipurpose empanelment; violate articles 14, 19(1)(g)

and 21 of the Constitution of India and also are ultra vires the provisions of the Act as well as Chapter X of the Regulations, and hence, the above

writ petitions.

The grievance of the petitioners, legal contentions and the reliefs sought for in the above writ petitions are identical in nature, and, therefore, all

the above writ petitions are heard together.

Mr. Arvind P. Datar, the learned counsel for the petitioner, contends that certain information sought for and the documents to be enclosed with

the application form are more personal in nature and they are not in any way either related or relevant to the professional competency required for

the preparation of the panel, nor for any statistical purpose. much less, to update the same; these information and documents cannot be the

yardstick to assess the professional proficiency or competency of the petitioners or their technical ability: the information and documents hitherto

called for by the Institute for the purpose of preparation of the panel themselves are self-sufficient; and existing system of preparation of panel was

going on smoothly for all these years without any, grievance or complaint from any quarter.

24.1 Mr. Arvind P. Datar contends that the information and documents already furnished by the members for the maintenance of the Register as

required u/s 19(1), read with section 2(1)(g), of the Act as well as Regulation 3 read with Form ''I'' in Schedule A to the Regulations and the

information and details furnished in the List of Members prepared u/s 19(3) of the Act, read with Regulations 185 and 186(1) themselves are self-

sufficient for the purpose of empanel ent. Assuming the council proposes to prescribe any other particulars in order to maintain the status and

standard of the professional qualification of the members of the Institute as required u/s 30(2)(c) or for the purpose of maintaining the said register

of the members of the Institute u/s 19(1), read with sections 19(2)(c) and 30(2)(b), (C~, (e) and (h) or for publishing such list of members u/s

19(3) of the Act or for any other matter to achieve the object of the Act as per section 30(2)~ 1) of the Act, the same shall be given effect to only

by framing appropriate Regulation, getting the approval of the Central Government as per sect ion 30(3), notifying the same in the Gazette of India

by exercising powers u/s 30(1) and tabling the same as per section 3013. Otherwise, the prescription of such particulars would suffer from want of

authority of law.

24.2 According to Mr. Arvind P. Datar, there is no necessity to insist for the details and production of the documents relating to the Income Tax

returns of the firm as well as the personal income of the individual partners of the firm and that of the companies audited with their respective

networth/turnover, Income Tax returns and assessment orders, except as provided u/s 138 of the Act; the requirement to furnish the Income Tax

returns and assessment orders of the audit firms and the partners as well are highly arbitrary and irrational; and similarly there is no requirement for

furnishing the particulars relating to the indebtedness and the credit card details of the individual partners of the firm, professionals employed in the

firm such as Cost Accountants, Engineers, Lawyers, etc., and other employees of the firm.

24.3 Mr. Arvind P. Datar further contends that except a bald allegation, no material is placed before this court as to the alleged malpractice of

furnishing false or incorrect particulars by the audit firms for the empanelment; nor any details are available as to the alleged mushroom growth of

bogus firms or as to the misuse of their office by filing wrong declaration for the purpose of empanelment. Placing reliance on the decisions in

Laxmi Khandsari and Others Vs. State of U.P. and Others, ; Municipal Corporation of the City of Ahmedabad and Others Vs. Jan Mohammed

Usmanbhai and Another, ; and Indian Council of Legal Aid and Advice, etc. etc. Vs. Bar Council of India and another, , it is contended that the

onus of proving to the satisfaction of the court that the restriction imposed is reasonable, lies upon the State. However, it is contended that the

respondents have not discharged their onus to establish the mischief in the existing system.

24.4 Mr. Arvind P. Datar complains that rendering those who do not furnish such information and documents contemplated under the impugned

applications as ineligible for empanelment is punitive, unreasonable, arbitrary and violates articles 14 and 19(1)(g) of the Constitution as they

would, consequently, be deprived of the opportunity of being considered for appointment as auditors of the Nationalised Banks and Regional

Rural Banks under the control of the RBI as well as that of public sector undertakings under the control of C&AG.

24.5 Mr. Arvind P. Datar contends that the refusal to empanel the members who do not comply with the requirements under the impugned

application forms and the consequential classification created among the members whose names are found in the Register prepared u/s 19(1), read

with section 2(1)(g) as well as Regulation 3 read with Form l'' in Schedule A to the Regulations and those names found in the list of Members

prepared u/s 19(3), read with regulations 185 and 186(1 ) can not be said to be reasonable under article 19(6) of the Constitution inasmuch as the

respondents have not discharged their onus to prove that the information and documents are relevant for the multi-purpose empanelment and in this

regard. Mr. Arvind P. Datar has relied on the decisions in Laxmi Khandsaris case (supra) and Bar Council of India''s case (supra).

24.6 Even though the respondents would contend that the above particulars and documents called for from the members would be kept secret, the

respondents have also reserved their right to use such information and documents sought to be furnished by the petitioners for any other purpose

they deem fit, which is arbitrary and unreasonable and such reservation is punitive and violates the principles of natural justice.

24.7 Mr. Arvind P. Datar, while elaborating his arguments, further contends that the particulars relating to professionals employed in the firm,

previous experience as statutory, auditor of companies other than the Government Companies and Banks and Insurance Companies. Partners/

Proprietors those who have signed the audit report/ conducted the audit, previous experience as statutory auditor of Head/Central Office(s) or

branches of Insurance Companies, Partners/Proprietor those who have signed the audit report/ conducted the audit, experience as Concurrent/

Internal Auditor of Head/Central Office/Branches of Insurance Companies and the details of partners /proprietor who have signed the audit report

/conducted the audit, previous experience in rendering professional services to Government Companies and the details of partners/ proprietor who

signed the audit report /rendered the relevant service, and previous experience in rendering professional services to Co-operative Institutions

including co-operative banks and the details relating to the concern and partners /proprietor who signed the audit report/rendered the relevant

services vide Annexures J, K, L, M, N and 0 have no relevance 1 o the object of preparation of panel. The creation of a category of foreign firms

will obviously discriminate against Indian firms not fulfilling the foreign criteria. Even assuming that the object and purpose behind insisting for

furnishing such information and documents are noble and laudable, the Institute have no legal sanctity or authority to insist on the same for the

purpose of empanelment, without following the procedure known to law. Placing reliance on State of Uttar Pradesh Vs. Singhara Singh and

Others, and State of U.P v. Kishori Lal : [1980]2SCR724 , it is contended that since there is no law under which the Institute could ask for these

information and documents from the applicants, the applicants cannot be compelled to furnish such particulars and documents by informing them

that unless such information and documents are furnished, their applications will not be considered for empanelment. It is further contended that the

Institute cannot seek such particulars through the impugned application form indirectly, which the Institute cannot seek directly under Form -A of

Schedule ''V.

24.8 Mr. Arvind P. Datar contends that the Act itself intends to regulate the profession of Chartered Accountants, and, therefore, these particulars

and documents are not at all relevant for assessing the professional and technical competency of the applicants for the purpose of empanelment.

The details relating to personal financial status of the members by any stretch of imagination cannot be construed as a legitimate yardstick to assess

the professional and technical competency of the members not such criteria can be said to weigh the status and standard of professional

qualification of members of the Institute.

