1. By this petition under Article 226 of Constitution of India, the petitioner has prayed for the following relief(s):-
"8(A) This Hon'ble Court may be pleased to issue a writ of mandamus or any other appropriate writ in the nature of mandamus and/or an appropriate writ, order or direction, quashing and setting aside the impugned communication dated 02.01.2019 along with the prima facie option of the respondent no.2 dated 04.08.2018.
(B) Pending admission, hearing and final disposal of this petition, this Hon'ble Court may be pleased to stay the operation, execution and implementation of the impugned communication dated 02.01.2019 along with the prima facie opinion of the respondent no.2 dated 04.08.2018.
(C) This Hon'ble Court may be pleased to grant such other and further relief and/or order in the interest of justice in favour of the petitioner- firm."
2. The brief facts of the case are as under:-
2.1 The petitioner being a limited liability partnership firm has filed this petition through its partner. The petitioner firm is registered with the Institute of the Chartered Accountants of India (for short the "ICAI") under the provisions of the Chartered Accountants Act, 1949 (for short the "Act- 1949").
2.2 It is the case of the petitioner that the petitioner-firm was earlier known as M/s. Manubhai & Co. prior to its conversion into Manubhai & Shah LLP. M/s Manubhai & Co was registered with ICAI on 20.01.1975 having Registration No.FRN 106041W.
2.3 It appears that Manubhai & Co. entered into a Representation Agreement with HLB International Ltd (for short the "HLBI") on 26.09.1997 for providing common platform to the members of HLBI for sharing relevant knowledge, expertise and resources.
2.4 It is the case of the petitioner that Manubhai & Co. from the date of execution of the agreement did not secure any business from the HLBI.
2.5 It is the case of the petitioner that the ICAI published Rules of Network and Merger - Demerger amongst the firms registered with ICAI which were made effective from 06.01.2005. As per Explanation 2 of Rule 2(i) of the said Rules, it is stipulated that any entity shall not be treated as an affiliate merely for the reason that professional knowledge and database is shared or even if some professional assignments are required amongst network firm. In this regard, the network firms were required to file a declaration in Form-D in case of Networks with entities outside India. M/s. Manubhai & Co has filed a declaration in prescribed Form-D with the ICAI pursuant to the aforesaid network rules.
2.6 It is the case of the petitioner that on 11.06.2009, a communication was addressed by the Secretary, High Powered Committee of the ICAI to the M/s. Manubhai & Co calling for details of agreement entered into with the HLBI. In the said communication, the ICAI also called for the details of profit sharing, sharing of human resources and infrastructure as well as the details of remittances made to and received from HLBI, copies of Partnership Deed, Income Tax Assessment Orders for the last three assessment years with return of income filed and the copies of letter heads and visiting cards generally used by the firm.
2.7 The petitioner-firm replied to the aforesaid communication by providing the details called for and also specifically submitted that the petitioner and the HLBI do not have any profit-sharing arrangement nor do they share any human resources. The petitioner also disclosed the details of remittances made to the HLBI in the form of membership fees and conference fees. For the year 2007, 2008 and 2009, the membership fees were Rs.97,676/-, Rs.1,21,578/- and Rs.1,62,071/-, respectively, whereas conference fees amounted to Rs.61,167/-, Rs.1,65,330/- and Rs.41,191/- for respective years.
2.8 It is the case of the petitioner that in the year 2011,the report on operation of Multinational Network Accounting Firms (for short the "MNAF") in India was issued by the group formed by the Council of the ICAI. As per the report of the said group, it was found that most of the networks were established or created outside India and are functioning under different set of ethical and different types of guidelines. The report, therefore, recommended that an appropriate course of action shall be initiated against the firm that have shared the revenue, cost and other sources.
2.9 It is the case of the petitioner that neither the name of the petitioner firm nor the names of the partners of the petitioner firm were mentioned in the said report. It is the case of the petitioner that the petitioner-firm had never shared revenue, cost or other resources with HLBI, and therefore, there was no violation on the part of the petitioner firm and no action could have been taken against the petitioner-firm.
2.10 The ICAI revised the erstwhile guidelines for Networking with effect from 27.09.2011. In the new guidelines, the definition of 'Network' was completely changed. The new definition of 'Network' means Network that was aimed at providing cooperation as well as on sharing of profit, cost, common ownership, control, management and sharing of quality control policies and procedures with common brand name.
2.11 It is the case of the petitioner that the petitioner-firm cannot be considered as having Network with the HLBI , as it never shared its profit, cost etc. It is, therefore, the case of the petitioner that the network guidelines would not be applicable to the petitioner-firm.
2.12 It appears from the record that M/s Manubhai & Co was merged with another firm M/s. Shah & Com, a Chartered Accountant firm established on 01.07.1945. Thereafter, Manubhai & Shah was converted into a limited liability partnership in the year 2016.
2.13 It is the case of the petitioner that the respondent no.2 again addressed a communication dated 03.08.2016 after a gap of seven years stating that the petitioner-firm derived benefit by way of work referred to it by other members of HLBI, and therefore, the petitioner-firm has violated the provisions of item (5) of Part I of the First Schedule to the Act-1949. According to the petitioner-firm, the said communication was based on the report on operations of MNAF along with records/references received by the Director (Discipline) of ICAI. Therefore, clarification was called for in exercise of the powers conferred under Section 21(c) of the Act. The petitioner was also called upon to provide copy of the membership firm criteria which was forming part of the main agreement entered into with HLBI.
2.14 The petitioner-firm, thereafter, vide letter dated 24.09.2016 submitted its reply stating that the petitioner-firm has not secured any professional business from HLBI or any of its members. It was also submitted by the petitioner that the representation agreement with HLBI was only for knowledge and experience sharing and not for securing any professional assignment. It was also submitted that the payments made by the petitioner-firm to HLBI were with regard to membership and conference fees and it does not constitute any referral fees.
