The Chartered Accountants (Amendment) Act, 2006.

KM.

REGISTERED NO . DL-(N)04/0007/2003-05

रजिस्ट्री सं० डी० एल० ( एन) 04/0007/2003-05

भारत का राजपत्र The Gazette ofIndia

असाधारण

EXTRAORDINARY

भाग II - खण्ड 1

PART II - Section 1

प्राधिकार से प्रकाशित

PUBLISHED BY AUTHORITY

सं० 11]

नई दिल्ली, वृहस्पतिवार, मार्च 23, 2006 / चैत्र 2, 1928

No. 11]

NEW DELHI, THURSDAY, MARCH 23, 2006 /CHAITRA 2 , 1928

इस भाग में भिन्न पृष्ठ संख्या दी जाती है जिससे कि यह अलग संकलन के रूप में रखा जा सके ।

Separate paging is given to this Part in order that it may be filed as a separate compilation.

MINISTRY OF LAW AND JUSTICE

(Legislative Department)

New Delhi, the 23rd March , 2006/Chaitra 2, 1928 (Saka)

The following Act of Parliament received the assent of the President on the 22nd March , 2006 , and is hereby published for general information:-

THE CHARTERED ACCOUNTANTS ( AMENDMENT) ACT, 2006

No. 9 OF 2006

[22ndMarch, 2006. ]

AnAct further to amend the CharteredAccountants Act, 1949 .

BE it enacted by Parliament in the Fifty- seventh Year of the Republic of India as follows:-

1. (1) This Act may be called the Chartered Accountants (Amendment) Act, 2006.

Short title and commencement .

(2) It shall come into force on such date as the Central Govemment may, by notification intheOfficial Gazette , appoint :

Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement ofthis Act shallbe construed as a reference to the commencement of that provision.

GAZETTE OF INDIA EXTRAORDINARY

[PART II-

Amendment of section 2 .

2. In the Chartered Accountants Act, 1949 (hereinafter referred to as the principal Act) , 38 of 1949 . in section 2 ,-

(1) insub -section ( 1 ) , -

( i) after clause (a) , the following clauses shall be inserted , namely:-

'(aa) "Authority " means the Appellate Authority constituted under section 22A;

(aaa) "Board" means the Quality Review Board constituted under section 28A; ' ;

(ii) after clause ( e) , the following clause shall be inserted , namely:-

'(ea) " notification" means a notification published in the Official

Gazette;';

(iii) after clause (h) , the following clauses shall be inserted , namely: --

' (ha) " specified " means specified by rules made by the Central Government under this Act;

(hb) "Tribunal" means a Tribunal established under sub - section ( 1)

ofsection 10B ;

(11) in sub- section ( 2) , in the Explanation , for the words "training of articled clerks ", the words " training of articled assistants " shall be substituted.

Amendment of section 4 .

3. In section 4 of the principal Act , for sub - section ( 3 ) , the following sub- section shall be substituted, namely:

"(3) Every person belonging to any of the classes mentioned in clauses ( ii) , ( iii) , (iv) , (v) and ( vi) of sub -section ( 1) shall have his name entered in the Register on application being made and granted in the prescribed manner and on payment of such fees , as may be determined , by notification, by the Council , which shall not exceed rupees three thousand:

Provided that the Council may, with the prior approval ofthe Central Government, determine the fee exceeding rupees three thousand, which shall not in any case exceed rupees six thousand ." .

Amendment of section 5.

4. In section 5 of the principal Act, for sub- section ( 3 ) , the following sub -section shall be substituted , namely:--

"(3) A member , being an associate who has been in continuous practice in India for at least five years , whether before or after the commencement of this Act, or whether partly before and partly after the commencement of this Act, and a member who has been an associate for a continuous period ofnot less than five years and who possesses such qualifications as the Council may prescribe with a view to ensuring that he has experience equivalent to the experience normally acquired as a result of continuous practice for a period of five years as a chartered accountant shall , on payment of such fees , as may be determined , by notification , by the Council , which shall not exceed rupees five thousand and on application made and granted in the prescribed manner , be entered in the Register as a fellow of the Institute and shall be entitled to use the letters F. C. A. after his name to indicate that he is a fellow of the Institute of Chartered Accountants:

Provided that the Council may with the prior approval ofthe Central Government , determine the fee exceeding rupees five thousand , which shall not in any case exceed rupees ten thousand. " .

5. In section 6 of the principal Act ,-

Amendment of section 6.

namely: (1) for sub -section (2), the following sub - section shall be substituted ,

"(2) Every such member shall pay such annual fee for his certificate as may be determined , by notification, by the Council, which shall not exceed rupees three thousand , and such fee shall be payable on or before the 1st day of April in each year :

GAZETTE OF INDIA EXTRAORDINARY

SEC. 1 ]

Provided that the Council may with the prior approval of the Central Government, determine the fee exceeding rupees three thousand , which shall not in any case exceed rupees six thousand." ;

(ii) after sub-section (2 ) , the following sub - section shall be inserted , namely:--

"(3) The certificate of practice obtained under sub -section ( 1 ) may be cancelled by the Council under such circumstances as may be prescribed . " .

