An adjournment a day keeps orders away: Why CA appellate body needs a closer scrutiny and overhaul – The Economic Times

Clipped from: https://economictimes.indiatimes.com/prime/corporate-governance/an-adjournment-a-day-keeps-orders-away-why-ca-appellate-body-needs-a-closer-scrutiny-and-overhaul/primearticleshow/88652572.cms

SynopsisCA/CS/CWA tribunal’s adjournment culture is taking the sheen out of the disciplinary process. With remuneration of the tribunal members linked to number of sittings, litigants complain of too few hearings each day, often just one a day and frequent adjournments of even these.

Srinivas Talluri was the signing partner of audit major Price Waterhouse in its mandate to audit the books of Satyam Computer Services.

Talluri was among the chartered accountants who faced action when an INR8,000 crore scandal broke out in the Hyderabad-based company in January 2009.

The scandal had a deep impact on the country’s corporate law framework and regulatory landscape. The new Companies’ Act, that came into force in 2013, incorporated several provisions to improve corporate governance.

In April 2014, the disciplinary body of the Institute of Chartered Accountants of India (ICAI) confirmed the life ban on Talluri and three others and imposed a penalty of INR5 lakh on each of them.

Seven years on, Talluri’s appeal is languishing in the appellate authority that deals with the disciplinary cases of the three professional bodies, ICAI, Institute of Cost and Management Accountants of India and the Institute of Company Secretaries of India (ICSI).

On December 21, another hearing of the matter was scheduled. The hearing came and went, closure eludes.

Lawyers and appellants say Talluri’s case is symptomatic of the rot that has afflicted the body over the years. The structure and working of this institution, which was established to reduce the load on the high courts and ensure faster delivery of justice, needs an urgent relook, they argue.

Born in the year of Satyam
It is ironic that an appeal related to Satyam is dragging along in the appellate body, for it was two months after the scandal broke, that the government notified the formation of the authority as measure to “expedite” justice delivery in areas of professional misconduct.

Though the mother acts of CAs, CMAs and CS were amended as early as 2006 to allow appeals against the disciplinary cases to be made to the appellate authority as against the high courts earlier, the constitution of the appellate body itself was notified only in March 2009.

The body consists of a chairperson, who is usually a retired high court judge, two government nominees and two nominees each from the councils of the three institutes.

The appellate authority is located in NCR, headed by a chairperson, who is or has been a judge of a high court, two former members of the council of each of the three institutes and two nominees of the central government having knowledge and practical experience in the field of law, economics, business, finance or accountancy.

“It is absurd because they list only one case a day, when matters get adjourned, the next date is three to four months later. Other than the fact this is a waste of public resources, it becomes excruciating for both lawyers and appellants, because cases are simply not heard.”

— A lawyer representing an appellantThus, each matter is heard by the panel of five members – chairperson, two government nominees and two members of the respective institutes. At present, retired judge of Allahabad High Court Shashikant Gupta is the chairperson of the body.

Structure of the appellate body@2x

Former members of the central councils of the respective institutes get appointed to the authority as members, Delhi-based Pankaj Tyagee and Hyderabad-based J Venkateswarlu are currently members representing the CA institute on the authority.

Similarly, Preeti Malhotra and Shyam Agarwal represent ICSI, while Brijmohan Sharma and Avjit Goswami represent ICMAI. Praveen Garg and Anand Mohan Bajaj are the government nominees on the authority.

Only one hearing a day
Stakeholders who are familiar with the body’s functioning said that for the past several months, the body has been listing only one matter for hearing everyday.

This, they point out, is unusual and tribunals like the Securities Appellate Tribunals (SAT), which hears complex matters relating to securities markets hear at least half a dozen matters on a routine basis, though they might reserve an odd day for matters that require detailed hearings.

The causelists of the appellate authority are put up on its website. The latest causelist dated December 13, 2021 shows that every day in December there was a solitary case listed for hearing. Even holidays like Christmas and Sundays were no exception.

Appellate causelist

The causelist showed that hearings were scheduled for each of the 31 days in the month of December at various timings such as 11AM, 4PM and 5.15PM.

“So, what you see is everyday, they list only one matter each and even that, they grant adjournments at the drop of a hat,” said a lawyer representing an appellant.

Any member of the institutes (professional) who is aggrieved by an order of the board of discipline or the disciplinary committee of the institute imposing a penalty on him, may appeal against the order to the appellate authority. The director (discipline) can also appeal against the decision of the board of discipline or the disciplinary committee to the appellate authority.

However, in majority of the cases it is the members filing appeals against ICAI.

“It is absurd because they list only one case a day, when matters get adjourned, the next date is three to four months later. Other than the fact this is a waste of public resources, it becomes excruciating for both lawyers and appellants, because cases are simply not heard,” the lawyer quoted earlier added.

Appellants said there are cases of adjournments being heard when no one is asking.

A member of the appellate body said, “It is the prerogative of the chairman to decide the hearings. At present, due to Covid-19 we are doing online hearings. But there are a lot of technical troubles. And, litigants are also requesting adjournments often and as per principles of natural justice, we have to grant these adjournments.”

On the Satyam case, the member said, “In Satyam matters, out of six only one is remaining. It was supposed to be decided in June but due to some personal inconvenience of the then chairman this could not be done. It will be concluded soon.”

People familiar with the working of the institute said the case backlog is not as high as in the courts and about 50-60 matters will be pending. “These matters could be quickly heard and disposed of.”

Finances and sitting fee
Though the appellate body is set up by the central government, it is heavily reliant on the institutes themselves for funding and infrastructure requirements.

While the ICAI provides the infrastructure facilities, the other two institutes share the funding burden.

The payment of allowances to the chairperson and members is governed by rules called The Appellate Authority (Allowances payable to and other terms and conditions of service of chairperson and members and the manner of meeting expenditure of the authority) Rules, 2006.

The rules are silent on any regular salary or monthly remuneration for the members or the chairperson.

It says the chairperson and the members of the authority shall be paid a prescribed amount for each day of sitting.

Rising sitting fees@2x

While initially this was fixed at INR2,000 for the chairperson and INR1,500 for the members, this has since gone up considerably. In 2011, the government tripled it to INR6,000 per day for the chairperson and INR4,500 for the members.

In 2016, the fee was further raised to INR10,000 and INR8,000 for the chairperson and the members, respectively.

A back of the envelope calculation showed that for the month of December 2021, where there were 31 days of hearing including Christmas and Sundays, the chairperson’s sitting fee amounts to INR3,10,000, while each of the members would have taken home some INR2,40,000. Moreover, 30 of the 31 cases listed in December pertained to ICAI. Only one case listed on December 31 was related to an order by ICSI.

A detailed questionnaire sent to the registrar of the appellate authority on Wednesday asking for details of cases concluded, pendencies and whether the sitting fee linked to days of sitting is the cause of few hearings and frequent adjournments is yet to be responded to.

When ET Prime called the registrar on Friday on his mobile phone, he said a response will be shared. This article will be updated on receipt of the response.

A former member of the appellate body said, “The functioning of the body depends largely on the chairman. The members of the institute are senior ones and they are holding these positions more for prestige than for the money.”

(Graphics by Sadhana Saxena)(Originally published on Jan 3, 2022, 12:01 AM IST)

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