2.15 It appears that, before the Apex Court, violation of provision of the Act-1949 and the regulation framed there under by the MNAF came up for consideration in Civil Appeal No.2422 of 2018 with Writ Petition (Civil) No.991 of 2013. According to the petitioner-firm, the firms like M/s Price Water House Cooper, Deloitte Haskins & Sells, etc. who are having global presence in various countries were transferring foreign currencies into their firms/member firms registered in India. Hence, there was violation of FEMA. The Apex Court had categorized the firms into A, B, C and D category as many of the firms were not having effective registration with ICAI, it was extremely difficult for the ICAI to take appropriate steps for the alleged violation of the Act-1949. It was observed by the Apex Court that though the MNAF have got registered partnership firm with Indian partners, the real beneficiaries of transacting the business of Chartered Accountancy remains the Companies of the foreign entities. The Apex Court, therefore, issued directions to the ICAI to initiate appropriate and effective proceedings against such MNAF for violating the Code of Conduct and the Act-1949. The Apex Court also directed the relevant authorities to take appropriate actions for violation of Foreign and Direct Investment Policies, FEMA regulations and the Act-1949 after completing pending investigations that were initiated against the erring firms. The Apex Court directed the Union Government to constitute a three member committee of Experts to look into the statutory framework for enforcement of Sections 25 and 29 of the Act-1949.
2.16 It is the case of the petitioner that neither the petitioner firm nor its partners were party respondents before the Apex Court. Moreover, as per the categorization of the firms made by the Apex Court, the petitioner-firm does not fall into any of the categories either A, B, C or D, and therefore, no action could have been initiated against the petitioner-firm for alleged violation of the Code of Conduct as well as the Act-1949.
2.17 Thereafter, respondent no.2-Disciplinary Directorate of the ICAI issued communication dated 05.04.2018 based on some material available on record which was never supplied to the petitioner-firm and in view of the observations made by the Apex Court, decided to treat the matter as "Information" within the meaning of Rule 7 of the Chartered Accountants (Procedure of Investigations of Professional and other Misconduct and Conduct of Cases) Rules,2007 (for short the "Rules-2007) for violation of Sections 25 and 29 of the Act-1949. It was stated in the said communication that the petitioner-firm would fall under the ambit of items (2) and (5) of the Part-I of First Schedule and item (1) of Part-II of Second Schedule of the Act-1949. The petitioner was also called upon to provide details for disclosure of names of partners, who are answerable.
2.18 The petitioner, by reply dated 25.04.2018, informed the respondent no.2-disciplinary directorate that Shri Kshitij Patel is the answerable member on behalf of the petitioner-firm and prayed for further time up to 31.05.2018 for filing reply to the letter dated 05.04.2018. The respondent no.2 informed the petitioner by letter dated 14.05.2018 to submit reply within seven days from the date of receipt of the communication of such letter.
2.19 The petitioner thereafter, filed its reply dated 20.05.2018 contending that the directions issued by the Apex Court would not be applicable to the petitioner-firm, as it was not party respondent before the Apex Court. It was further submitted that the "information" under Rule 7 of the Rules-2007 would constitute any written information in the form of any allegation against the members received in person or by post or by courier by the Directorate of ICAI. It was contended that just based on the directions issued by the Apex Court in some other proceedings, wherein the petitioner-firm is not a party would not constitute as an information and it was urged to the respondent no.2 to drop the proceedings.
2.20 It is the case of the petitioner that the Ministry of Corporate Affairs, Government of India had constituted the Committee of Experts vide office memorandum dated 20.04.2018 and the Committee was entrusted to look into the statutory framework for enforcement of Section 25 and Section 29 of the Act- 1949 along with the Rules framed there under in letter and spirit. The said Committee submitted its report on 25.08.2018. As per the said report, there was no violation, either of Section 25 or Section 29 of the Act-1949. It was stated in the report that no instance of any malpractice was brought before the Committee and the ICAI was recommended to amend the regulations to prevent such potential malpractice.
2.21 It appears that, thereafter, the respondent no.2 addressed a communication dated 02.01.2019 to initiate disciplinary proceedings against the petitioner along with prima facie opinion dated 04.08.2018 of the respondent no.2 which was approved by the Disciplinary Committee, wherein the petitioner firm was prima facie found guilty of professional misconduct within the meaning of Items (2) and (5) of Part I of the First Schedule and Item (1) of the Part II of the Second Schedule to the Act-1949 and in terms of Clause(b) of sub-rule (2) of the Rule (9) of the Rules-2007. Being aggrieved, the petitioner has filed this petition.
3. The co-ordinate bench of this Court (Coram: V. M. Pancholi, J.) passed the following order dated 15.02.2019:-
"1. Heard learned Senior Counsel Mr.Mihir Joshi assisted by learned advocate Mr.Chintan Dave for the petitioner.
2. Learned senior counsel has referred to the provisions contained in Section 21 of the Chartered Accountants Acts, 1949 (hereinafter referred to as `the Act' for short) and thereafter referred the relevant documents produced on record. Learned senior counsel thereafter referred to the averments made in the memo of the petition in paragraphs 3.4, 3.5 and 3.7 and thereafter submitted that Manubhai and Company was not sharing any profits, human resources or infrastructure with HLBI. The said aspect was pointed out in the reply pursuant to the notice issued by the respondent authority in June, 2009. Learned senior counsel referred to the said reply wherein it is specifically mentioned that the petitioner firm did not have any profit sharing arrangement with HLBI nor had they shared any human resources or infrastructure. Thereafter, it is submitted that now the impugned communication is issued to the petitioner on 2.1.2019 by the respondent authority. In the said communication, it is stated from the `information' treated against the petitioner firm under Section 21 of the Act based on the report on operation of multi-national network accounting firms in India and the written statement and documents submitted by the petitioner, along with the prima facie opinion formed by the Director (discipline) under Rule 9.1) of the Chartered Accountants (Procedure of Investigations of Professional and other Misconduct and Conduct of Cases) Rules of 2007 were considered by the disciplinary committee. It is further stated that the said Committee, after considering the material, concurred with the reasons given against the charge and agreed with the prima facie opinion of Director (discipline) that the petitioner is guilty of professional misconduct. It is, therefore, urged that the impugned communication cannot be said to be a simple show cause notice calling upon the petitioner to give his explanation and in fact, prima facie, opinion is formed by the Director (discipline) as well as Committee. It is submitted that though the period of 21 days as mentioned in the impugned show cause notice is over, no order is passed against the petitioner as the petitioner has requested for time.
3. In view of the aforesaid submissions, issue Notice to the respondents returnable on 12.3.2019. In the meantime, ad-interim relief in terms of paragraph 8(B) is granted till then. Direct service is permitted."