24.9 Mr. Arvind P. Datar further contends that even assuming that the Institute requires these particulars and documents in order to regulate the

profession of Chartered Accountants and to maintain the standard of profession, the Institute can call for these particulars and documents only by

framing appropriate regulation in that regard, approving the same by the Central Government as per section 30(3), tabling the same before each

House of Parliament as per section 30B and notifying the same in the Gazette of India as per sections 30(1) and 30B, but not by enlarging the

powers conferred under Regulation 186(2). The ratio laid down in Singhara Singh''s case (supra) has been relied on in this regard.

24.10 Mr. Arvind P. Datar further contends that since the Act and Regulations itself provide for taking appropriate disciplinary action against the

erring members who furnish false and incorrect information for preparing the list u/s 19(3), read with Regulations 185 and 186(1), there is no

necessity to call for these information and documents through the impugned application forms, from all the Chartered Accountants in the country.

That apart, in the absence of any guidelines as to how these particulars are to be used for the purpose of empanelment, the requirement of such

particulars by the Institute is arbitrary and unreasonable.

24.11 Referring to the decisions in Mrs. Neera Mathur Vs. Life Insurance Corporation of India and another, and R. Rajagopal v. State of Tamil

Nadu 1994 (6) SCC 632, wherein the Apex court held that the right of privacy is implicit in right to life and liberty guaranteed under article 21 of

the Constitution, it is contended that the compulsion imposed by the respondents on the petitioners to produce such particulars and documents

relating to Income Tax returns, the assessment orders and credit cards under Annexures G, J, K, M, N and 0 to the impugned application forms is

not only irrelevant, irrational, arbitrary, unreasonable and suffers from want of nexus to the purpose of empanelment, but also infringes the right of

privacy of individual partners protected under article 21 of the Constitution. Placing reliance on the decision in Meera Mathur''s case (supra), it is

contended that even though certain personal details are required for administrative reasons, such details should not be insisted upon if they are

embarrassing though not humiliating; and, therefore. the details regarding the personal Income Tax return, Income Tax assessment orders and

credit cards of the members should not be insisted as it would otherwise offend article 21 of the Constitution.

24.12 It is, therefore, contended that the decision of the Institute to call for such information and documents is arbitrary and unreasonable, violating

articles 14, 19(1)(g) and 21 of the Constitution of India.

Per contra, Mr. N.R. Chandran, the learned senior counsel appearing for the Institute, at the outset, raised a preliminary objection that the

above writ petitions are not maintainable for the following reasons:

(i) Firstly, the decision of the Professional Development Committee, as approved by the Council of the Institute, requiring the members to furnish

the details and documents as per the impugned application form for the multipurpose empanelment as well as such decision of the C&AG are

policy decisions of statutory/ constitutional expert bodies respectively, and such policy decisions cannot be challenged by, seeking a writ of

declaration, and in such a case, the only proper remedy for the petitioners is to seek a writ of certiorari. In this regard, Mr. N.R. Chandran,

learned senior counsel, cited the decision in Prabodh Verma and Others Vs. State of Uttar Pradesh and Others, .

(ii) Secondly, it is contended that many of the members of the petitioner societies have already submitted their application forms, furnishing the

required particulars and documents and, therefore, the petitioners have no locus standi to maintain the above writ petitions.

25.1 Assuming the above writ petitions are maintainable, Mr. R.K Chandran, the learned senior counsel, contends that the RBI is under a statutory

obligation to appoint auditors to audit the accounts of the Nationalised Banks and Regional Rural Banks, as per sections 29,30 and 31 of the

Banking Regulations Act. Similarly, as per section 619(2) of the Companies Act, C&AG has an obligation to appoint the auditors to the public

sector undertakings. Mr. N.R. Chandran, learned senior counsel, points out that these appointments of auditors should satisfy section 226 of the

Companies Act. It is optional for the members to apply for empanelment and the same is not compulsory, or mandatory as the empanelment is

totally different from the Register maintained by the Institute u/s 19(1), read with section 2(g) as well as Regulation 3 read with Form 1 in the

Schedule A to the Regulations and the list prepared u/s 19(3), read with Regulations 185 and 186(1).

25.2 According to Mr. N.R. Chandran, the learned senior counsel, the empanelment of auditors is, thus, prepared by the Institute and C&AG of

the past 15 years. However, by experience, the Institute has come across certain failures on the part of the members in disclosing certain material

facts known to them, which are necessary to make their financial statements not misleading; failure to report the material mis-statement known to

them to appear in financial statement with which they are concerned in professional capacity; failure to notify attention to any material departure

from the generally accepted procedure of audit application to the circumstances, etc., and other discrepancies like filing multiple applications by

firms having common partners, filing applications by members whose main occupation is not practising, etc. Taking note of these failures and

discrepancies, the Council, by exercising power u/s 17(2) appointed an expert body, viz., Professional Development Committee, the second

respondent in W.P. Nos. 12479 and 12480 of 1999, to go into the above failures and discrepancies and provide appropriate recommendations

for preparing a multipurpose empanelment of the Chartered Accountants as per the requirements of the statutory authorities and in accordance

with the provisions of the Act.

25.3 Mr. N.R. Chandran, the learned senior counsel, explains that these particulars and supporting documents are required to check certain

alleged malpractices that were brought to the notice of the Professional Development Committee.

25.4 Mr, N.R. Chandran, the learned senior counsel, contends that since the requirement of these particulars and documents does not amount to a

new regulation, there is no reason to test the same by the doctrine of mischief.

25.5 Mr. N.R. Chandran, the learned senior counsel, further contends that these particulars are, though diverse in nature, relevant to assess the

professional competency and experience of the Chartered Accountants.

25.6 Placing reliance on the ratio laid down in Somanna v. Subba Rao AIR 1958 AP 2000 that the Income Tax returns and assessment orders are

public documents, Mr. N.R. Chandran, the learned senior counsel, contends that the requirement to produce such Income Tax returns and

assessment orders will not, in any way, offend the personal rights and privacy of the petitioners inasmuch they are intended to avoid multiple

applications and to facilitate equal distribution of work to more members, nor section 138 prohibits such disclosure. It is, therefore, clear that the

impugned requirements have a direct nexus to the object of preparation of multipurpose empanelment, and, hence, it cannot be complained that the

requirement of these details and documents suffers from want of flexus.

25.7 Mr. N.R. Chandran, the learned senior counsel, further contends that disciplinary powers available under the Act and Regulations cannot be

a bar for requiring the members to furnish the above details and documents to prepare a fool proof panel of auditors in order to achieve the object

of the Act; the requirements of such details and documents, therefore, would not amount to a professional misconduct, nor a violation of article 14

of the Constitution and the reservation of rights to use the information received from the members for any purpose also cannot be complained of as

punitive and arbitrary.

25.8 Mr. N.R. Chandran, the learned senior counsel, contends that as the petitioners have no right for appointment merely because they were

empanelled as notified by the institute, there is no violation of article 19(1)(g) of the Constitution of India, and, consequently, there is no necessity

for the respondents to prove that these details and documents required under the impugned applications are reasonable nor to prove that the

refusal to empanel the members for want of such details and documents amounts to a reasonable restriction, within the meaning of article 19(6) of

the Constitution. Hence, the ratio laid down in Laxmi Khandsari''s case (supra), Ahmedabad Municipal Corpn.''s case (supra) and Bar Council of

India''s case (supra) is not applicable to the facts and circumstances of the present case.

25.9 Mr. N.R. Chandran, the learned senior counsel, further contends that the question of providing an opportunity before rejecting the application

for empanelment for want of details and documents does not arise as such a decision is only ministerial in nature, but not a quasi-judicial decision

inasmuch as even the inclusion of the members in the panel itself does not confer any right f or allotment of audit to the petitioner, and as such,

article 19(1)(g) is not attracted.

25.10 Placing reliance on the decisions of the Apex court in Mohammad Shujat Ali and Others Vs. Union of India (UOI) and Others, as followed

in Chandra Gupta, I.F.S. Vs. The Secretary, Govt. of India, Ministry of Environment and Forests and others, , Mr. N.R. Chandran, the learned

senior counsel, contends that the right to be considered for promotion is a condition of service, but the mere chance of promotion is not a condition

of service. Quoting the above ratio, Mr. N.R. Chandran, learned senior counsel, argues that the petitioners get only a chance of allotment of work

by being empanelled, and, therefore, such chance of allotment of work by being on the panel or denial of work by not being on the panel, in any

way, will not attract article 19(1)(g) of the Constitution, as the right to practise is not in any way curtailed and the mere inconvenience in the

profession cannot be a ground for widening the scope of article 19(1)(g).

25.11 Again, relying on the decision in Dr. Haniraj L. Chulani Vs. Bar Council of Maharashtra and Goa, , Mr. N.R. Chandran, the learned senior

counsel, contends that the impugned proposal of carving out and shortlisting the Chartered Accountants in the light of the details and documents

cannot be held to be arbitrary, attracting articles 14 and 19(1)(g) of the Constitution nor it could be contended that the Institute and C&AG

proposed to act with unguided powers in rejecting the applications for want of such details and documents.

25.12 According to Mr. N.R. Chandran, the learned senior counsel, the contention that the requirement of details and documents violates the right

of privacy protected under article 21 of the Constitution is misconceived and the decisions in Meera Mathur''s case (supra) and R. Rajagopals

case (supra), relied upon on behalf of the petitioners in this regard, are inappropriate and do not fit in the facts -and circumstances of the case.

25.13 Placing reliance on the decisions in S. Narayan Iyer Vs. The Union of India (UOI) and Another, and Krishnan Kakkanth Vs. Government

of Kerala and ohters, Mr. N.R. Chandran, the learned senior counsel, contends that the impugned decision of the statutory and constitutional

authorities, viz., the Institute and C&AG respectively, being based on the recommendations of the expert committee, cannot be challenged by the

petitioners by way of judicial review. Again, placing reliance on the decisions in Shyam Babu Verma and Others Vs. Union of India (UOI) and

Others, , Tata Iron and Steel Co. Ltd. etc. Vs. Union of India and others and Industrial Development Corporation of Orissa Ltd., , Farida

Shatikath v. Unit Trust of India 1994 CTC 736, Punjab Communications Ltd. Vs. Union of India and Others, and E. Chandravadanam and 4

others Vs. The State of Tamil Nadu and 2 others, , Mr. N.R. Chandran, the learned senior counsel, contends that the requirement of the impugned

details and the documents are based on the policy decisions of the statutory and constitutional authorities, born out of necessity and relevancy

cannot be challenged under judicial review as the same satisfies the Wednesbury principles of rationality.

25.14 Relying on the decision in Krishnan Kakkanih''s case (supra), Mr. N.R. Chandran, the learned senior counsel, contends that when there are

substantial reasons for requiring these details and documents in the large)interest, as a matter of public policy, the same cannot be said to be

violative of articles 14 and 19(1)(g) of the Constitution.

25.15 Mr. N.R. Chandran, the learned senior counsel, placing reliance on the decision in Madan Lal and Others Vs. State of Jammu and Kashmir

and Others, , contends that in the absence of any allegation of bias and mala fide against the expert body, this court cannot scrutinise the decision

of the expert body merely on imaginary and hypothetical ground that this court cannot sit in appeal over such decision of the expert body.

Mr. T. Srinivasamoorthy, the learned counsel for the respondents, in W.P. Nos. 12630 and 12631 of 1999, adopting the arguments of Mr.

N.R. Chandran, the learned senior counsel, contends these details and documents are required to assess the capability and suitability of the

members and to test not only the qualification but also to ensure that they are not disqualified in other aspects; there is no compulsion for the

petitioners to seek empanelment under any provision of the Act; nor the petitioners have any right of allotment of audit work on the basis of

empanelment, and in any event, quoting the averment in the counter- affidavit furnished by C&AG, the learned counsel states that if the information

furnished by the firms are found to be incorrect, C&AG would give a show-cause notice to the Chartered Accountants before refusing to empanel

them.

In reply, Mr. Arvind P. Datar, the learned counsel for the petitioners, contends that the particulars and documents that are required under the

impugned application forms for the purpose of empanelment are out side the and object of the Act and the Regulations, and, therefore, the same is

ultra vires the Act and Regulations as well as violative of articles 14,19())(g) and 21 of the Constitution, and as such, thepetitioners can very well

challenge the same by way of a writ of declaration. Even assuming that the petitioners have prayed for an improper relief of a writ of declaration,

this Court, exercising its extra-ordinary jurisdiction under article 226 of the Constitution, can entertain the writ petitions, mould the relief sought for

by the petitioners and grant appropriate relief as deemed fit and necessary under the facts and circumstances of the case. Mr. Datar further

contends that assuming many of the members of the petitioner societies apply for empanelment as per the impugned application form, the

petitioners can still maintain the above writ petitions as it is well settled in law that there is no waiver of fundamental rights.

27.1 Mr. Arvind P. Datar strongly disputes the case of the respondents that the details and documents are required for assessing the professional

competency and potentiality of the Chartered Accountants; the reasons explained in the counter-affidavit cannot be substituted to substantiate the

decision of the respondents as there is no material before the court to satisfy that these details and documents are reasonable and related to

professional expertise; since the respondents could disqualify the members for empanelment for want of information and documents required under

the application, the petitioners would not be considered for appointment of auditors in the Nationalised Bank/Regional Rural bank as well as Public

Sector Undertakings and, therefore, their right conferred under the Articles is certainly infringed, attracting article 19(1)(g) of the Constitution of

India; such right protected under article 19(1)(g) could be infringed for want of such details and documents unless they are proved to be

reasonable and relevant within the meaning of article 19(6) and, hence, the onus lies on the respondents to place substantial materials before this

court to prove that the required details and documents are reasonable and relevant, as protected under article 19(6), Mr. Datar, therefore,

contends that the phrase ''reasonable restriction ''in article 19(6) implies an intelligent care and deliberation, ie., the choice of a course which reason

dictates as held by the Apex court in Chintaman Rao Vs. The State of Madhya Pradesh, and further relying upon the decision in R.M. Seshadri

Vs. The District Magistrate, Tanjore and Another, , contends that any condition which is more in the nature of an imposition than a restriction, is

field to be obnoxious and unreasonable and cannot be considered as reasonable restriction within the meaning of article 19(6) of the Constitution.

Relying on the above ratio, Mr. Datar contends that the particulars and the documents required by the respondents are in no way relevant for

assessing the professional competency, as they are very personal, and, therefore, rendering the members disqualified for want of such details

documents which are irrelevant to assess the professional competency amounts to imposition but not a reasonable restriction.

27.2 Mr. Datar distinguished the decision in Krishnan Kakkanth''s case (supra) and contends that the petitioners are entitled to challenge the policy

decision of the respondents, if the decision of the respondent,-, requiring the petitioners to furnish the details and documents has no nexus to the

object to be achieved, and the same is arbitrary, capricious and unreasonable, and, therefore, violates articles 14, 19(1)(g) and 21.

27.3 Mr. Arvind Datar, further replies that the details and documents required are attracted by Wednesbury Principles of irrationality and

perversity. Hence, it is contended that the decisions relied upon bv the respondents, viz., S. Narayans case (supra), Shyambabu Verillas case

(supra), Tata Iron & Steel Co. Ltd.''s case (supra), Farida Shaukalh''s case (supra), Chandravadanam, E.''s case (supra) and Punjab

Communications Ltd.''s case (supra) are not applicable to the facts and circumstances of the instant case; since the refusal to consider the members

for empanelment for want of details and information ultimately deprives the right of the petitioners to be appointed as auditors in the National

Bank/Regional Rural Banks by the RBI and Public Sector Undertakings by C&AG, attracting article 19(1)(g) of the Constitution, the onus lies on

the respondents to prove that the details and documents required in the impugned application form are relevant and reasonable; and in the absence

of any material supporting such policy decisions, the same is held to be perverse and suffers from want of nexus and attracts articles 14, 19(1)(g)

and 21 of the Constitution.

27.4 Mr. Datar also contends that the respondents, being statutory/constitutional authorities, are expected to act transparently, fairly and openly, as

they are bound by public accountability and placing reliance on the decisions in Mohinder Singh Gill and Another Vs. The Chief Election

Commissioner, New Delhi and Others, and Commissioner of Police, Bombay Vs. Gordhandas Bhanji, , contends that in the absence of reasons

transparent in the notification, the Institute or C&AG is not entitled to supplement fresh reasons by filing a counter-affidavit substantiating his action.

Therefore, they should have disclosed materials and reasons for requiring these details and documents; or otherwise, such requirements are held to

be perverse, capricious and arbitrary, attracting article 14 of the Constitution.

27.5 Mr. Datar further contends that the respondents are not entitled to seek ''fishing'' information relating to personal and private affairs of the

individual partner with regard to their indebtedness and credit cards, as they are unrelated to professional competency and potentiality. 111 this

regard he places reliance on the decision in D.B.S. Financial Services Pvt. Ltd. Vs. Smt. M. George, Second Income Tax Officer and others, . He

also contends that the refusal to consider the applications which do not contain the correct information, even without furnishing reasonable

opportunity to them, is unfair, unreasonable and violative of the principles of natural justice.

I have given a careful consideration to the submissions of both sides.

The following issues arise for my consideration in the above writ petitions :

(i) whether the above writ petitions are maintainable in law ? and

(ii) whether the details and documents required in the impugned application violate articles 14, 19(1)(g) and 21 of the Constitution as well as the

principles of natural justice ?

30.1 Point No. (i) Whether the above writ petitions are maintainable in law ?

In W.P. Nos. 12479 and 12480 of 1999, the petitioner seeks a writ of declaration, challenging the decision of an expert body, namely, the

Professional Development Committee, as approved by the Council of the Institute, requiring the details and documents under the impugned

application for the empanelment of the Chartered Accountants. Similar decision of the C&AG, a constitutional authority, has been challenged by

the petitioner in W.P. Nos. 12630 and 12631 of 1999. The petitioners alleged that the details and documents required in the impugned application

in the above writ petitions are arbitrary, perverse and violative of articles 14, 19(1)(g) and 21 of the Constitution and also violative of the principles

of natural justice and ultra vires the provisions of the Chartered Accountants Act and Chapter X of the Regulations framed thereunder. Argued Mr.

N.R. Chandran, the learned senior counsel, placing reliance on the decision in Prabodh Vermas case (supra), that a writ of declaration can be

prayed only where constitutional validity of the decision of a State or the Authority,'' is raised, but not otherwise.

30.2 In Prabodh Verma''s case (supra), the petitioners sought for a writ of certiorari to declare an Act or an Ordinance as unconstitutional and

void, but the Apex court held that where the petitioners contend that an Act or an Ordinance is unconstitutional or void, the appropriate relief for

them is to seek only a writ of declaration and not a writ of certiorari which can be granted only against the inferior Courts or Tribunals or

authorities to transmit the records of the proceedings pending before them for scrutiny of the same by the High Court or the Supreme Court, if

necessary, and for quashing the same. Inviting my attention to the observation of the Apex court that in such case, the High Court ought not to have

proceeded to hear and dispose of the writ petition without insisting upon the petitioner to amend the prayer in the writ petition, Mr. N.R.

Chandran, the learned senior counsel, contends that the petitioners, having challenged the policy decision of the expert committee which has

culminated in the impugned application form required by the Institute and the C&AG in exercise of their statutory powers, ought to have sought for

a writ of certiorari instead of the writ of declaration, as constitutional validity of the impugned application form does not arise, and, therefore,

argues that the above writ petitions are liable to be dismissed for improper relief sought for.

30.3 There is no dispute on the issue that the recommendations of the Professional Development Committee, an expert body, for a comprehensive

application form seeking the impugned details and documents, had been approved by the statutory authority, viz., the Institute in W.P. Nos. 12479

and 12480 of 1999 and a similar decision had also been taken by the constitutional authority, viz. C&AG in W.P. Nos. 12630 and 12631 of

1999, which is the subject-matter in all these writ petitions. It may be noted that the said policy decision of the statutory/constitutional authorities is

challenged not only on the ground that the same is unreasonable, unfair, arbitrary, capricious, violative of articles 14, 19(1)(g) and 21 of the

Constitution of India and also violative of the principles of natural justice, but also as ultra vires the provisions of the Act and Chapter X of the

Regulations, as pointed out by Mr. Arvind P. Datar, the learned counsel for the petitioners. Therefore, taking into consideration, the substantial

grounds raised in the above petitions, it may not be proper for this court to dismiss the above writ petitions merely because they have prayed for an

improper relief. Hence, in order to meet the ends of justice, instead of refusing to hear the aggrieved party purely on a technical and narrow

procedural grounds, the petitioners are required to be heard on merits, as the powers conferred on the court under article 226 of the Constitution

are wide and flexible to mould the relief sought for, as held in Chiranjit Lal Chowdhuri Vs. The Union of India (UOI) and Others, , B.R.

Ramabhadriah Vs. Secretary, Food and Agriculture Department, Andhra Pradesh and others, , M.V. Elisabeth and Others Vs. Harwan

Investment and Trading Pvt. Ltd., Hanoekar House, Swatontapeth, Vasco-De-Gama, Goa, , Ashok alias Somanna Gowda and Another Vs.

State of Karnataka by its Chief Secretary and Others, , State of Rajasthan Vs. Hindustan Sugar Mills Ltd. and Others, and Dwarka Nath Vs.