6. In section 9 of the principal Act,-

Amendment of section 9 .

( 1) for sub-section (2 ) , the following sub -section shall be substituted , namely:-

"(2) The Council shall be composed of the following persons , namely :-

(a) not more than thirty -two persons elected by the members ofthe Institute from amongst the fellows of the Institute chosen in such manner and from such regional constituencies as may be specified:

Providedthat a fellow ofthe Institute, who has been found guilty of any professional or other misconduct and whose name is removed from the Register or has been awarded penalty of fine , shall not be eligible to contest the election,-

(1) incase of misconduct falling under the First Schedule of thisAct, for a period of three years;

(ii) in case of misconduct falling under the Second Schedule ofthisAct, for a period of six years ,

from the completion of the period of removal of name from the Register or payment of fine , as the case may be;

( b) not more than eight persons to be nominated in the specified manner, by the Central Government." ;

(ii) after sub- section ( 2 ), the following sub- sections shall be inserted , namely:-

"(3) No person holding a post under the Central Government or a State Government shall be eligible for election to the Council under clause (a) ofsub- section (2).

(4) No person who has been auditor of the Institute shall be eligible for election to the Council under clause (a) of sub-section (2) , for a period of three years after he ceases to be an auditor." .

7. For section 10 of the principal Act, the following section shall be substituted , namely:-

Substitution of new section for section 10 .

" 10. A member of the Council , elected or nominated under sub -section (2) of section 9 , shall be eligible for re-election or, as the case may be , re -nomination:

Re-election or re-nomination to Council .

Provided that no member shall hold the office for more than three consecutive

terms:

Provided further that a member of the Council, who is or has been elected as President under sub-section ( 1) of section 12 , shall not be eligible for election or nomination as a member of the Council . " .

8. After section 10 of the principal Act, the following sections shall be inserted , namely:-

Insertion of new sections 10A and 10B.

Settlement of dispute regar- ding election .

" 10A. In case of any dispute regarding any election under clause (a) of sub- section ( 2) of section 9, the aggrieved person may make an application within thirty days from the date of declaration of the result of election to the Secretary of the Institute, who shall forward the same to the Central Government.

GAZETTE OF INDIA EXTRAORDINARY

[PART II-

Establishment ofTribunal .

10B .( 1) On receipt of any application under section 10A , the Central Government shall , by notification , establish a Tribunal consisting of a Presiding Officer and two other Members to decide such dispute and the decision of such Tribunal shall be final .

(2) A person shall not be qualified for appointment,-

(a) as a Presiding Officer of the Tribunal unless he has been a member of the Indian Legal Service and has held a post in Grade I ofthe service for at least three years;

(b) as aMember unless he has been a member of the Council for at least one full term and who is not a sitting member ofthe Council or who has not been a candidate in the election under dispute; or

(c) as a Member unless he holds the post of a Joint Secretary to the Government of India or any other post under the Central Government carrying a scale ofpay which is not less than that of a Joint Secretary to the Government of India.

(3) The terms and conditions of service ofthe Presiding Officer and Members of the Tribunal , their place ofmeetings and allowances shall be such as may be specified.

(4) The expenses of the Tribunal shall be borne by the Council ." .

9. In section 12 of the principal Act,-

Amendment of section 12.

(i) in sub- section (3) , after the words " he shall be eligible for re-election" , the words, brackets and figure "under sub-section ( 1) " shall be inserted;

(ii) insub-section (4) ,

(a) for the word " President" occurring at both the places , the words "President and the Vice - President " shall be substituted;

(b) for the words" charge of his duties" , the words " charge of their duties" shall be substituted.

10.In section 13 of the principal Act,-

Amendment of section 13 .

(1) insub -section (2) , after the words "meetings of the Council ", the words " or he has been found guilty of any professional or other misconduct and awarded penalty of fine, " shall be inserted;

(ii) in the proviso to sub- section ( 3 ) , for the words " six months" , the words "one year" shall be substituted.

11. For section 15 of the principal Act, the following section shall be substituted, namely:-

Substitution of new section for section 15 .

Functions of Council .

"15. ( 1 ) The Institute shall function under the overall control , guidance and supervision of the Council and the duty of carrying out the provisions of this Act shall be vested in the Council.

(2) In particuiar , and without prejudice to the generality of the foregoing powers , the duties of the Council shall include

(a) to approve academic courses and their contents ;

(b) the examination of candidates for enrolment and the prescribing of feestherefor;

SEC. 1 ]

GAZETTE OF INDIA EXTRAORDINARY

(d) the prescribing of qualifications for entry in the Register ;

(e) the recognition of foreign qualifications and training for the purposes ofenrolment;

( the granting or refusal of certificates of practice under this Act ;

(g) the maintenance and publication of a Register of persons qualifiedto practice as chartered accountants;

(h) the levy and collection of fees from members , examinees and other persons;

( 1) subject to the orders of the appropriate authorities under the Act, the removal ofnames from the Register and the restoration to the Register of names which have been removed ;

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

(k) the carrying out , by granting financial assistance to persons other than members ofthe Council or in any other manner, of research in accountancy;

(1) the maintenance of a library and publication of books and periodicals relating to accountancy ;

(m) to enable functioning of the Director (Discipline) , the Board of Discipline, the Disciplinary Committee and the Appellate Authority constituted under the provisions of this Act;

(n) to enable functioning of the Quality Review Board;

(0) consideration of the recommendations of the Quality Review Board made under clause (a) of section 28B and the details of action taken thereon in its annual report ; and

(p) to ensure the functioning of the Institute in accordance with the provisions of this Act and in performance of other statutory duties as may be entrusted to the Institute from time to time ." .

12. After section 15 of the principal Act , the following section shall be inserted , namely:-

Insertion of new section 15A.

" 15A. ( 1 ) Subject to the provisions of this Act , any University established by law or any body affiliated to the Institute , may impart education on the subjects covered by the academic courses of the Institute.

Imparting education by Universities and other bodies.

(2) The Universities or bodies referred to in sub- section ( 1 ) shall , while awarding degree, diploma or certificate or bestowing any designation , ensure that the award or designation do not resemble or is not identical to one awarded by the Institute .

(3) Nothing contained in this section shall enable a University or a body to adopt a name or nomenclature which is in any way similar to that ofthe Institute." .

13. For section 16 of the principal Act, the following section shall be substituted, namely:-

Substitution of new section for section 16 .

" 16. ( 1 ) For the efficient performance of its duties , the Council shall

(a) appoint a Secretary to perform such duties as may be prescribed;

Officers and employees . salary, allowances , elc .

(b) appoint a Director (Discipline ) to perform such functions as are assigned to him under this Act and the rules and regulations framed thereunder.

GAZETTE OF INDIA EXTRAORDINARY

[PART II-

(2) The Council may also-

(a) appoint such other officers and employees as it considers necessary;

(b) require and take from the Secretary or from any other officer or employee such security for the due performance of his duties , as the Council considers necessary;

(d) with the previous sanction ofthe Central Government, fix the allowances ofthe President, Vice- President and other members of the Council and members of its Committees .

(3) The Secretary of the Council shall be entitled to participate in the meetings of the Council but shall not be entitled to vote thereat . " .

14. In section 17 of the principal Act,-

Amendment of section 17.

(a) insub-section ( 1) , for clause ( iii) , the following clause shall be substituted, namely:-

"(iii) a Finance Committee ." ;

(b) for sub-sections (2) and (3) , the following sub-sections shall be substituted, namely :-

"(2) The Council may also form such other committees from amongst its members as it consider necessary for the purpose of carrying out the provisions ofthisAct, and any Committee so formed may, with the sanction of the Council, co-opt such other members of the Institute not exceeding one- third of the members of the committee as it thinks fit, and any member so co-opted shall be entitled to exercise all the rights of a member of the committee.

(3) Each of the Standing Committees shall consist of the President and theVice-President ex officio, and minimum ofthree and maximum of five members to be elected by the Council from amongst its members ." .

15. In section 18 of the principal Act ,-

Amendment of section 18 .

(i) for sub - sections ( 3 ) , ( 4) and (5) , the following sub- sections shall be substituted, namely:-

"(3) The Council shall keep proper accounts of the fund distinguishing capital from revenue in the manner prescribed.

(4) The Council shall prepare in the manner prescribed and approve , prior to the start of the financial year, an annual financial statement (the budget) indicating all its anticipated revenues as well as all proposed expenditures for the forthcoming year.

(5) The annual accounts of the Council shall be prepared in such manner as may be prescribed and be subject to audit by a chartered accountant in practice to be appointed annually by the Council :

member of the Council during the last four years or a person who is in partnership

with such member shall be eligible for appointment as an auditor under this

Provided that no member of the Council or a person who has been a sub-section:

GAZETTE OF INDIA EXTRAORDINARY

SEC . 1 ]

Provided furtherthat, in the event it is brought to the notice of the Council that the accounts of the Council do not represent a true and fair view of its finances , then, the Council may itself cause a special audit to be conducted:

Provided also that, if such information , that the accounts of the Council do not represent a true and fair view of its finances, is sent to the Council by the Central Govemment , then, the Council may, wherever appropriate cause a special audit or take such other action as it considers necessary and shall fumish an action taken report on it to the Central Government." ;

(ii) after sub- section (5) , the following sub - sections shall be inserted, namely: --

"( 5A) As soon as may be practicable at the end of each year , the Council shall circulate the audited accounts to its members at least fifteen days in advance and consider and approve these accounts in a special meeting convened for the purpose.

(5B) The Council shall cause to be published in the Gazette of India not later than the 30th day of September of the year next following , a copy of the audited accounts and the Report of the Council for that year duly approved by the Council and copies of the said accounts and Report shall be forwarded to the Central Government and to all the members of the Institute." .

16. In section 19 of the principal Act ,-

Amendment of section 19 .

(i) in sub -section (3 ) , the words " on payment of such amount as may be prescribed" shall be inserted at the end;

(ii) for sub -section (4) , the following sub - section shall be substituted , namely:---

"(4) Every member of the Institute shall, on his name being entered in the Register, pay such annual membership fee as may be determined, by notification, by the Council , which shall not exceed rupees five thousand:

Provided that the Council may with the prior approval of the Central Govemment, determine the fee exceeding rupees five thousand, which shall not in any case exceed rupees ten thousand ." .

Amendment of section 20 .

17. In section 20 of the principal Act , after sub - section (2 ) , the following sub - section shall be inserted , namely:-

"(3) Ifthe name of any member has been removed from the Register under clause

(c) of sub- section ( 1 ) , on receipt of an application , his name may be entered again in the Register on payment of the arrears of annual fee and entrance fee along with such additional fee , as may be determined , by notification, by the Council which shall not exceed rupees two thousand:

Provided that the Council may with the prior approval of the Central Government, determine the fee exceeding rupees two thousand , which shall not in any case exceed rupees four thousand. " .

18. For section 21 of the principal Act , the following section shall be substituted , namely:-

Substitution of new section for section 21 . Disciplinary Directorate .

"21. ( 1 ) The Council shall , by notification , establish a Disciplinary Directorate headed by an officer of the Institute designated as Director (Discipline ) and such other employees for making investigations in respect of any information or complaint receivedby it.

(2) On receipt of any information or complaint along with the prescribed fee , the Director (Discipline) shall arrive at a prima facie opinion on the occurrence of the alleged misconduct.

GAZETTE OF INDIA EXTRAORDINARY

[PART II-

(3) Where the Director ( Discipline) is of the opinion that a member is guilty ofany professional or other misconduct mentioned in the First Schedule , he shall place the matter before the Board of Discipline and where the Director (Discipline) is of the opinion that a member is guilty of any professional or other misconduct mentioned in the Second Schedule or in both the Schedules , he shall place the matter before the Disciplinary Committee .

(4) In order to make investigations under the provisions of this Act , the Disciplinary Directorate shall follow such procedure as may be specified.

(5) Where a complainant withdraws the complaint, the Director (Discipline ) shall place such withdrawal before the Board of Discipline or , as the case may be, the Disciplinary Committee , and the said Board or Committee may, if it is of the view that

the circumstances so warrant, permit the withdrawal at any stage. " . 19. After section 21 of the principal Act, the following sections shall be inserted , namely:-

Insertion of new sections 21A, 21B , 21C and 21D.

'21A. ( 1) The Council shall constitute a Board of Discipline consisting of-

Board of Discipline.

(a) a person with experience in law and having knowledge of disciplinary matters and the profession , to be its presiding officer;

(b) two members one ofwhom shall be a member ofthe Council elected by theCouncil and the other member shall be nominated by the Central Government from amongst the persons of eminence having experience in the field of law, economics, business, finance or accountancy;

(2) The Board of Discipline shall follow summary disposal procedure in dealing with all cases before it .

(3) Where the Board of Discipline is of the opinion that a member is guilty of a professional or other misconduct mentioned in the First Schedule , it shall afford to the member an opportunity of being heard before making any order against him and may thereafter take any one or more ofthe following actions , namely:

(a) reprimand the member;

(b) remove the name of the member from the Register up to a period of three months ;

lakh. (c) impose such fine as it may think fit , which may extend to rupees one

(4) The Director (Discipline ) shall submit before the Board of Discipline all information and complaints where he is ofthe opinion that there is no primafacie case and the Board of Discipline may, if it agrees with the opinion ofthe Director (Discipline), close the matter or in case of disagreement , may advise the Director (Discipline ) to further investigate the matter.

Disciplinary Committee.

21B . ( 1 ) The Council shall constitute a Disciplinary Committee consisting ofthe President or the Vice- President of the Council as the Presiding Officer and two members to be elected from amongst the members ofthe Council and two members to be nominated by the Central Government from amongst the persons of eminence having experience in the field of law, economics , business , finance or accountancy:

Provided that the Council may constitute more Disciplinary Committees as and when it considers necessary.

GAZETTE OF INDIA EXTRAORDINARY

SEC. 1 ]

(2) The Disciplinary Committee, while considering the cases placed before it shall follow such procedure as may be specified.

(3) Where the Disciplinary Committee is ofthe opinion that a member is guilty of a professional or other misconduct mentioned in the Second Schedule or both the First Schedule and the Second Schedule , it shall afford to the member an opportunity of being heard before making any order against him and may thereafter take any one or more ofthe following actions , namely: --

(a) reprimand the member;

(b) remove the name of the member from the Register permanently or for such period, as it thinks fit;

(4) Theallowances payable to the members nominated by the Central Government shall be such as may be specified.

5 of 1908 .