4. Learned Senior Counsel Mr. Mihir Joshi assisted by Mr.Chintan Dave, learned advocate for the petitioner submitted that the initiation of the disciplinary proceedings under Section 21 of the Act- 1949 together with prima facie opinion formed by the Director (Discipline) under Rule 9(1) of the Rules- 2007 for professional misconduct is without jurisdiction, as no show-cause was ever issued to the petitioner-firm informing about the prima facie opinion formed by the respondent no.2. It was submitted that the respondent authorities have relied upon "Information" received based on some documents which was never shared with the petitioner-firm. The disciplinary proceedings are initiated only on the basis of the order passed by the Apex Court. Reliance is placed on Rule 7 of the Rules-2007 to submit that the "information" constitute any written information in the form of any allegation against the member received in person or by post or by courier by the Director (Discipline) of ICAI. It was, therefore, submitted that as the respondent-authorities have not received any information containing any allegation against the petitioner-firm, the initiation of disciplinary proceedings against the petitioner-firm is without jurisdiction. It was contended that merely on the basis of directions issued by the Apex Court in some other proceedings, wherein the petitioner- firm is not party-respondent, no disciplinary proceeding could have been initiated considering such directions as information under Rule 7 of the Rules- 2007.
4.1 Learned Senior Advocate for the petitioner submitted that the as per Rule 7 of the Rules-2007 "information" must be received containing written allegations against the member or a firm by the Director (Discipline) of the ICAI and in the absence of any written complaint against the petitioner, the initiation of the disciplinary proceedings is without jurisdiction. It was submitted that, in order to assume the jurisdiction, the receipt of the "Information" in the form of written complaint containing allegations is a prerequisite. It was submitted that the respondent-authorities failed to consider the submissions of the petitioner-firm before forming "prima facie" opinion by arriving at a conclusion in a mechanical manner holding the petitioner "prima-facie" guilty of professional misconduct. It was submitted that "prima facie" opinion provides the basis for punishing the member with severe consequences and hence, the same has to be formed objectively and not mechanically. It was submitted that prima-facie opinion dated 04.08.2018 was formed by the Director (Discipline) of the ICAI holding that the petitioner was prima facie guilty under the provisions of the Act-149. It was further submitted that contrary to the submissions made by the petitioner-firm, Director (Discipline) of the ICAI relied upon the clause (e) of the Representation Agreement between the petitioner and the HLBI which provides that HLBI was under an obligation to refer appropriate business. It was submitted that there is no factual foundation for the same and the conclusion arrived at and as such the "prima facie" opinion is contrary to the facts, as the petitioner firm entered into Representation Agreement with the HLBI only for the purpose of knowledge sharing and there was no share of profit, cost etc. It was also submitted that except payment towards membership fees and conference fees to the HLBI, the petitioner-firm has not shared any profit with the HLBI and nor secured any work from the members of Network of the HLBI. It was therefore, submitted that there is no violation of the provisions of the Act-1949 or the Rules-2007 by the petitioner-firm by entering into an agreement for knowledge sharing and not profit sharing or cost.
4.2 The learned Senior Advocate for the petitioner referred to the relevant clause of the representation agreement to point out that the representation agreement was only an agreement for sharing of the knowledge and not for the profit. It was also pointed out that the clause (e) and (f) of the Representation Agreement Stipulates prohibition upon the petitioner-firm from operation of the Representation Agreement for breach of any prior agreement, undertaking or professional restrictions applicable to your firm where such agreements, undertakings or restrictions have been fully disclosed to HLBI. It was, therefore, submitted that the prima facie opinion arrived at by the respondent- authority is contrary to the terms of the Representation Agreement.
4.3 Learned Senior Advocate for the petitioner submitted that ingredients of the professional misconduct falls within the meaning of item No.2 of Part-I of the First Schedule and item No.1 of Part-II of the Second Schedule of the Act-1949 which are not applicable in the facts of the case. It was further submitted that the respondent authorities have wrongly formed prima facie opinion that the petitioner-firm has not complied with the requirements of Sections 25 and 29 of the Act-1949. Referring to the prima facie opinion, it was pointed out that the respondent authorities have not assigned any reason in coming to the conclusion that for securing a particular professional work, the petitioner-firm has actually paid any commission or brokerage to the HLBI. It was also submitted by the learned Senior Advocate that, as the petitioner is found prima-facie guilty of the professional misconduct, the petitioner-firm would be required to disclose such facts to all its corporate clients as per the Companies (Audit and Auditors) Rules, 2014. The petitioner is also required to disclose such facts before the various authorities like Comptroller and Auditor General of India, Reserve Bank of India and other authorities with whom the petitioner-firm is empanelled for audit work.
4.4 It was, therefore, submitted that such disclosure adversely affects the goodwill created by the petitioner-firm over the span of more than 70 years and shall have a direct bearing over the professional assignments which are being undertaken by it resulting into irreparable loss of reputation in the professional field which cannot be measured or compensated in the terms of money.
5. Per contra, Mr. S. N. Shelat, learned Senior Advocate assisted by Ms. Dharmishta Raval, learned advocate for the respondent raised preliminary objections regarding maintainability of the petition. He referred to the following averments made in the affidavit-in-reply filed on behalf of the respondent:-
"2. I say and submit that I have gone through the record pertaining to the present case and I have read the contents of the present petition, and therefore, I am competent to depose what is stated herein below.
OBJECTION ON MAINTAINABILITY:-
3. At the outset, I deny each and every allegations made in contentions raised in the petition unless the same are specifically admitted by me herein under.
4. It is submitted to this Hon'ble High Court that the ex-parte ad-interim relief already granted may kindly be vacated and that the Hon'ble High Court may not intervene in matters where only a show cause in the form of a prima- facie opinion of the Director (Discipline) is issued and further proceedings are still in progress.
5. It is submitted that the petitioner has rushed to invoke the extraordinary writ jurisdiction of this Hon'ble High Court under Article 226 of the Constitution of India when the facts suggest that no adverse order is passed by the respondent against the petitioner. An opportunity of hearing was given to the petitioner before the Director (Discipline) who is investigating authority as per Rules prior to the formation of the impugned prima facie opinion. The petitioner's case is placed before the quashi-judicial authority of the Institute in terms of the Chartered Accountant Act, 1949 which is required to conduct the Disciplinary proceeding in accordance with the provisions of the Act and Rules made thereunder by giving a fair and reasonable opportunity to the petitioner."
