company law-professional misconduct

Professional misconduct

Under section 9 of the Company Secretaries Act, 1980, the Council of the Institute is mandated to manage the affairs of the Institute and discharge the functions assigned to it under the Act. The Council has authority to exercise disciplinary powers by instituting inquiry into cases where it is prima facie of the opinion that a member is guilty of professional or other misconduct.

Section 21 of the Act and Regulations 15, 16, 17, 18 & 19 of the Company Secretaries Regulations, 1982 lay down the procedure to be followed in an enquiry to know that for the purpose of disciplinary proceedings, 'member of the Institute' includes a person who was a member of the Institute on the date of the alleged misconduct although he has ceased to be a member at the time of enquiry.

DEFINITION OF PROFESSIONAL OR OTHER MISCONDUCT

Section 22 of the Act deems any act or omission specified in the Schedules to the Act to be a misconduct.  It categorically provides that the Council’s power to enquire into the conduct of any member under any circumstances is in no way limited or abridged.

 

Professional misconduct in relation to members of the Institute is broadly categorized as below:

A.      Professional misconduct in relation to Company Secretaries in Practice (Part I of the First Schedule containing 11 clauses)

B.       Professional misconduct in relation to members of the Institute in service (Part II of the First Schedule containing two clauses)

C.      Professional misconduct in relation to members of the Institute generally (Part III of the First Schedule containing three clauses)

D.      Other misconduct in relation to members of the Institute generally (Part IV of the First Schedule containing two clauses)

E.       Professional misconduct in relation to Company Secretaries in Practice (Part I of the Second Schedule containing ten clauses)

F.       Professional misconduct in relation to members of the Institute generally (Part II of the Second Schedule containing four clauses)

G.      Other misconduct in relation to members of the Institute generally (Part III of the Second Schedule containing one clause)

 

A)        Professional misconduct in relation to Company Secretaries in Practice (Part I of the First Schedule containing 11 clauses)

 

A Company Secretary in Practice shall be deemed to be guilty of professional misconduct, if he–

   (1)   allows any person to practice in his name as a Company Secretary unless such person is also a Company Secretary 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 Company Secretary in practice has entered into partnership which is not in contravention of item (4) of this Part;

   (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 Company Secretary 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 (e) of sub-section (1) of section 4 or whose qualifications are recognized 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 company secretary or who is not his partner or by means which are not open to a Company Secretary, 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 company secretary from applying or requesting for or inviting or securing professional work from another company secretary in practice; or

         (ii)   a member from responding to tenders or enquiries issued by various users of professional services or organizations 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 Company Secretary on professional documents, visiting cards, letterheads or sign boards, unless it be a degree of a University established by law in India or recognized by the Central Government or a title indicating membership of the Institute of Company Secretaries of India or of any other institution that has been recognized by the Central Government or may be recognized 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 a Company Secretary in practice previously held by another Company Secretary in practice without first communicating with him in writing;

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

(10)   engages in any business or occupation other than the profession of Company Secretary unless permitted by the Council so to engage:

          Provided that nothing contained herein shall disentitle a Company Secretary from being a director of a company except as provided in the Companies Act, 1956;

(11)   allows a person not being a member of the Institute in practice, or a member not being his partner to sign on his behalf or on behalf of his firm, anything which he is required to certify as a Company Secretary, or any other statements relating thereto.

B)         Professional misconduct in relation to members of the Institute in service (Part II of the First Schedule containing two clauses)

A member of the Institute (other than a member in practice) shall be deemed to be guilty of professional misconduct, if he, 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 of the employment undertaken by him;

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

 

C)         Professional misconduct in relation to members of the Institute generally (Part III of the First Schedule containing three clauses)

A member 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 Company Secretary or while responding to tenders or enquiries or while advertising through a write up, or anything as provided for in items (6) and (7) of Part I of this Schedule, gives information knowing it to be false.

 

D)        Other misconduct in relation to members of the Institute generally (Part IV of the First Schedule containing two clauses)

A member of the Institute, whether in practice or not, shall be deemed to be guilty of other misconduct, if –

   (1)   he 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, he brings disrepute to the profession or the institute as a result of his action whether or not related to his professional work.]

 

 

E)         Professional misconduct in relation to Company Secretaries in Practice (Part I of the Second Schedule containing ten clauses)

A Company Secretary 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;

   (2)   certifies or submits in his name, or in the name of his firm, a report of an examination of the matters relating to company secretarial practice and related statements unless the examination of such statements has been made by him or by a partner or an employee in his firm or by another Company Secretary in practice;

   (3)   permits his name or the name of his firm to be used in connection with any report or statement 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 any report or statement given to 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 in his report or statement but the disclosure of which is necessary in making such report or statement, where he is concerned with such report or statement in a professional capacity;

   (6)   fails to report a material mis-statement known to him and with which 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 relating to the secretarial practice;

(10)   fails to keep moneys of his 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.

 

F)         Professional misconduct in relation to members of the Institute generally (Part II of the Second Schedule containing four clauses)

A member 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 of this 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.

 

G)         Other misconduct in relation to members of the Institute generally (Part III of the Second Schedule containing one clause)

A member of the 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.]