21C. For the purposes of an inquiry under the provisions of this Act , the Authority, the Disciplinary Committee, Board ofDiscipline and the Director (Discipline ) shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, in respect ofthe following matters , namely:-

(a) summoning and enforcing the attendance of any person and examining him on oath;

Authority, Disciplinary Committee, Board of Discipline and Director (Discipline) to have powers of civil court.

(b) the discovery and production of any document; and

Explanation. For the purposes of sections 21 , 21A, 21B , 21C and 22, "member of the Institute" includes a person who was a member of the Institute on the date ofthe alleged misconduct although he has ceased to be a member of the Institute at the time of the inquiry.

Transitional provisions .

21D. All complaints pending before the Council or any inquiry initiated by the Disciplinary Committee or any reference or appeal made to a High Court prior to the commencement of the Chartered Accountants (Amendment) Act, 2006 , shall continue to be governed by the provisions of this Act, as if this Act had not been amended by the Chartered Accountants (Amendment) Act, 2006. ' .

20. For section 22 of the principal Act , the following section shall be substituted , namely:-

Substitution of new section for section 22 . Professional or other misconduct defined.

'22. For the purposes of this Act, the expression " professional or other misconduct " shall be deemed to include any act or omission provided in any of the Schedules, but nothing in this section shall be construed to limit or abridge in any way the power conferred or duty cast on the Director (Discipline) under sub -section ( 1) of section 21 to inquire into the conduct of any member of the Institute under any other circumstances .' .

21. For Section 22A of the principal Act, the following sections shall be substituted, namely:-

"22A. ( 1 ) The Central Government shall, by notification, constitute anAppellate Authority consisting of-

new sections for section 22A . Substitution of Constitution ofAppellate Authority.

(a) a person who is or has been a judge of a High Court, to be its Chairperson;

(b) two members to be appointed from amongst the persons who have been members of the Council for at least one full term and who is not a sitting member ofthe Council;

GAZETTE OF INDIA EXTRAORDINARY

[PART II-

(c) two members to be nominated by the Central Government from amongst persons having knowledge and practical experience in the field of law, economics, business, finance or accountancy.

(2) The Chairperson and other members shall be part -time members .

22B . ( 1 ) A person appointed as the Chairperson shall hold office for a term of three years from thedate on which he enters upon his office or until he attains the age of sixty- five years, whichever is earlier.

Term of office of Chairperson and members ofAuthority.

(2) A person appointed as a member shall hold office for a term ofthree years from the date on which he enters upon his office or until he attains the age of sixty- two years , whichever is earlier .

22C. The allowances payable to , and other terms and conditions of service of, the Chairperson and members and the manner of meeting expenditure of the Authority by the Council and such other authorities shall be such as may be specified.

Allowances and conditions of service of Chairperson and members ofAuthority.

22D. ( 1 ) The office of the Authority shall be at Delhi .

(2) The Authority shall regulate its own procedure ..

Procedure 10 be regulated by Authority.

(3)All orders and decisions of the Authority shall be authenticated by an officer duly authorised by the Chairperson in this behalf.

Officers and other staff of Authority.

22E. ( 1 ) The Council shall make available to the Authority such officers and other staff members as may be necessary for the efficient performance of the functions oftheAuthority.

(2) The salaries and allowances and conditions of service of the officers and other staff members of the Authority shall be such as may be prescribed .

22F. ( 1 ) The Chairperson or a member may, by notice in writing under his hand addressed to the Central Government , resign his office:

Resignation and removal of Chairperson and members .

Provided that the Chairperson or a member shall , unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of term of office, whichever is earlier.

(2) The Chairperson or a member shall not be removed from his office except by an order ofthe Central Government on the ground of proved misbehaviour or incapacity after an inquiry made by such person as the Central Government may appoint for this purpose in which the Chairperson or a member concerned has been informed of the charges against him and given a reasonable opportunity of being heard in respect of such charges .

Appeal to Authority.

22G. ( 1 ) Any member of the Institute aggrieved by any order of the Board of Discipline or the Disciplinary Committee imposing on him any of the penalties referred to in sub-section (3 ) of section 21A and sub -section (3 ) of section 21B , may within ninety days from the date on which the order is communicated to him , prefer an appeal totheAuthority:

Provided that the Director (Discipline) may also appeal against the decision of theBoard ofDiscipline or the Disciplinary Committee to the Authority, if so authorised by the Council , within ninety days:

Provided further that the Authority may entertain any such appeal after the expiry ofthe said period of ninety days , if it is satisfied that there was sufficient cause for not filing the appeal in time .

GAZETTE OF INDIA EXTRAORDINARY

SEC. 1 ]

(2) TheAuthority may, after calling for the records of any case , revise any order made by the Board ofDiscipline or the Disciplinary Committee under sub- section (3) ofsection 21 A and sub -section ( 3) of section 21B and may-

(a) confirm , modify or set aside the order;

(b) impose any penalty or set aside , reduce, or enhance the penalty imposed bythe order;

(c) remitthecase to the Board of Discipline or Disciplinary Committee for such further enquiry as the Authority considers proper in the circumstances of the case; or

(d) pass such other order as the Authority thinks fit:

Provided that the Authority shall give an opportunity of being heard to the parties concerned before passing any order. " .