5.1 Learned Senior Counsel for the respondent submitted that that the Supreme Court in the case of S.Sukumare vs The Secretary, Institute of Chartered Accountants of India & Ors passed in Civil Appeal No.2422 of 2018 and in the case of Centre For Public Interest Litigation vs. Union of India passed in Writ Petition (Civil) No.991 of 2013 vide judgment and order dated 23.02.2018 issue following directions:- "(i) The Union of India may constitute a three member Committee of experts to look into the question whether and to what extent the statutory framework to enforce the letter and spirit of Section 25 and 29 of the CA Act and the statutory Code of Conduct for the CAs requires revisit so as to appropriately discipline and regulate MAFs. The Committee may also consider the need for an appropriate legislation on the pattern of Sarbanes Oxley Act, 2002 and Doda Frank Wall Street Reform and Consumer Protection Act, 2010 in US or any other appropriate mechanism for oversight of profession of the auditors. Question whether on account of conflict of interest of auditors with consultants, the auditor's profession may need exclusive oversight body may be examined. The Committee may examine the study group and the Expert Group Reports referred to above, apart from any other material. It may also consider steps for effective enforcement of the provisions of the FDI policy and the FEMA Regulations referred to above. It may identify the remedial measures which may then be considered by appropriate authorities. The Committee may call for suggestions from all concerned. Such Committee may be constituted within two months. Reports of the Committee may be submitted within three months thereafter. The UOI may take further action after due consideration of such report.
(ii) The ED may complete the pending investigation within three months.
(iii) ICAI may further examine all the related issues at appropriate level as far as possible within three months and take such further steps as may be considered necessary."
5.2 It was submitted that in the Year-2009, considering the development which had taken place relating to case of Satyam Computer Services Limited, the High Powered Committee was constituted which called for information from the petitioner in relation to its agreement with the HLBI. Thereafter, the attention of the Court was invited to the Report on Operation of MNAF in India of the ICAI to submit that Paragraph No.4.11 of the said report clearly points out that the Chartered Accountants are prohibited to practice in corporate firm to undertake audit and assurance services, FDI in a Chartered Accountant firm cannot be made except by non-resident Indians or persons of Indian origin, subject to regulatory guidelines and restrictions imposed by the Act-1949 and the Regulations framed there under.
5.3 It was submitted that such report as well as the directions issued by the Supreme Court were considered as "Information" under Rule 7 of the Rules-2007 to issue show-cause notice dated 05.04.2018 for initiating disciplinary proceedings against the petitioner-firm under Section 21 of the Act-1949. It was submitted that considering the reply filed by the petitioner, prima facie, opinion was formed by the respondent no.2 observing that the petitioner-firm is guilty for professional misconduct, and thereafter, in terms of provisions of Rule 9(2)(a)of the Rules-2007, the matter was placed before the Disciplinary Committee in its meeting held on 30.11.2018. The Disciplinary committee considered the prima facie opinion formed by the Director (Disciplinary) along with relevant material on record concurring with the prima-facie opinion and accordingly impugned communication dated 02.01.2019.
5.4 Learned Senior Advocate for the respondent submitted that what is "Information" is interpreted by the Supreme Court in the case of Kalyanji Mavji And Company Vs. Commissioner of Income Tax, West Bengal [AIR 1976 SC 203] as under:- "10.In Maharaj Kumar Kamal Singh v. The Commissioner of Income-tax, Bihar & Orissa(1) the word "information" fell for interpretation by this Court, where it was observed thus:
"We would accordingly hold that the word "information" in s. 34(1) (b) includes information as to the true and correct state of the law and so would cover information as to relevant judicial decisions. If that be the true position, the argument that the Income-tax officer was not justified in treating the Privy Council decision in question as information within s. 34 (1) (b) cannot be accepted.
In our opinion, even in a case where a return has been submitted, if the Income-tax officer erroneously fails to tax a part of assessable income, it is a case where the said part of the income has escaped assessment. The appellant's attempt to put a very narrow and artificial limitation on the meaning of the word "escape" in s. 34(1)(b) cannot therefore succeed."
It will be seen that this Court was in favour of placing not a narrow but a liberal interpretation on the provisions of s. 34(1) (b) of the Act. This decision was considered by this Court in Commissioner of Wealth Tax, West Bengal v. Imperial Tobacco Company of India Ltd.(2) where Wanchoo, J., speaking for this Court observed as follows: "It may be added that after the decision of this Court in Maharaj Kumar Kamal Singh's case it is now settled that "information in s. 34(1) (b) included information as to the true and correct state of law, and so would cover information as to relevant judicial decisions" and that such information for the purpose of s. 34(1) (b) of the Income-tax Act need not be confined only to cases where the Income-tax officer 11. discovers as a fact that income has escaped assessment."
11. Similarly in Commissioner of Income-tax, Excess Profits Tax, Hyderabad, Andhra Pradesh v. V. Jagan Mohan Rao and ors.(3), while following the decision of this Court in Maharaj Kumar Kamal Singh's case (supra) it was observed as follows:
"In these circumstances it was held by this Court firstly that the word information in s. 34(1) (b) included information as to the true and correct state of the law, and so would cover information as to relevant judicial decisions, secondly that `escape' in s. 34(1) was not confined to cases where no return had been submitted by the assessee or where income had not been assessed owing to inadvertence or oversight or other lacuna attributable to the assessing authorities. But even in a case where a return had been submitted, if the Income-tax officer had erroneously failed to tax a part of the assessa ble income, it was a case where that part of the income had escaped assessment. The decision of the Privy Council, therefore, was held to be information within the meaning of s. 34(1)
(b) and the proceedings for re- assessment were validly initiated."
12. The matter was again fully considered by this Court in A. Raman and Company's case (supra), where Shah, J., speaking for the Court extended the connotation of the word `information' to two different categories of cases and observed as follows:
"The expression "information" in the context in which it occurs must, in our judgment, mean instruction or knowledge derived from an external source concerning facts or particulars, as to law relating to a matter bearing on the assessment.
Jurisdiction of the Income-tax officer to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment. That information, must, it is true, have come into the possession of the Income-tax officer after the previous assessment, ’but even if the information be such that it could have been obtained during the previous assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the Income-tax officer is not affected." An analysis of this case would clearly show that the information as contained in s. 34(1) (b) must fulfil the following conditions:
(1) The information may be derived from an external source concerning facts or particulars as to law relating to matter bearing on the assessment;
(2) That the information must come after the previous or the original assessment was made. In fact the words "in consequence of information" as used in s. 34(1) (b) clearly postulate that the information must be subsequent to the original assessment sought to be reopened; and (3) That the information may be obtained even on the basis of the record of the previous assessment from an investigation of the materials on the record, or the facts- disclosed thereby or from other enquiry or research into facts or law.
These categories are in addition to the categories laid down by this Court in Maharaj Kumar Kamal Singh's case which has been consistently followed in several decisions of this Court as shown above.
5.5 It was further submitted that the "Information" from any source is relevant to hold the person guilty of misconduct. Reliance was placed in the case of Mr. R.K.,Malhotra Vs. Kasturbhai Lalbhai [AIR 1977 S.C.2129, wherein it is observed as under:-
"5. Sub-section (b) of Section 147 enables the Income-tax Officer to assess or reassess the income if in consequence of information in his possession he has reason to believe that income chargeable to tax has escaped assessment. Two conditions are necessary for invoking the Sub-section: (1) the officer should receive information after the original assessment; (2) in consequence of such information he should have reason to believe that income has escaped assessment. The 'information' may be of facts or of law. The 'information' of a fact may be from external source. The fact that the Income-tax Officer with diligence could have obtained the information during the previous assessment on a proper investigation of the materials on the record or the facts disclosed thereby, would not make it any the less information if the fact was not in fact obtained and came to his knowledge only subsequently. So also the fact that on a research as to the sate of law the Income-tax would have ascertained the true legal position would not make anyu difference. If the office came to know the real position of the law only subsequently. The decision of a Court of law subsequent to the assessment would be 'information' and the Income-tax Officer is entitled to take note of it. Mr.B.Sen, the learned counsel for the assessee, contended that on the facts of this case, it cannot be said that the Income Tax Officer had only 'information' as required under the section. He submitted that the officer was fully aware of the fact that the houses were self-occupied and therefore the question of coming into possession of any information as to facts does not arise. The Income-tax Officer took an erroneous view in applying the provisions of the section and merely pointing out by the auditor the error in the application of the law would not amount to 'information'. The contention of the learned counsel will be examined in the light of the decision bearing on the question."
Further reliance was placed on the decision of this Court in the case of Council of Institute of Chartered Accountants of India Vs. Mukesh R. Shah FCA [2004 (2) G.L.H. 610, wherein it is observed as under:-
"25 Therefore, applying the aforesaid principles to the facts of the case the contention of the respondent may be examined. It is necessary to bear in mind that Regulation 11 of the Regulations does not provide for any hearing to either party at the stage when the Council records its prima facie opinion as to whether the respondent is guilty or not. In fact the said stage is only for the purpose of ascertaining as to whether, on the facts and in the circumstances of the case, the Council is required to cause an inquiry to be made in the matter by the Disciplinary Committee. The respondent does not suffer from any prejudice at this stage, because the respondent has already been granted opportunity to file his defence by way of written statement; to offer his comments on the rejoinder of the complainant and hence the respondent cannot be heard to have a grievance that no opportunity of hearing was granted to the respondent at the point of time when the Council formed a prima facie opinion. This position becomes absolutely clear when one considers provisions of Regulation 11[ii] of the Regulations whereunder if the Council forms a prima facie opinion that the respondent is not guilty of any professional or other misconduct the complaint shall be filed. Thus, the entire stage of formation of prima facie opinion is a tentative stage."
It was submitted that no personal hearing is required to be given to the petitioner-firm at the stage of forming "prima-facie" opinion as to whether the petitioner is guilty or not. It was, therefore, submitted that at the stage of formation of "prima- facie" opinion the council is required to decide whether an inquiry is to be made in the matter by the Disciplinary Committee or not and hence, the petitioner would not suffer any prejudice at this stage, because the petitioner is granted opportunity to file his defense by way of written-statement to offer his comments as per the provisions of the Rules-2007. It was, therefore, submitted that the petition is premature and no interference is required to be made at this stage by the Court while exercising the powers under Article 226 of the Constitution of India.
6. Mr. Mihir Joshi, learned Senior Advocate, in rejoinder submitted that, as the entire initiation of proceedings is without jurisdiction, the petition is maintainable and should be entertained by this Court under Article 226 of the Constitution of India. It was further submitted that the Representation Agreement cannot constitute "Information" as per the Rule 7 of the Rules-2007 which stipulates that information means any written information containing allegation or allegations against the member or a firm received by the Directorate to be treated as "Information" received under Section 21 of the Act- 1949. It was, therefore, pointed out that as there is no written information containing allegation or allegations against the petitioner-firm, mere reliance upon the representation agreement read with report on MNAF and the observations made by the Supreme Court in the case where the petitioner-firm is not a party cannot constitute "Information" under Rule 7 of the Rules-2007.
6.1 It was further submitted that as per the Revised Guidelines of Network issued on 27th day of September, 2011, the petitioner-firm would not fall within the definition of Network as per the Clause 2(g) thereof as there is no agreement between the petitioner and HLBI for sharing profit or cost, etc. It was further submitted that no action is taken by the ICAI after letter written by the High Powered Committee on 11.07.2009 as well as letter dated 03.08.2016 with regard to the same issue of Representation Agreement between the petitioner and HLBI. The attention of the Court was invited to the observations made by the Supreme Court in the aforesaid judgment dated 23.02.2018 to point out that the said judgment specifically refers to PWC Services BV Netherlands and appropriate actions for violation of FDI policies, FEMA Regulations and the Act-1949 was to be taken in relation to such entity and necessary directions issued to the ICAI for the same. It was, therefore, submitted that such observations made by the Apex Court and the directions issued in the said judgment would not form basis for initiation of any proceeding against the petitioner and such judgment and directions contained therein cannot be considered as "Information" as per Rule 7 of the Rules-2007.
6.2 With regard to the reliance placed by the respondent on the various judgments of the Supreme Court, as to what constitute "Information", the learned Senior Advocate for the respondent submitted that the Supreme Court was dealing with the meaning of "Information" for the purpose of invoking Section 147 of the Income Tax Act-1961 for reopening of assessment. The "Information", therefore, as provided under Rule 7 of the Rules-2007 in written form containing allegations against the petitioner-firm cannot be equated with the meaning of "Information", as held by the Apex Court to mean instructions or knowledge derived from an external source concerning facts or particulars, as to law relating to a matter bearing on the assessment. It was, therefore, submitted that, in the facts of the case, the ratio of the Apex Court in the judgments cited by the respondents would not be applicable in the facts of the present case.
