In a rare ruling against the Institute of Chartered Accountants of India (ICAI), the Kerala high court has held that the professional body not allowing chartered accountants (Cas) to register a new firm without settling dispute with the earlier partnership firm violates the constitutional right to practise a profession.
The ruling was given by justice A Nagaresh after considering a petition (WP-C No. 5833/2020) filed by Joshi John of Chittethukara through advocate VM Krishnakumar.
In the petition, it was stated that the petitioner was the working partner of a three-member partnership at will and that the other two members were not taking an active role in the running the partnership.
Following a dispute with the other partners, the petitioner filed an application to ICAI online to dissolve the partnership but the professional body insisted on OTP confirmation by other partners. Another application filed by the petitioner to register a new partnership was also not allowed citing the reason that he was in charge of the other partnership. His attempt to register his firm as a sole proprietorship was also denied for the same reason.
The court said it is clear from the scheme and provisions of the Chartered Accountants Act that it is not intended to register the partnerships of CAs or regulate inter se relations or disputes between partners but only intended to regulate trade name or firm name and changes to them. Thus, registration and regulation of a partnership firm of CAs, like any other partnerships, are governed by Indian Partnership Act (IPA), the court held.
As per Section 43 of IPA, an at-will partnership can be dissolved by any partner giving notice in writing to other partners. Therefore, the partnership should be treated as dissolved from the date the petitioner issued notices to the other partners, the court held.
“The legal position under the Indian Partnership Act being so, the 1st respondent-Institute (ICAI) cannot take a stand that they will not recognize such retirement for the purpose of Regulation 190 of the Chartered Accountant Regulations,” the judgment said. Such decision of ICAI 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 court held.
Read Judgement here: