Vipen Seth vs State of Jammu and Kashmir

T.S. Doabia, J.—The petitioner is a Chartered Accountant. He submits that his activities are not commercial and his office is not an

establishment falling within the purview of the definitions in the Jammu & Kashmir Shops & Establishments Act 1966. It is submitted that the

notification SRO No. 740 dated 13.11.1978 by which provision the aforementioned Act have been made applicable to the Chartered

Accountants is contrary to the provisions of Act of 1956. The prayer made in this petition is that the notification be declared ultra vires of the Act.

The short question which is required to be gone into in this petition is as to whether the work of a Chartered Accountant brings them within

commercial, industrial or trading activity.

The profession of a Chartered Accountant is regulated by the provisions of Chartered Accountants Act. Chartered Accountant is a person who

is a member of the Institute of Chartered Accountants of India. A Member of this Institute can practice accountancy. He can offer his services in

the field of Auditing and verification of commercial transactions. He is to examine the books of accounts and other records. He is also to remain

within certain limitations. These limitations are

i) He cannot pay either directly or indirectly any share or commission or brokerage in the fees or profits of his professional business to any person

other than a member of the Institute.

ii) He cannot accept any part of the profits of the professional work of a lawyer, auctioneer, broker or other agent who is not a member of the

Institute.

iii) He cannot enter into a partnership with any person other than a Chartered Accountant in practice.

iv) He cannot solicit clients or professional work either directly or indirectly.

v) He cannot issue any circular, advertisement or interview or by other means to canvass business, nor can be advertise his professional

attainments or services.

vi) He cannot accept a position as auditor previously held by another Chartered Accountant without first communicating with the Chartered

Accountant in writing.

vii) He cannot charge any fee based on a percentage of profits.

Above are some of the limitations within which a Chartered Accountant is supposed to work.

Some judicial precedents in this regard be noticed. Office of a lawyer or firm of lawyers was held to be not a commercial establishment for the

purposes of Kerala Shops Act. The view expressed by the Kerala High Court in the case reported as 1978 LTC 1614 was upheld by the

Supreme Court of India in case reported as AIR 1984 SC 1700. It was categorically laid down that office of a lawyer or a firm of lawyers is not a

shop within the meaning of afore mentioned Act. This aspect of the matter has again been considered in the case of P.K. Ramanathan v. The State

of Kerala (1991(2) ILR Kerala 400). Mr. Justice K.T. Thomas, now Judge of the Supreme Court, took note of the various earlier decisions.

These decisions are :

Sakharam v. Nagpur Corporation, AIR 1964 Bombay (sic), Sasidharan v. Peter 1978 KLT 613, Ram Narain v. The State of U.P., 1957 SC

18 at page 23, Darshan Singh v. State of Punjab, AIR 1953 SC 83; Sathurama Menon v. Momal Amma, 1966 KLT 655; N.E. Merchant v.

State, AIR 68 Bom 283; National Union of Commercial Employees v. Mehar, AIR 1962 SC 1080; Phillpose & Co. v. State, Vol. (80) Current

Tax Reporter page 1.

Taking note of the aforementioned judgments it was accordingly held that the office of Chartered Accountant is not a commercial establishment.

The view expressed by the Kerala High Court which is based on the decision given by the Supreme Court of India and other decisions is a view to

which no exception can be taken.

What has been stated in the above decisions would apply to the facts of this case also.

In view of the above this petition is allowed. The notification SRO No. 710 dated 13.11.1970 by which the premises of Chartered Accountants

are sought to be brought within the definition of `Shops' is held to be ultravires of the Act.