Right to Practice Profession is Fundamental
ICAIs refusal to register retirement of partner from firm offends the professional’s right to practice profession under Article 19(1)(g) of the Constitution.
In the High Court of Kerala at Ernakulam
WP(C) No. 5833 of 2020(D)
Joshi John …………. Petitioner
- The Institute of Chartered Accountants of India ……. Respondent No.1
- Anitha C Shenoy …… Respondent No. 2
- Girija P.K ………… Respondent No. 3
On 26th April 2021, the Hon’ble Kerala HC passed an order stating that ICAI’s refusal to retire a partner from a previous firm and enable practice in a new firm would violate the said professional’s fundamental right to practice profession freely under Article 19(1)(g) of the Indian Constitution.
A look at the relevant details leading to this landmark judgment.
- John Joshi (Petitioner) was a qualified Chartered accountant registered with the Institute of Chartered Accountants of India – ICAI (R1).
- John Joshi along with Anitha Shenoy (R2) and Girija P.K (R3) constituted a partnership firm vide agreement dated 30th June 2015. They were partners of the Firm “R Menon & Associates” in Ernakulam. The duration of the firm was “Partnership at Will”.
- John Joshi was the only working partner of “R Menon & Associates” as the other two were residing outside Ernakulam and not taking active part or participation in running the Firm.
- As disputes arose between the partners, John Joshi was not interested in continuing as partner and sent notice to the other two partners dissolving the partnership firm w.e.f 20th November 2019.
- John Joshi submitted an online application to ICAI requesting for the dissolution of the Firm to be taken on record. However, the same was not completed as the ICAI sought the consent of the other partners by way of entering OTPs which R2 and R3 refused to do.
- Thereafter, John proposed to start an independent sole proprietorship – “John Joshi & Co”. However, he could not file for registering his new sole proprietorship online. He sought relief from the High Court. The HC passed an interim directing ICAI (R1) to upload the form for registering John Joshi’s sole proprietorship. The ICAI complied with the interim direction of the HC and registered John Joshi’s new sole proprietorship “Joshi & Associates”.
- However, Mr. John Joshi’s name was still showing as working partner of “R Menon & Associates” and the firm’s name was still reflecting in the name of the ICAI portal despite being dissolved. Aggrieved, John Joshi has filed this Civil Writ petition.
John Joshi contended that the due to the partnership firm’s name continuing to reflect on the ICAI portal despite being dissolved at will, he was unable to commence his individual practice as a sole proprietor.
- ICAI (R1) contended that:
(i) The CA, before commencing practice shall apply to the council for a Trade or Firm name. Further, every time there is a change in the particulars of office or Firm, the Member or the Firm, as the case may be, shall communicate it to the Council.
(ii) The council in its 165th meeting held in November 1993 decided that in the case of retirement of Partner(s), if other Partner(s) do not confirm the retirement within the specified period, such retirement would not be noted in the records of the partnership. In the event of any dispute amongst the partners of a Firm, the same would be referred to the C&AG / RBI while furnishing particulars of the Firm or empanelment of Bank / C&AG Audit.
(iii) The Council, in its 300th meeting held that where a Firm is ‘at will’, retirement or reconstitution cannot be permitted if partners object to it on being put to notice.
(iv) In accordance with section 27(1) of the Chartered Accountants Act and Regulation 187(1), if a Chartered Accountant in practice or a Firm, has more than one office in India, each one of such offices shall be in the separate charge of a member of the Institute. Therefore John Joshi cannot register his sole proprietorship at a different address unless he is relieved as in charge of the Head Office of the Firm.
- Anitha Shenoy (R2) and Girija P.K (R3) objected to the unilateral act of dissolution of the partnership firm by John Joshi. They originally stated they would have agreed if John had retired / resigned from the Firm leading to reconstituting the firm. However, after the writ petition was filed, they stated that retirement of the partner would be permitted only after settlement of the partnership accounts. They further objected to the dissolution on the ground that John Joshi appropriated all the work / professional assignments, business, and clientele without settling the accounts in an unreasonable manner.
Whether ICAI can force a Chartered Accountant to continue in a partnership of Chartered Accountants even after dissolution of the Partnership Firm or retirement of the Chartered Accountant, by retaining such unwilling partner in the Partnership Firm, in the register of partnerships maintained?
The HC observed the following:
- The Chartered Accountants Act, 1949 including its amendments from time to time governs only the eligibility, qualification, registration of individuals / Partnerships, regulation of trade names or firms names to practice the profession of Chartered accountancy. The CA Act does not register the partnership agreements or involve with relations or disputes between the partners. The registration / regulation of partnership agreements are governed by the Indian Partnership Act 1932 including its amendments.
- The Partnership Act regulates the agreements between partners. In the present case, the agreement between the John Joshi, Anitha Shenoy and Girija PK was an agreement, the duration of which was “partnership at will”. This means as per section 43 of the Partnership Act 1932, the firms may be dissolved by any partner giving notice in writing to all other partners of his / her intention to dissolve the firm. The Firm is dissolved as from the date mentioned in the notice and if no date is so mentioned, as from the date of communication of the notice. The HC observed that notice of dissolution of partnership at will was given by John Joshi to R2 and R3 on 20.11.2019. Therefore the Firm ‘M/s. R. Menon and Associates’ should ordinarily be treated as dissolved from that date.
- R2 and R3 had objected to the dissolution of the partnership at will given by John Joshi. Originally, they had stated that they would give their consent to the dissolution of the Firm if John Joshi had retired and reconstituted the firm. However, when Mr. John Joshi submitted his application for retirement, R2 and R3 stated that they would not approve the retirement of John Joshi without settling the claims of the continuing partners. As per section 32(1)( c) of the Partnership Act, in a partnership at will, a person may retire by giving notice in writing to all other partners of his intention to retire. In this case, the HC observed that John Joshi gave notice of his retirement to R2 and R3 and in view of Section 32(1)(c), the petitioner stands retired from the partnership namely ‘R. Menon and Associates’ on and from the date of notice.
- The HC was of the view that it was incorrect on part of the ICAI to refuse registering the notice of such retirement u/s 32(1)(c) of the Partnership Act for the purpose of Regulation 190 of the CA Regulations as Section 190 serves the limited purpose of approving the trade name or Firm name of a Chartered Accountant or a Firm and for maintaining Register of Offices and Firms, for that purpose.
- The HC further observed that non-recording of such retirement by the ICAI in its Registers, will have serious adverse consequences on a Chartered Accountant. The Council will not only record in their registers that the partnership is under dispute but will communicate the said fact C & A.G. and Reserve Bank of India, while furnishing the particulars of a Firm for empanelment of Bank/C&AG audits. The decision of ICAI not to recognise and record the retirement of the petitioner from ‘M/s. R. Menon and Associates’ will therefore cause unnecessary and unwarranted hindrance to the professional advancement of the petitioner. It will offend the fundamental right of the petitioner to practice a profession freely, guaranteed to him under Article 19(1)(g) of the Constitution of India.
- The forcible continuance of the petitioner, as a partner of a Firm which is loaded with partnership disputes, has civil consequences also on the petitioner. Such recording and communication will indeed affect the chances of the petitioner to get audit assignments.
Based on the above observations, the HC directed ICAI to recognise the retirement of the petitioner from the Firm ‘M/s. R. Menon and Associates’ and ICAI to permit the reconstitution of Firm of R 2 and R3 if they so desire and are eligible.