Income Tax Officer, Special Circle D-ward, Kanpur and Another, and such a power of judicial review can elastically be exercised to render

''Justice'' wherever injustice is complained of; and, therefore, the exercise of judicial review need not be restricted for want of proper relief. Hence,

in my considered opinion, these writ petitioners deserve to be heard on merits irrespective of the cob-webs of technicalities; otherwise, the

petitioners would be let down to a bottomless pit.

30.4 Similarly, where the petitioners complain that their fundamental rights are infringed, it is well-settled in law that there cannot be any waiver for

breach of the fundamental rights, as held in Basheshar Nath Vs. The Commissioner of Income Tax, Delhi and Rajasthan and Another, . Therefore,

refusing to hear the petitioners merely on a technical ground that some of the petitioners have already applied in the prescribed form would render

the powers of judicial review of this court conferred under article 226 of the Constitution of India to suffer from judicial shackle.

30.5 Point No. (i) is answered accordingly.

Point No. (it): Whether the impugned details and documents required in the impugned application violate articles 14, 19(1)(g) and 21 of the

Constitution of India as well as the principles of natural justice ?

Section 226 of the Companies Act contemplates that a person shall not be qualified for appointment as auditor of a company unless he is a

Chartered Accountant within the meaning of Chartered Accountants Act and is not disqualified for such appointment as prescribed therein.

Therefore, apart from the ''Register'' maintained by the Institute as per section 19(1) and the ''List'' prepared as per section 19(3), the Institute is

also required to prepare a penal of Chartered Accountants as per the requirement contemplated u/s 226 of the Companies Act for appointment of

auditors in the Nationalised Banks and Regional Rural Banks by the RBI. Similarly, the C & AG is required to prepare a panel for appointing

auditors in the Public Sector Undertakings. Necessarily, the details and documents required by the Institute and C&AG need not be the same as

required for the purpose of maintaining the Register as per section 19(1) and for preparing the List as per section 19(3).

It appears that certain discrepancies were brought to the notice of the Institute by the RBI as well as to the C&AG in furnishing information for

empanelment of auditors. It is also felt by the Institute as well as the C&AG that the information furnished by the auditors in the existing system is

insufficient for preparing the panel as per the requirement in law or give way for growth of bogus firms, depriving the legitimate rights of the

qualified auditors. These alleged malpractices include (a) showing members as partners who are not in fact associated with the functioning of the

firm; (b) showing branch office/head office at places where they are not actually functioning; (c) inclusion of members who are in full-time

employment as partners without disclosing the fact of their employment; (c~ showing the members as in-charge of the branch office without fulfilling

the prescribed conditions; and (e) showing the members as partners who are also engaged in other occupations without disclosing the fact about

the engagement. Unmistakably, these malpractices are considered as detrimental not only to the public image of the profession of Chartered

Accountants but also to the very interest of the society at large.

The Professional Development Committee, in order to check the mushroom growth of bogus audit firms; to arrest malpractice in furnishing

false, incorrect and misleading particulars by the audit firms and to prepare a panel of genuine and bona fide firms to protect the interests of the

financial institutions in the larger interest of the society, recommended to seek the impugned details and documents, in a composite application

form, from the members of the Institute who apply for empanelment, which are relevant for the appointment of auditors in nationalised banks and

regional rural banks by the RBI. After the approval of the Council, the Institute invited the impugned details and documents in the prescribed

format from the members of the Institute for empanelment of Chartered Accountants for the appointment of auditors of the banks, notifying that the

applications which do not contain the impugned details and documents would not be considered for empanelment.

These details and the documents required under the impugned application as well as in the Annexures G, H, I, J, K, L, M, N and O are related

to the income and net worth of the firms as well as the individual partners; the constitution of the firm; the name of their bankers; credit limit and

bank account number; latest balance sheet; standing of the firms with the details of empanelment with RBI and C&AG; length of empanelment;

past assignment; maximum size of project handled and value of the project and infrastructure, manpower with list of senior executives and other

professionals like cost accountants, lawyers, engineers, etc. These particulars are required to prepare a fool-proof panel of auditors supported with

authenticated information from the applicants themselves, which would enable the Institute to check the malpractice at the threshold and also to

hold the erring members with accountability, and, therefore, there is no reason to feel either aggrieved or prejudiced by such measures which are

purely intended to ensure credibility to the empanelment mechanism and to enhance the image of the profession in the eye of public. Further, as

rightly pointed out by Mr. N.R. Chandran, the learned senior counsel, the details of indebtedness including the outstandings in respect of credit

cards which exceed Rs. 1,000 of the Public Sector Banks/Regional Rural Banks, as required in Annexure G and the details of directorship in

Public Sector Banks/ Regional Rural Banks, as required under Annexure H, are required to ensure that the applicants are in no way disqualified u/s

226 of the Companies Act. Similarly, particulars, as required under Annexures 1, K, L, M, N and 0 with the details of partners who have signed

the audit report are required to assess the quantum of work they had undertaken, professional competency and their association with Public Sector

Banks/ Regional Rural Banks so that the conflict of interest between the banks and the applicants could be avoided. The particulars of

professionals employed in the firm, as required in Annexure J, are relevant to assess the professional potentiality. 1 am satisfied that these details

are neither intended to favour any multinational firm nor to interfere with the personal right of the individual member, much less the privacy, but they

are intended to assess the qualification, experience, competency, as well as to ensure that they are not disqualified in any manner as per section

226 of the Companies Act. Similarly, 1 am satisfied that the documents to be attached with the application, viz., the partnership deed, the balance

sheet, profit and loss account, latest Income Tax returns and assessment order of the firms as well as individual partners, are necessary to cross

verify the details that are relevant for the purpose of appointment of the auditors to the Public Sector Undertakings and the banks and that the

production of Income Tax returns and the assessment orders of the firm as well as individual partners would enable the lnstitute to(a)shortlist the

applications by avoiding multiple applications, and (b) to avoid the members who are actually not practising, so that the practising members would

get job; thus, in overall, the members who are actually practising would be benefited and the work would be distributed equally and impartially.

Consequently, the concentration of work with a few members who are partners in different firms would be avoided in order to facilitate equal

distribution of work to more members, according to their professional competency. No doubt, the Income Tax returns and the assessment orders,

per se, would enable the Institute to verify and to eliminate the dummy and no practising partners and to enlist the genuine and bona fide members

in the panel, by cross-checking the information and the supporting documents of the firms as well as individual partners. 1 am also unable to

appreciate the contention of Mr. Arvind P. Datar that the requirement of such information relating to Income Tax returns and the assessment

orders of the firms and the individual partners cannot be caused to be disclosed, except as ordered u/s 138. Section 138 enables the authorities

mentioned therein, to furnish or cause to be furnished such information received or obtained by any Income Tax authorities, that are necessary to

perform his or its functions under the law mentioned therein, as per clause (1) of section 138, and further authorises the Central Government to

direct by appropriate notification in the Official Gazette that no information or document shall be furnished or produced by a public servant in

respect of such matters relating to such class of the assessees or except such authorities as may be specified in the order, notwithstanding anything

contained u/s 138(1) or any other law for the time being in force, as per section 138(2). Section 138. thus, enables the authorities mentioned

therein or the Central Government to pass appropriate order in the matter of disclosure of the particulars of the assessees, notwithstanding anything

contained in any law in force. Therefore, in the absence of any notification by the Central Government u/s 138(2), the Institute and C&AG are not

barred to seek disclosure of information relating to the assessees when such information is relevant and necessary to suit other statutory

requirements for empanelment of Chartered Accountants for the appointment of auditors in the Nationalised Banks and Public Sector

Undertakings, as per section 226 and to achieve the object of the Chartered Accountants Act, viz., to regulate the profession of the Chartered

Accountants, and, hence, such disclosure would not in any way run counter to section 138 of the Act, as rightly pointed out by Mr. N.R.