6.3 With regard to submission of the respondent that no opportunity of hearing is required to be granted to the petitioner at the stage of formation of prima facie opinion, it was submitted by the learned senior advocate for the respondent that the Rule 11 of the Rules-2007 stipulates that the procedure laid-down for dealing with complaint in sub-rule 6 of Rule 3, sub-rule (1), (2), (3) and (4) of Rule-5 and sub-rule (1),(2), (3) & (5) of Rule 8 and Rule 9 and Rule 10 shall also applied to the information received by the Director relating to misconduct of the member and therefore, the petitioner ought to have been given an opportunity to explain its case at the time of formation of prima facie opinion by the respondent no.2.
6.4 It was submitted that the procedure prescribed in Rule 3 for filing Complaint, Rule 5 for Registration of Complaint, Rule 8 for procedure to be followed by Director on a complaint, Rule 9 for Examination of complaint and Rule 10 for Mode of aending Notice in Rules-2007 would apply if the information is received by the Directorate in written form containing allegations against the petitioner-firm. It was, therefore, submitted that in absence of procedure followed by the respondent no.2, the entire proceedings is vitiated, and therefore, the same is liable to be quashed and set aside.
7. Having heard the learned advocates for the respective parties and having gone through the material on record, it would be necessary to refer the relevant provisions of the Act-1949 and Rules- 2007 so as to adjudicate the issues raised in this petition as under:-
"21. Disciplinary Directorate:-
(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 investigation in respect of any information or complaint received by 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.
(3) Where the Director (Discipline) is of the opinion that a member is guilty of any professional or other misconduct mentioned in the First Schedule, he shall place the matter before ht 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 investigation 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 saids Board or Committee may, if it is of the view that the circumstances so warrant, permit the withdrawal at any stage."
22. Professional misconduct defined:- For the purposes of this Act, the expression "professional misconduct" shall be deemed to include any act or omission specified 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 Council under sub- section (1) of Section 21 to inquire into the conduct of any member of the Institute under any other circumstances.
(1) Any member of the Institute aggrieved by any order of the Council imposing on him any of the penalties referred to in sub-section (4) of section 21, may, within thirty days of the date on which the order is communicated to him, prefer an appeal to the High Court :Provided that the High Court may entertain any such appeal after the expiry of the said period of thirty days, if it is satisfied that the member was prevented by sufficient cause from filing the appeal in time.
(2)The High Court may, on its own motion or otherwise, after calling for the records of any case, revise any order made by the Council under sub-section (2) or sub-section (4) of section 21 and may-
(a) confirm, modify or set aside the order;
(b) impose any penalty or set aside, reduce, confirm, or enhance the penalty imposed by the order;
(c) remit the case to the Council for such further inquiry as the High Court considers proper in the circumstances of the case; or
(d) pass such other order as the High Court thinks fit :
Provided that no order of the Council shall be modified or set aside unless the Council has been given an opportunity of being heard and no order imposing or enhancing a penalty shall be passed unless the person concerned has also been given an opportunity of being heard.
Explanation.-In this section "High Court" and "member of the Institute" have the same meanings as in section 21.
The relevant rules of Rules-2007 read as under:- "3. Procedure for filing complaint:- (1) A complaint under Section 21 of the Act against a member or a firm shall be filed in Form I, in triplicate before the Director in person or by post or courier:
Provided that the complaint sent by post or courier under this sub-rule shall be deemed to have been presented to the Director on the day on which it is received in the Directorate.
5. Registration of complaint:- (1) The Director or an officer or officers authorized by the Director, shall endorse on every complaint the date on which it is received or presented and the Director or the officer or Officers so authorized, shall sign on each such endorsement.
7. Information:- (1) Any written information containing allegation or allegations against member or a firm, received in person or by post or by post or courier, by the Directorate, which is not in Form I under sub-rule (1) of rule (3), shall be treated as information received under Section 21 of the Act and shall be dealt with in accordance with the provisions of these rules.
8. Procedure to be followed by Director on a complaint:- (1) The Director or an officer or officers authorized by the Director, within sixty days of the receipt of a complaint under rule 3, shall -
(a) If the complaint is against an individual member, send particulars of the acts of commission or omission alleged or a copy of the complaint, as the case may be, to that member at his professional address;
(b) If the complaint is against a firm, send particulars of the act of commission or omission alleged or a copy of the complaint, as the may be, to the firm at the address of its head office, as entered last in the Register of Offices and Firm maintained by the Institute, with a notice calling upon the firm to disclose the name or names of the member or members concerned and to send particulars of acts of commission or a copy of the complaint, as the case may be, to such members:
Provided that while disclosing the name or names of the member or members, the firm shall also send a declaration signed or, as the case may be, jointly signed by the member or members concerned to the effect that he or she or they shall be responsible for answering the complaint and that the particulars of acts of commission or omission or the copy of the complaint sent to the firm by the Director had been duly received by him, her or them.
Explanation:- A notice to the firm shall be deemed to be notice to all the members who are partners or employees of that firm as on the date of registration of the complaint."
11. Certain provisions relating to complaint also be responsible for information relating to misconduct of members:- The procedure laid down for dealing with complaints in sub-rule(6) of rule 3, sub-rule (1), (2), (3) and (4) of rule 5, sub-rule (1), (2), (3) and (5) of rule 8, rule 9 and rule 10 shall also apply to information received by the Director relating to misconduct of members."
8. It appears that the impugned communication dated 02.01.2019 along with prima facie opinion dated 04.08.2018 is based on the report on the operation of Multinational Network Accounting Firm in India which was considered by the Council of the ICAI in the year 2010 and finalized by a group constituted by the Council in July-2011. Based upon the said report, the Secretary, ICAI, who was authorized to look into the documents relating to the facts of the case of the petitioner decided to seek clarification in respect of the representation agreement entered into by the petitioner with the HLBI and letter dated 03.08.2016 was sent to the petitioner-firm which was replied by the petitioner on 24.09.2016. Thereafter, in view of the directions issued by the Supreme Court in case of S.Sukumare (supra), considering the same as information , proceedings were once again initiated against the petitioner. Prima facie opinion dated 04.08.2018 further states as under:-
"3. Thereafter, in terms of the recommendations of the Secretary and on overall examination of allegation vis-a-vis further clarifications/submissions subsequently sought/received by the Directorate from the respondent firm and a letter dated 12th Maruch-2018 of the Secretary, ICAI along with relevant documents whereby he directed to go through the judgment actually and to take steps to complete the process, the matter was examined and treated as "Information" within the meaning of Rule 7 of the Chartered Accountants (Procedure of Investigation of Professional and Other Misconduct and Conduct of Cases) Rules, 2007."