22. In section 24A of the principal Act , sub - section (3) shall be omitted.

Amendment of section 24A.

Amendmeni of section 26 .

23. In section 26 of the principal Act, for sub-section (2 ) , the following sub- section shall be substituted, namely:--

"(2) Any person who contravenes the provisions of sub - section ( 1 ) shall , without prejudice to any other proceedings , which may be taken against him , be punishable on firstconviction with a fine not less than five thousand rupees but which may extend to one lakh rupees , and in the event of a second or subsequent conviction with imprisonment for a term which may extend to one year or with fine not less ten thousand rupees but which may extend to two lakh rupees or with both . " .

24. After Chapter VII of the principal Act, the following Chapter shall be inserted , namely:-

Insertion of new Chapter VIIA .

"CHAPTER VIIA

QUALITY REVIEW BOARD

28A . ( 1 ) The Central Government shall , by notification, constitute a Quality Review Board consisting of a Chairperson and ten other members .

Establishment of Quality Review Board .

(2) The Chairperson and members of the Board shall be appointed from amongst the persons of eminence having experience in the field of law, economics , business, finance or accountancy.

(3) Five members ofthe Board shall be nominated by the Council and other five members shall be nominated by the Central Government .

28B. The Board shall perform the following functions , namely:--

Functions of Board.

(a) to make recommendations to the Council with regard to the quality of services provided by the members of the Institute;

(b) to review the quality of services provided by the members of the Institute including, audit services ; and

(c) to guide the members of the Institute to improve the quality of services and adherence to the various statutory and other regulatory requirements .

Procedure of Board.

28C. The Board shall meet at such time and place and follow in its meetings such procedure as may be specified.

28D. ( 1) The terms and conditions of service of the Chairperson and the members ofthe Board, and their allowances shall be such as may be specified.

(2) The expenditure of the Board shall be borne by the Council ." .

Terms and conditions of services of Chairperson and members of Board and its expenditure.

GAZETTE OF INDIA EXTRAORDINARY

[PART II-

25. After section 29 of the principal Act , the following section shall be inserted , namely:-

Insertion of new seclion 29A.

"29A . ( 1 ) The Central Government may, by notification , make rules to carry out the provisions of thisAct .

Power of Central Government to make rules .

(2) In particular , and without prejudice to the generality of the foregoing powers , such rules may provide for all or any of the following matters , namely:-

(a) the manner of election and nomination in respect of members to the Council under sub - section (2) of section 9;

(b) the terms and conditions of service of the Presiding Officer and Members of the Tribunal , place of meetings and allowances to be paid to them undersub - section (3 ) of section 10B;

(d)theprocedure while considering the cases by the Disciplinary Committee under sub - section (2 ) , and the fixation of allowances of the nominated members under sub - section ( 4) of section 21B ;

(e) the allowances and terms and conditions of service of the Chairperson and members of the Authority and the manner of meeting expenditure by the Council under section 22C;

(1) theprocedure to be followed by the Board in its meetings under section 28C; and

(g) the terms and conditions of service of the Chairperson and members of the Board under sub- section ( 1 ) of section 28D . " .

26. In section 30 of the principal Act,-

Amendment of section 30.

(a) in sub-section ( 1 ) , the words " and a copy of such regulations shall be sent to each member of the Institute" shall be omitted .

(b) in sub-section ( 2 ),-

(i ) in clause (g) , the words " the Council and " shall be omitted;

(ii) in clause (1) , for the word " clerks " occuring at both the places, the word "assistants " shall be substituted ;

(iii) in clause ( r) , the word " and " shall be inserted at the end;

(iv) clause ( s ) , shall be omitted .

27. For section 30B of the principal Act, the following section shall be substituted,

Substitution of new section for namely:- section 30B .

Rules, regulations and nolifications tobe laid before Parliament.

"30B . Every rule and every regulation made and every notification issued under this Act shall be laid , as soon as may be after it is made or issued, before each House of Parliament , while it is in session , for a total period of thirty days which may be comprised in one session or in two or more successive sessions , and if, before the expiry of the session immediately following the session or the successive sessions aforesaid , both Houses agree in making any modification in the rule, regulation or notification , or both Houses agree that the rule , regulation or notification should not be made or issued, the rule , regulation or notification , shall thereafter have effect only insuch modified form or be of no effect, as the case may be; so , however , that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule , regulation or notification ." .

28. After section 30B of the principal Act, the following sections shall be inserted , namely:-

Insertion of new sections 30C , 30D and 30E .

Power of Central Government to issue directions .

"30C. ( 1 ) In the event of non -compliance by the Council of any provisions of this Act , the Central Government may give to the Council such general or special directions as it considers necessary to ensure compliance and the Council shall, in the discharge of its functions under this Act, comply with such directions.