Chandran. To contend such details should prejudice the personal rights and privacy, in my considered opinion, is unsustainable in law as the

Income Tax returns and the assessment orders are public documents as held in Somannas case (supra) and, therefore, the production of the same

could not be said to prejudice anyone.

I am, therefore, satisfied that there are sufficient and tangible reasons to justify the requirement of the impugned details and documents. The

Professional Development Committee and the Council of the Institute are competent to take appropriate decision requiring all relevant particulars

for preparing a multi-purpose empanelment and such efforts could not be termed either as irrelevant or unwise attempt nor would amount to

framing of new regulation, requiring it to be notified in the Official Gazette as per section 30(1); nor to be approved by the Central Government as

per section 30(3); nor to be laid before each House of Parliament as per sect ion 3013; and, therefore, the requirement of the impugned details

and documents is not in violation of sections 30(1), 30(3) and 3013.

As I am satisfied that the requirement of impugned details and documents has strong nexus with the object to be achieved under the Act and

rendering the members disqualified for want of impugned details and documents, the same could not be said to be unreasonable, arbitran and

perverse, attracting articles 14, 19(1)(g) and 21 of the Constitution. Further, as observed in details, the notifications of the Institute as well as

C&AG themselves apparently disclose the reasons for seeking the impugned details and documents. Nine discrepancies that were noticed while

processing the applications submitted by the members of the firms and seventeen points that are to be taken note of by the applicants while filling

up the applications for empanelment are expressly stated in tile notification. Therefore, I do not find any merit in the contention of Mr, Arvind P.

Datar that the impugned notifications do not reflect any reason and that the respondents had failed to place materials to satisfy this court for

requiring the impugned details and documents. Hence, 1 do not find any force in the argument of Mr. Arvind P. Datar, relying on the decisions in

Mohinder Singh Gill''s case (supra) and Gordhandas''s case (supra), that the respondents are trying to supplement fresh reasons by filing counter to

substantiate their action.

The ratio laid down by the Apex court in Dutta Associates Pvt. Ltd. Vs. Indo Merchantiles Pvt. Ltd. and Others, , that the decision make-in-

process should be transparent, fair and open and that the authorities have public accountability to maintain the fairness in their action without giving

room for abuse of powers for extraneous reasons, is not in any way attracted in the instant case.

I am also not impressed with the submission of Mr. Arvind P. Datar, placing reliance on DBS Financial Service''s case (supra), that the

respondents seek ''fishing information'' relating to personal and private affairs. Even though the impugned details and documents are related to

personal and private affairs, it cannot be disputed that these details and documents reflected the indebtedness of the members, which is directly

relevant to ensure that they are not in any way disqualified u/s 226 of the Companies Act, and as such the impugned details and documents relating

to the personal income and credit cards of the petitioners offend the right to life and liberty of the petitioners, attracting article 21 of the Constitution

and, therefore, the reliance placed on Meera Mailizir''s case and Rajagopal''s case (supra) is of no avail.

Various decisions cited by Mr. Arvind Datar, viz., Laxmi case (supra) Municipal Corpn.''s case (supra) and Bar Council''s case (supra),

unmistakably support the proposition that where there is a clear violation of article 19(1)(g), the State has to justify, by acceptable evidence,

inevitable consequences or sufficient materials that the restriction, whether partial or incomplete, is in the public interest and contains the quality of

reasonableness; when the exercise of fundamental right is prohibited, the burden of proving that a total ban on the exercise of the right alone may

ensure the maintenance of the interest of general public, lies heavily upon the State; but the question as to what are the reasonable restrictions

would naturally depend on the natural circumstances of the case, character of the statute, object which it seeks to serve, and the existence of the

circumstances. Therefore, to decide on violation of article 19(1)(g) in terms of any reasonable restriction, ''keeping the public interest as a

parameter'' should be the cardinal principle; but, not the mere inconvenience of the individuals as complained.

The principles laid down in Papnasam Labour Union Vs. Madura Coats Ltd. and Another, , that the restriction sought to be imposed on the

fundamental rights guaranteed under article 19 of the Constitution must not be arbitrary or of an excessive nature so as to go beyond the

requirement of felt need of the society and object sought to be achieved and that there must be a direct and proximate nexus or a reasonable

connection between the restriction imposed and the object sought to be achieved cannot have universal application in all cases, as the question of

reasonableness varies from case to case. The reason that weighed for requiring the impugned details and documents in the instant case, does not, in

any way, derogate the well-founded principles laid down in the case referred to above.

As rightly contended by Mr. N.R. Chandran, the learned senior counsel, the mere disciplinary powers available under the Act, cannot, in any

way, disable the Institute to seek the impugned details and documents from the members who desire to apply for empanelment, in order to avoid

any malpractice at the threshold, and to achieve the object of the Act and to satisfy the requirement of the statutory authorities. Since the Institute

itself requires the members to furnish the details relating to the names of companies audited by the members and their net worth and turnover,

furnishing of such details would not amount to a professional misconduct; but a member shall be deemed to be guilty of professional misconduct

only if lie does not supply the information called for. Further, reservation of'' right to use the information received from the members for any

purpose in the interest of profession in addition to submitting the same to the appropriate authorities also cannot be complained as arbitrary,

unreasonable, mala fide and violative of article 14 of the Constitution. From the notification, 1 find that the Institute does not undertake any

responsibility with regard to the allotment of audit or other assignment to any of the applicants, and, therefore, as explained by Mr. N.R. Chandran,

the learned senior counsel, the empanelment will not confer any right for appointment of auditors. In other words, the members who apply for

empanelment have no right for appointment as auditors automatically by virtue of such empanelment. Therefore, the refusal to consider the

petitioners who have not furnished the required details and documents, will not, in any way, violate article 19(1)(g). Consequently, there is no

necessity for the respondents to satisfy that these required details and documents amount to reasonable restriction within the meaning of article

19(6) of the Constitution of India. Hence, I am unable to appreciate the arguments of Mr. Datar, basing on the ratio laid down in Laxmi

Khandsari''s case (supra), Municipal Corpn., Ahmedabad''s case (supra) and Bar Council of India''s case (supra), that the onus lies on the

respondent-Institute/C&AG to place the materials before the court to prove that the impugned details and documents required are reasonable,

relevant and necessary for the multi-purpose empanelment. In any event, there are substantial, relevant and tangible reasons to justify the

requirement of these details and documents for preparing the multi-purpose empanelment. Further, as rightly contended by Mr. N.R. Chandran,

the learned senior counsel, if article 19(1)(g) is not attracted, there is no obligation for the respondents to produce the materials to satisfy that the

impugned details and documents are reasonable and relevant.

As I am satisfied with the corporeal reasons for the requirement of the impugned details and documents, the ratio laid down in Chintaman

Rao''s case (supra) as well as in R.M. Seshadris case (supra) that ""reasonable restriction"" required within the meaning of article 19(6) should be

based on intelligent care, what the reason dictates and that any condition which is more of nature of imposition than a restriction is held to be

obnoxious, cannot be considered as reasonable within the meaning of article 19(6), does not come in aid of the petitioners.

In Haniraj Chauhan''s case (supra) the Apex court has held that the rule restricting the entry of persons already carrying on other professions

for enrolment as Advocate neither could it fall foul on the altar of articles 14 and 19(1)(g), read with article 19(6), nor could it be said that

unguided and unchartered powers are handed over on a platter to the Bar Council for regulating entry to the legal profession. Applying the above

ratio to the instant case, the impugned proposal of carving out and short listing the Chartered Accountants in the light of the details and documents

to be furnished with the impugned application form, cannot be complained as arbitrary and unreasonable, attracting articles 14 and 19(1)(g), as

such details and documents are required to prepare a multi-purpose empanelment of auditors germane to high and exacting standards of auditing

and to maintain the status and standard of professional qualification of the members of the Institute. Therefore, refusing to consider the applications

for want of such relevant details and documents, in my considered opinion, will not amount to ''conferring'' unguided and unchartered powers with

the Institute or C & AG. On the other hand, taking note of the reasonableness, relevancy and necessity of these details and documents into

consideration, it could be safely concluded that the same is found to be well-sustain able in law, not attracting articles 14 and 19(1)(g), and once

such conclusion is reached, the absolute requirement of article 21 would be out of way, and the petitioners, therefore, cannot be said to have been

deprived of their rights to livelihood by not being empanelled for want of such details and documents, and, therefore, the requirements under the

impugned application cannot be faulted on the touchstone of article 21 of the Constitution.

I am also unable to appreciate the arguments of Mr. Datar basing on the decision in Bar Council of India''s case (supra) that the requirement of

impugned details and documents affects the right of the petitioners to practise, attracting articles 14 an - d 19(1)(g) of the Constitution of India. In

the said Bar Council''s case (supra) the Apex court considered the rule barring persons who have completed 45 years of age from enrolment as

Advocate and held the same as ultra vires articles 14 and 19(1)(g), finding that there is no reliable, statistical or other material placed on record in

support of the inference that ex-Government or quasi-judicial Government servants or the like indulged in undesirable activity, after entering the

profession, and held that the said rule is unreasonable and arbitrary, as the choice of the age of 45 years is made, keeping only a certain group in

mind, excluding the vast majority of other persons who are in service of the Government or quasi-judicial Government or similar institutions at any

point of time, and, therefore, violates principles of equality enshrined in article 14 of the Constitution. But, in the instant case, the Institute and

C&AG have come out with sufficient and convincing reasons for the requirement of the above details and documents and all the members of the

Institute are permitted to apply for empanelment uniformly, by furnishing all the relevant details and documents required in the impugned

application. Therefore, 1 do not see that the Institute and C&AG have arbitrarily and unreasonably insisted upon these details and documents,

offending article 14 of the Constitution, and, hence, the reliance placed on the ratio laid down in Bar Council of India''s case (supra) is

inappropriate.

In S. Narayan''s case (supra), the Apex court has held that the subscriber, under the Telegraph Act, is not entitled to maintain the writ petition

challenging the increase in telephone tariff rates recommended by the Tariff Enquiry Committee which was subsequently placed before the House

in the shape of budget proposal. The Apex court observed that, the Parliament, having gone into all the budget proposals and sanctioned the same,

such tariff ratio had become the legislative policy as well as the legislative process, and, therefore, the court has no jurisdiction under article 226 of

the Constitution to go into the reasonableness of such rates, which are decided as policy matters in fiscal planning, which cannot be subjected to

any judicial determination. Applying the ratio laid down in the above decision to the facts and circumstances of the instant case, I am satisfied that

the impugned application form, having been recommended originally by an expert body and subsequently approved by the Council as required by

the statutory and constitutional authorities, viz., Institute and C&AG as a matter of policy decision, cannot be questioned by the petitioners by way

of judicial review under article 226 of the Constitution, and the Court, therefore, would not interfere with the decision of the body of experts in the

absence of any unreasonableness. The requirement of reasonableness in the action of the authorities is one of the most active criteria but not a mere

empty formality and the same would mean not what the authorities like but what they ought, by ascertaining and following the course which reason

directs, which could be conveniently explained as a test of ""Wednesbury''s principles of reasonableness."" In other words, mere discretion of the

authorities to take appropriate decision on a particular subject and exercise of such discretion itself would not be sufficient, if such discretion is

exercised not satisfying the principle of reasonableness. The discretion, which does not stand to the test of reasonableness, would thwart and run

counter to the object of conferring such discretion on the authorities. Any policy decision derived as a result of such defective exercise of discretion

for want of reasonableness, is not entitled to the protection of the Court. If the decision of requiring the impugned details and documents is tested

by the Wednesbury principles of rationality, I am satisfied that there are sufficient and strong reasons for requiring such details and documents in

order to satisfy the requirement of statutory/ constitutional authorities, viz., RBI and C&AG. The impugned policy decision which stands the test of

reason ableness, cannot, therefore, be challenged under article 226 of the Constitution, by way of judicial review, as held in Tata Iron & Steel Co.

Ltd.''s case (supra), Punjab Communications Ltd.''s case (supra) and Chandravadanain''s case (supra). That apart, I am of the firm opinion that the

mere inconvenience would not amount to a legal prejudice and such inconvenience cannot be a ground to allege violation of articles 14, 19(1)(g)

and 21 of the Constitution of India.

In Krishnan Kakkanths case (supra), the Apex court has upheld the decision of the Government that the subsidy can be paid only to the

approved dealers, and such decision, being a policy decision, cannot be challenged by way of a judicial review on the ground of violation of article

14 of the Constitution. Applying the above ratio, 1 have no option except to hold that if the petitioners want to be empanelled, they have to furnish

the details and documents in accordance with t he terms and conditions of the application, inasmuch as the same are reasonable, relevant, and,

therefore, required in the public interest to assess the professional competency and potentiality, as explained above. The reasonableness of such

requirement has to be determined in an objective manner from the standpoint of the interest of the general public and not from the standpoint of the

interest of individuals upon whom, the requirements were contemplated on abstract and imaginary inconvenience.

The allegation that the petitioners would be prejudiced by, furnishing the details and documents required in the impugned application form is

nothing but imaginary surmise and hypothetical, but not based on reasons, and such a grievance cannot be gone into under article 226 of the

Constitution unless the petitioners are legally prejudiced, and this Court, rather, cannot act as a court of appeal on such issues as per the ratio laid

down in Madan Lal''s case (supra).