9. It is relevant to note that prima facie opinion is silent with regard to applicability of Rule 7 of the Rules-2007 which provides that the information has to be in form of any written information containing allegation or allegations against the member or a firm, received in person or by post or courier. However, the report of operation of MNAF in India and the judgment referred to in Paragraph No.3 of the prima facie opinion, there is no reference to petitioner and therefore, question arises whether it would constitute the "Information" as per Rule 7 of the Rules-2007 or not. However, it appears from the material on the record that what is to be treated as "Information" within the meaning of Rule 7 of the Rules-2007 is missing because from the contents of the Paragraph No.3 of the prima facie opinion, which is extracted herein above, it does not reveal any written allegation or allegations against the petitioner so as to treat the same as "Information" within the meaning of Rule 7 of the Rules-2007. The report of operation of MNAF in India and the judgment referred to in Paragraph No.3 of the prima-facie opinion, it cannot consider as "information" withing the meaning of Rule 7 of the Rule-2007. Therefore, entire basis of formation of prima facie opinion is contrary to Rule 7 of the Rules-2007. The report of operation of MNAF in India and the judgment referred to in Paragraph No.3 of the prima-facie opinion, it cannot consider as "information" within the meaning of Rule 7 of the Rules-2007. Therefore, entire basis of formation of prima-facie opinion is contrary to Rule 7 of the Rules-2007.
10. Letter dated 05.04.2018 in form of show cause notice which refers to the earlier communication dated 03.08.2016 and reply of the petitioner-firm dated 24.09.2016 is also based on report on operation of MNAF in India so as to consider the said report and recommendation contained in Paragraph No.7 of the said report as Information . Relevant extract of same is as under:- "In this regard, Hon'ble Apex Court has observed violation of Section 25 and Section 29 of the Chartered Accountant Act, 1949 and has also raised certain questions on the way and manner the fee is being shared by the Indian CA firms who are associates of multinational international entities. Therefore, in light of the above judgment as quoted above and facts/submissions on record, it is felt that your firm has violated the provisions of Item (2) of Part I of First Schedule and Item (1) of Part II of Second Schedule to the Chartered Accountants Act, 1949 for alleged sharing of fee and for violation of Section 25 and 29 of the Chartered Accountants Act, 1949 respectively.
Therefore, in the light of material available on record and observations of Hon'ble Supreme Court in the aforesaid case, whereby inter alia, it has been directed to ICAI to further examine/investigate the matter, it has been decided to treat the matter as "Information" within the meaning of Rule 7 of the Chartered Accountants (Procedure of Investigation of Professional and Other Misconduct of Cases) Rule- 2007 for the alleged violations of Section 25 & 29 of the Chartered Accountants Act, 1949 and which would fall within the meaning of professional misconduct in terms of Item (1) of Part-II of Second Scheduled of the Chartered Accountants Act, 1949.
In totality, the alleged acts of professional misconduct by your firm, if proved, would fall within the purview of professional misconduct falling within the meaning of Item (2), (5) of Part I of First Schedule and Item (1) of Part-II of Second Schedule to the Chartered Accountants Act-1949.
Accordingly, in accordance with the provisions of clause(b) of sub-rule (1) of Rule 8 read with Rule 11 of the aforesaid Rules, you are requested to disclose the name or names of the member or members who is/are answerable to the allegation/s and send a copy of the aforesaid Information letter along with its enclosures to the said member/members. Thereafter, the member/members answerable is/are required to forward his/her written statement, if any, in triplicate, within 21 days of the receipt of this letter."
On perusal of the above contents of the letter dated 05.04.2018, it emerges that the very basis to treat the material available on record and observations of the Supreme Court as the "Information" within the meaning of Rule 7 of the Rules-2007 for alleged violation of Section 25 and Section 29 of the Act-1949 cannot be considered as "Information" in absence of any written information containing allegation or allegations against the petitioner-firm as provided under Rule 7 of the Rules-2007. Therefore, merely on the basis of inference drawn by the respondent no.2, and thereby, analyzing various terms of the representation agreement between the petitioner and the HLBI to form prima facie opinion is without any basis in absence of information as contemplated in Rule 7 of the Rules-2007.
11. On perusal of the prima-facie opinion recorded by the Director (Discipline), wherein reference was made to the meaning of agreement and other provisions of the agreement to come to the conclusion that one cannot say that, there was absolute intent of securing business through the international tie-up, is without any basis. It appears that the submissions made by the petitioner-firm that the payments made to the HLBI were only for the membership fees and conference fees is totally ignored while arriving at prima facie opinion is without any basis as is evident from the extract as under:
"10.14 Thus, it is opined that considering there has been payments made and there is no categorical denial by the respondent-firm of the references work received from HLBI (the firm is only stating that mere referral does not entail acceptance), there appears a cause for further investigation and accordingly, the respondent- firm is prima facie guilty for professional misconduct falling within the meaning of Item (5) of Part I of First Schedule to the Chartered Accountants Act-1949."
Similarly, reference was made to Clause (h) of the agreement to form an opinion regarding violation of item (2) of Part-I of the First Schedule by observing in Paragraph No.11.3 as under:-
"11.3 Therefore, though the firm is taking a plea that this amount being paid by it to HLBI is no way a fee or profit sharing and it is merely a membership fee, yet it is really incomprehensible that only for the sake of knowledge sharing and or to maintain the quality standard or to keep its membership intact with the international entity, the firm shall be paying such a considerable and differential payment/amounts to the international entity over the period of time which might be from the year 1997 when it became the member of the international entity. It is also noted that there was nothing on record to indicate as to how the amount of membership fees has been/is being determined. It is coming out on the basis of other related firm (Ref:DD/46/INF/18) having tie up with the same entity HLBI, membership fees was payable based upon the revenue of the CA Firm. Since the respondent firm was also member of the same group (HLBI) and the amount of membership varies each year, it can be inferred that the membership fees was perhaps being determined on the revenue of the respondent-firm. It is, therefore, incomprehensible that if the payment made was for membership only then how this can be payable based upon the revenue of the respondent-firm. The respondent-firm has thus failed to bring in any corroborative evidences which may prove/substantiate that the firm has paid the amount on account of membership fee only and in no way this was a fee/profit sharing of professional fee based on referrals with HLB international. Thus, at this stage, the respondent-firm is prima facie guilty of professional misconduct falling within the meaning of item (2) of Part I of First Schedule to the Chartered Accountants Act-1949."