GAZETTE OF INDIA EXTRAORDINARY

SEC. 1]

(2) If, in the opinion of the Central Government, the Council has persistently made default in giving effect to the directions issued under sub - section ( 1) , it may, after giving an opportunity of being heard to the Council , by notification , dissolve the Council, whereafter a new Council shall be constituted in accordance with the provisions of this Act with effect from such date as may be decided by the Central Government:

Provided that the Central Government shall ensure constitution of a new Council in accordance with the provisions of this Act within a period ofone year from the date of its dissolution.

(3) Where the Central Government has issued a notification under sub-section (2) dissolving the Council , it shall , pending the constitution of a new Council in accordance with the provisions of this Act, nominate any person or body of persons not exceeding five members to manage the affairs and discharge all or any of the functions of the Council under this Act .

Protection of action taken ingood faith.

30D. No suit , prosecution or other legal proceeding shall lie against the Central Government or the Council or the Authority or the Disciplinary Committee or the Tribunal or the Board or the Board of Discipline or the Disciplinary Directorate or any officer ofthat Government, Council , Authority, Disciplinary Committee , Tribunal , Board, Board ofDiscipline or the Disciplinary Directorate , for anything which is in good faith done or intended to be done under this Act or any rule, regulation , notification , direction ororder made thereunder .

Members , etc. , to be public servants .

45 of 1860 .

30E. The Chairperson, Presiding Officer , members and other officers and employees of the Authority, Disciplinary Committee , Tribunal , Board , Board of Discipline or the Disciplinary Directorate shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code." .

29. For the First Schedule and the Second Schedule to the principal Act, the following Schedules shall be substituted, namely:-

Substitution of new Schedules for First Schedule and Second Schedule.

'THE FIRST SCHEDULE [See sections 21 (3 ), 21A(3 ) and 22]

PART I

Professional misconduct in relation to chartered accountants in practice

A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he

(1 ) allows any person to practice in his name as a chartered accountant unless such person is also a chartered accountant in practice and is in partnership with or employed by him;

(2) pays or allows or agrees to pay or allow, directly or indirectly, any share , commission or brokerage in the fees or profits of his professional business , to any person other than a member of the Institute or a partner or a retired partner or the legal representative of a deceased partner, or a member of any other professional body or with such other persons having such qualifications as may be prescribed , for the purpose of rendering such professional services from time to time in or outside India.

Explanation. In this item, "partner " includes a person residing outside India with whom a chartered accountant in practice has entered into partnership which is not in contravention of item (4) ofthis Part;

[PART II-

GAZETTE OF INDIA EXTRAORDINARY

(3) accepts or agrees to accept any part of the profits of the professional work of a person who is not a member of the Institute:

Provided that nothing herein contained shall be construed as prohibiting a member from entering into profit sharing or other similar arrangements , including receiving any share commission or brokerage in the fees , with a member of such professional body or other person having qualifications , as is referred to in item (2) of this Part ;

(4) enters into partnership , in or outside India, with any person other than a chartered accountant in practice or such other person who is a member of any other professional body having such qualifications as may be prescribed , including a resident who but for his residence abroad would be entitled to be registered as a member under clause (v) of sub -section ( 1 ) of section 4 or whose qualifications are recognised by the Central Government or the Council for the purpose of permitting such partnerships ;

(5) secures , either through the services of a person who is not an employee of such chartered accountant or who is not his partner or by means which are not open to a chartered accountant, any professional business:

Provided that nothing herein contained shall be construed as prohibiting any arrangement permitted in terms of items (2) , (3 ) and (4 ) of this Part;

(6) solicits clients or professional work either directly or indirectly by circular, advertisement, personal communication or interview or by any other means :

Provided that nothing herein contained shall be construed as preventing or prohibiting-

(i) any chartered accountant from applying or requesting for or inviting or securing professional work from another chartered accountant in practice ; or

(ii) amember from responding to tenders or enquiries issued by various users of professional services or organisations from time to time and securing professional work as a consequence;

(7) advertises his professional attainments or services , or uses any designation or expressions other than chartered accountant on professional documents , visiting cards , letter heads or sign boards , unless it be a degree of a University established by law in India or recognised by the Central Government or a title indicating membership of the Institute of CharteredAccountants of India or of any other institution that has been recognised by the Central Government or may be recognised by the Council :

Provided that a member in practice may advertise through a write up , setting out the services provided by him or his firm and particulars of his firm subject to such guidelines as may be issued by the Council ;

(8) accepts a position as auditor previously held by another chartered accountant or a certified auditor who has been issued certificate under the Restricted Certificate Rules , 1932 without first communicating with him in writing;

(9) accepts an appointment as auditor of a company without first ascertaining from it whether the requirements of section 225 of the Companies Act, 1956 in respect of such 1 of 1956. appointment have been duly complied with;

(10) charges or offers to charge , accepts or offers to accept in respect ofany professional employment, fees which are based on a percentage of profits or which are contingent upon the findings , or results of such employment, except as permitted under any regulation made under this Act;

GAZETTE OF INDIA EXTRAORDINARY

SEC. 1]

(11) engages in any business or occupation other than the profession of chartered accountant unless permitted by the Council so to engage:

Provided that nothing contained herein shall disentitle a chartered accountant from being a director of a company (not being a managing director or a wholetime director ) unless he or any of his partners is interested in such company as an auditor;

( 12) allows a person not being a member of the Institute in practice , or a member not being his partner to sign on his behalfor on behalfofhis firm, any balance-sheet, profit and loss account, report or financial statements.