As discussed in detail, the policy decision taken by the Institute and C&AG, in conformity with respective provisions of the Act as well as the

Companies Act, for substantial and tangible reasons referred to above, to avoid the discrepancies in preparing the penal of auditors as per the

statutory requirements of the RBI and C&AG and to prepare a fool proof penal of Chartered Accountants for the appointment of auditors in the

Nationalised Banks and Regional Rural Banks as well as in public sector undertakings, cannot be complained of saying that the said authorities,

viz., RBI and C&AG have acted in the manner not conferred on them. Therefore, the arguments of Mr. Arvind Datar, placing reliance on the

decision in Singhara Singh''s case (supra), following the decision in Taylor v. Taylor (1876) 1 Chd. 426 that, where the power is given to do

certain thing in a certain way, the thing must be done in that way or not at all and other methods of performance are necessarily forbidden, do not

fit into the facts of the instant case. Since the impugned decision of the Institute and C&AG is intended to avoid malpractices by the bogus firms, to

weed out the mushroom growth of bogus firms and to cull out the authenticate and correct information from Chartered Accountants and taking

note of the discrepancies that were experienced by the Institute and C&AG during the previous years, 1 am unable to appreciate the contention of

Mr. Datar that the impugned requirement of details and documents are attracted by Heydon''s rule, as the Institute and C&AG have not explained

the mischief in the existing system. Similarly, the argument of Mr. Datar, placing reliance on the decision in Kishori Lal''s case (supra), that the

requirement of the details and documents by the Institute and C&AG has no authority of law, cannot be accepted, as the source of authority for

such decision is distinctly traceable under the provisions of the Act read with sections 226 and 619 of the Companies Act.

In my well-considered opinion, auditing the Nationalised Banks/ Regional Rural Banks and the Public Sector Undertakings is a matter of

statutory necessity. It has a direct bearing on the financial and economic management of the country. As the allotment of such audit by the RBI and

C&AG, thus, has a driving force in the country''s fiscal operation, the preparation of panel of the Chartered Accountants for such allotment has

become an integral part of the statutory obligation of the concerned authorities. Discharging the vital role of empanelment of Chartered

Accountants by the Institute and C&AG, therefore, cannot be complained of lacking statutory source of authority. Where the statutory and

constitutional authorities, in exercise of their powers, are of the expert opinion that the existing system suffers from stigma and lacks required

strength to fully integrate with the statutory demands, and, therefore. the existing framework needs complete renovation to suit the statutory

requirements, the efforts of the Institute and the C&AG to develop and strengthen the institutional facilities and infrastructure, in order to provide a

''Zero Defeet'' panel of auditors as per the statutory requirements, cannot be said to be devoid of nexus. If a particular system is found to be

defective, by, experience, no arbitrariness, much less perversity, could be attributed in removing such defects and finding a solution for giving equal

opportunity to all similarly placed Chartered Accountants. Our intelligentsia should not be either misunderstood or under-estimated, as many

Indians have proved equally good or excelled whenever and wherever they are given equal opportunity. The defects observed, by experience, in

the existing system, are warranted to be rectified, by an expert body, as saner thought will always throw more light even on the same subject; the

consequential policy decision intending to remove disparity among the similarly placed Chartered Accountants in order to provide adequate and

equal opportunity to all qualified Chartered Accountants, cannot be quoted as arbitrary or perverse, attracting articles 14, 19(1)(g) and 21 of the

Constitution. Failure to take such efforts by the Institute and the C&AG alone would paralyse the progress in the system and cause stagnation in

the financial and economic management of the country, which, in turn, affects the standard of living and quality of life from all corners. 1 am,

therefore, satisfied that there is a need to search for a remedial measure to rectify the defects in the existing system, which, even if causes any

inconvenience or hassles to some individuals, including the petitioners, the same will not, in an), way, amount to violation of fundamental rights

conferred under articles 14, 19(1)(g) and 21 of the Constitution.

Whether the details and documents required under the impugned application violate the principles of natural justice, and if so, to what extent,

remains to be answered. If the ''principle of reasonableness'' is held to be the most active, conspicuous and substantial ground to challenge the

action of the authorities on the substantive side, the violation of the principles of natural justice is equally a dynamic weapon to attack the action of

the authorities on the procedural side. Of course, no one can complain about violation of the principles of natural justice in the matter of legislative

or policy-making powers of the State or the authorities. Therefore, the petitioners are not entitled to complain for want of any opportunity, much

less reasonable opportunity, against the impugned policy decision of the Institute and C&AG. Argued Mr. N.R. Chandran, the learned senior

counsel, that the petitioners are not entitled for an opportunity before refusing to empanel them for want of details and documents, as such rejection

is only ministerial in nature. Of course, the ministerial act can be performed in a given set of facts and in a prescribed mariner, in obedience of the

mandate of law, without having regard to his own judgment on the propriety of the act of being done, and, therefore, the ministerial duty is simply

an administrative duty, which could be exercised without any discretion. In other words, the discretionary act is distinguishable from that of a

ministerial act as the discretionary act requires to be exercised, not as a matter of routine, but should stand the test of reasonableness in the

Wednesbury sense and in compliance of the principles of natural justice. Even though Mr. N.R. Chandran, the learned senior counsel, rightly

contends that there is no compulsion for the petitioners to apply for empanelment, nor the empanelment, by itself, will confer any right of allotment

of audit, it cannot be concluded that the petitioners are not aggrieved in any way, by not being empanelled outrightly, as the right of allotment of

audit flows from empanelment. Thus, in my considered opinion, the principles of natural justice come in aid of the petitioners, where their right to

be considered for allotment, by not being on the penal, is at stake, and, therefore, the petitioners are entitled to be ensured with a reasonable

opportunity by the Institute and C&AC before the petitioners are refused to be empanelled. The principles of natural justice are violated, not while

the Institute and C&AG take a policy decision requiring the particulars under the impugned application form, but when refusing them for

empanelment for want of all or any of the particulars, as required under the impugned application form, as such refusal ultimately, offends the right

of Chartered Accountants to be considered for allotment of audit, guaranteed under article 19(1)(g) of the Constitution. Hence, the compliance of

the principles of natural justice in the matter of empanelment cannot be lightly disregarded, as the empanelment, even if it does not confer any right

of allotment, still confers a right for being considered for allotment by being on the panel, and the same is definitely protected within the meaning of

article 19(1)(g) of the Constitution of India, as held in Mohammed Shuiat Alis case (supra). Therefore, such right to be considered for allotment of

audit by being on the panel, as guaranteed under article 19(1)(g) of the Constitution, necessarily mandates the Institute and C&AG to provide an

opportunity to the petitioners if the information furnished by them is found to be incorrect, before refusing to empanel them, as rightly weighed by

the C&AG. Denial of such opportunity to the petitioners by the Institute before refusing them for empanelment for want of details and documents

required in the impugned application, in my opinion, violates the principles of natural justice.

On the totality of the facts and circumstances of the case and for the reasons discussed above, 1 do not find any reasons to grant relief as

prayed for or to grant any other relief. However, I am obliged to direct the Institute and C&AG to give opportunity to the petitioners before

refusing to empanel the petitioners if the information furnished by them is found to be incorrect, and the Institute, as well as the C&AG, are,

therefore, directed to reschedule the time to enable the Chartered Accountants who desire to seek empanelment, to submit their applications, and

to finalise the empanelment in the light of the directions stated above.

The write petitions are dismissed with the above directions. Consequently, the connected W.M.Ps. are also dismissed. No costs.

Petition dismissed.