With regard to violation of item (2) of Part I of the First Schedule, following prima-facie opinion is arrived at:-
"12.1 Thus, it has been observed that the firm is taking a plea that the none of the above provisions are applicable to his firm as they do not have a corporate as a partner in his LLP, they have not shared any fees or have paid for advertisement as stated in their explanation above. In this regard, it needs to be mentioned that HLBI is an English Company Limited by guarantee. The international entity is having a global presence with may firms being its member including non-CA firms. In this regard, the observations made by Hon'ble Supreme Court read as under:- In the present context, having regard to the statutory framework under the CA Act, current FDI Policy and the RBI circulars, it may prima facie appear that there is violation of statutory provisions and policy framework effective enforcement of which has to be ensured. Statutory regulatory provisions intended to advance the object of law have to be enforced meaningfully. No vested interest can flout the same by manifesting compliance only in form. Compliance has to be in substance. The law enforcing agencies are expected to see the real situation. As found by the Expert Committee in its respect, there is a compliance by MAFs only in form and not in substance, by having got registered partnership firms with the Indian partners, the real benef
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iciaries of transacting the business of Chartered Accountancy remain the companies of the foreign entities. The partnership firms are merely a face to defy the law. The principle of lifting the corporate veil has to apply when the law is sought to be circumvented. (Emphasis provided)." Without reference to any facts only on the basis of observations made by the Supreme Court, following prima-facie opinion is arrived at:- "12.2 Thus, from an overall perusal and consideration of facts of the case, papers/documents on record and in light of the above observations of the Hon'ble Apex Court, at this stage, the possibility of the respondent firm allowing HLBI to stand on pan-india platform through it cannot be ruled out. Therefore, the matter requires to be investigated further to establish whether the respondent-firm in collaboration with the international entity, HLBI was involved in encouraging surrogate practice in India as highlighted in the judgment of the Hon'ble Supreme Court being referred to above. As of now, the respondent-firm in terms of reasoning at preceding paragraphs read with judgment of Hon'ble Supreme Court, therefore, seems to have facilitated HLBI overcome the barriers imposed through it, is prima facie guilty for professional misconduct falling within the meaning of Item (2) of Part I of First Schedule and Item (1) of Part-II of Second Schedule to the Chartered Accountants Act, 1949." 12. Thus, it appears from the above prima facie opinion that in absence of any "Information", as contemplated under Rule 7 of the Rules-2007, the respondent no.2 has formed prima facie opinion only to do fishing inquiry and investigation. The intention of prima facie opinion is not for initiating disciplinary inquiry for the purpose of investigating further to establish whether the petitioner-firm in collaboration with the international entity, HLBI was involved in encouraging surrogate practice in India as highlighted in the judgment of the Supreme Court or not. For such purpose, the petitioner-Firm which is in existence for more than 70 years cannot be put to rigors of disciplinary proceedings in absence of any specific allegation and in absence of any written information containing allegation as per Rule 7 of the Rule-2007. 13. In view of the aforesaid fact situation, the preliminary objection raised by the respondents with regard to maintainability of the petition is not tenable as there is no written information containing allegation against the petitioner-firm and no disciplinary proceedings could have been initiated against the petitioner-firm. 14. With regard reliance placed by the Learned Senior Advocate for the respondents upon the decisions of the Supreme Court to contend that the information from any source would be "Information" to mean any information or knowledge derived from an external source concerning facts or particulars would not be applicable as it would not be information equivalent to the information as per Rule 7 of the Rules-2007. 15. In order to initiate disciplinary proceedings for professional and other misconducts as per provisions of the Act-1949, the procedure of investigation is prescribed in the Rules-2007. Therefore, initiation of disciplinary proceedings has to be as per the provisions of the Rules-2007. Rule 3 provides for procedure for filing complaint in Form I, in triplicate before the Director in person or by post of courier, whereas Rule 5 prescribes procedure registration of complaint. Rule 7 prescribes "Information" means any written information which is not in Form-I under sub-rule (1) of rule 3 containing allegation or allegations against member or a firm, received in person or by post or courier, by the Directorate. Hence, when the formal complaint is not lodged in Form-I as per sub-rule (1) of Rule 3 of the Rules-2007, then any written information containing allegation can be treated as "Information" received under Section 21 of the Act-1949. Therefore, Rule 11 provides that the same procedure is required to be followed with regard to "Information" received by the Director relating misconduct of the members, as similar to the written complaint received under the Rules 3, 4, 5 , 8, 9 and 10 of the Rules-2007. 16. It is pertinent to note that Rule 11 of the Rules-2007 refers to sub-rule (6) of Rule 3 of the Rules-2007. Sub-rule (6) of Rule 3 provides that every complaint received by the Directorate shall be acknowledged by ordinary post together with an acknowledgement number. Therefore, in order to constitute information so as to initiate the disciplinary proceedings under Rules-2007, it would be incumbent upon the directorate to follow Rule 11. However, in the facts of the case, in absence of any information containing allegation against the petitioner-firm received by the Directorate in person or by post or by courier, it would not be possible for the Directorate to comply with the Rule 11 of the Rules-2007. 17. Thus, on conjoint reading of Rules 3, 5, 7, 8, 9, 10 & 11, the basis on which the disciplinary proceedings were initiated in the facts of the case cannot be proceeded further as the very basis for initiation of disciplinary proceedings is missing in form of any written information containing allegations against the petitioner-firm. Merely on the basis of the report of operation of MNAF in India and the judgment of the Supreme Court and analysis of the Representation Agreement between the petitioner- firm and the HLBI, no disciplinary proceedings could have been initiated under the Rules-2007. 18. In view of the aforesaid facts and in absence of any "Information" as contemplated in Rule 7 of the Rules-2007, prima facie opinion arrived at by the authority is without jurisdiction and on the basis of such prima facie opinion formed without any foundation, the initiation of disciplinary inquiry would also be without any jurisdiction. Therefore, the impugned communication dated 02.01.2019 together with the prima-facie opinion dated 04.08.2018 formed by the respondent no.2 prima facie holding the petitioner-firm guilty of professional misconduct under the provisions of the Act-1949 and the decision to proceed further under Chapter-V of the Rules-2007 is without jurisdiction. 19. In view of the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned communication dated 02.01.2019 along with prima facie opinion of respondent no.2 dated 04.08.2018 are hereby quashed and set aside. Rule is made absolute to the aforesaid extent. No order as to costs.