PART II

Professional misconduct in relation to members of the Institute in servicė

Amember ofthe Institute (other than a member in practice) shall be deemed to be guilty ofprofessional misconduct, ifhe being an employee of any company, firm or person--

(1) pays or allows or agrees to pay directly or indirectly to any person any share in the emoluments ofthe employment undertaken by him;

(2) accepts or agrees to accept any part of fees, profits or gains from a lawyer , a chartered accountant or broker engaged by such company, firm or person or agent or customer ofsuch company, firm or person by way of commission or gratification .

PART III

Professional misconduct in relation to members of the Institute generally

Amember of the Institute , whether in practice or not, shall be deemed to be guilty of professional misconduct, if he-

( 1 ) not being a fellow of the Institute , acts as a fellow of the Institute;

(2) does not supply the information called for, or does not comply with the requirements asked for , by the Institute , Council or any of its Committees , Director (Discipline) , Board of Discipline, Disciplinary Committee , Quality Review Board or the Appellate Authority;

(3)while inviting professional work from another chartered accountant or while responding to tenders or enquiries or while advertising through a write up or anything as provided for in items (6) and (7) ofPart I of this Schedule, gives information knowing it to be false.

PART IV

Other misconduct in relation to members of the Institute generally

Amember of the Institute , whether in practice or not , shall be deemed to be guilty of othermisconduct , if he-

(1 ) is held guilty by any civil or criminal court for an offence which is punishable with imprisonment for a term not exceeding six months ;

(2) in the opinion of the Council , brings disrepute to the profession or the Institute as a result of his action whether or not related to his professional work .

THE SECOND SCHEDULE

[ See sections 21 (3 ), 21B ( 3 ) and 22]

PARTI

Professional misconduct in relation to chartered accountants in practice

A chartered accountant in practice shall be deemed to be guilty of professional misconduct , if he-

(1) discloses information acquired in the course of his professional engagement to any person other than his client so engaging him , without the consent of his client or otherwise than as required by any law for the time being in force;

GAZETTE OF INDIA EXTRAORDINARY

[PART II-SEC.1 ]

(2) certifies or submits in his name , or in the name of his firm , a report ofan examination offinancial statements unless the examination of such statements and the related records has been made by him or by a partner or an employee in his firm or by another chartered accountant in practice;

(3) permits his name or the name of his firm to be used in connection with an estimate ofearnings contingent upon future transactions in a manner which may lead to the belief that he vouches for the accuracy of the forecast;

(4) expresses his opinion on financial statements of any business or enterprise in which he, his firm , or a partner in his firm has a substantial interest;

(5) fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he isconcerned with that financial statement in a professional capacity;

(6) failsto report a material misstatement known to him to appear in a financial statement withwhich he is concerned in a professional capacity;

(7) does not exercise due diligence , or is grossly negligent in the conduct of his professional duties ;

(8) fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion;

(9) fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances;

(10) fails to keep moneys ofhis client other than fees or remuneration or money meant to be expended in a separate banking account or to use such moneys for purposes for which they are intended within a reasonable time.

PART II

Professional misconduct in relation to members ofthe Institute generally

Amember of the Institute , whether in practice or not, shall be deemed to be guilty of professional misconduct, if he-

(1) contravenes any of the provisions ofthis Act or the regulations made thereunder or any guidelines issued by the Council ;

(2) being an employee of any company, firm or person , discloses confidential information acquired in the course of his employment except as and when required by any law for the time being in force or except as permitted by the employer ;

(3) includes in any information , statement, return or form to be submitted to the Institute , Council or any of its Committees , Director (Discipline), Board of Discipline, Disciplinary Committee, Quality Review Board or the Appellate Authority any particulars knowing them to be false;

(4) defalcates or embezzles moneys received in his professional capacity.

PART III

Other misconduct in relation to members of the Institute generally

Amember ofthe Institute, whether in practice or not , shall be deemed to be guilty of other misconduct, if he is held guilty by any civil or criminal court for an offence which is punishable with imprisonment for a term exceeding six months .' .

T. K. VISWANATHAN,

Secy. to theGovt. ofIndia.

PRINTED BY THE MANAGER , GOVERNMENT OF INDIA PRESS , MINTO ROAD , NEW DELHI AND PUBLISHED BY THE CONTROLLER OF PUBLICATIONS , DELHI , 2006 .

MGIPMRND-6709GI ( S- 3 )-24-03-2006 .