Court dismisses frivolous complaint against CA appointed by High Court - no jurisdiction to review judicial report

Get the full picture - access the original judgement of the court order here

Case Name

Wholesale Trading Services Pvt. Ltd. vs The Institute of Chartered Accountants of India (High Court of Delhi)

LPA 208/2021

Date: 11th November 2021

Key Takeaways

• Judicial Immunity for Court-Appointed Professionals: When a Chartered Accountant is appointed by a High Court and submits a report that becomes part of judicial proceedings, ICAI cannot subsequently investigate allegations of professional misconduct regarding that same report
• Locus Standi Requirements: A person must have a legitimate connection to the companies involved to file complaints against their auditors - strangers cannot file such complaints
• Abuse of Process: Courts will impose heavy costs and restrictions on litigants who repeatedly file frivolous cases without proper standing
• Finality of Judicial Decisions: Once a court has scrutinized and accepted a professional’s report, that decision cannot be collaterally attacked through disciplinary proceedings

Issue

Can ICAI investigate and take disciplinary action against a Chartered Accountant for a report that was submitted to and accepted by a High Court as part of judicial proceedings?

Facts

Back in 2014, three companies wanted to merge into a fourth company called Hasham Investment and Trading Company Private Limited. The Karnataka High Court was overseeing this merger and appointed a Chartered Accountant (Respondent No. 3) to verify the books and documents of the three companies that were merging.

The CA submitted his report on November 25, 2014, and the Karnataka High Court, after reviewing it, approved the merger scheme in March 2015.

Here’s where it gets interesting - in October 2016, Wholesale Trading Services Pvt. Ltd. (the appellant) filed a complaint with ICAI against this same Chartered Accountant, alleging professional misconduct. They claimed the CA had given false certificates and overlooked fraudulent transactions involving tens of thousands of crores being gifted to a private trust.

ICAI dismissed the complaint in December 2020, saying they had no jurisdiction since the report was part of judicial proceedings. The company then challenged this dismissal in Delhi High Court, which also dismissed their petition with costs. That’s what brought them to this appeal.

Arguments

Appellant’s Arguments:

The appellant argued that ICAI was wrong to dismiss their complaint because:

• ICAI’s Disciplinary Committee has original jurisdiction over professional misconduct cases
• Anyone can file a complaint under the Chartered Accountants Act - there’s no restriction on who can complain
• The Karnataka High Court proceedings about the merger recall were completely separate from the professional misconduct complaint
• They had found serious fraud in the audits, with assets worth thousands of crores being improperly gifted to a private trust

Respondent’s Arguments:

The Chartered Accountant and the intervener company argued that:

• Once the CA’s report was accepted by the Karnataka High Court, ICAI had no jurisdiction to review it
• The allegations were essentially the same as those made in a failed recall application before the Karnataka High Court
• The appellant had no connection to the companies involved and therefore no standing to file the complaint
• This was part of a pattern of vexatious litigation by the appellant

Key Legal Precedents

The judgment references several important legal precedents, though the connected documents don’t provide the complete verbatim case names. The court relied on:

• Previous judgments from the Karnataka High Court dismissing the recall application and subsequent appeal
• Earlier Delhi High Court cases involving the same appellant: W.P.© Nos. 8071/2019 and 8081/2019, which were dismissed with costs for similar frivolous litigation
• The principle established in “Udyami” case regarding forum shopping and criminal contempt

The court also referenced the Karnataka High Court’s observations about “speculative litigation” and abuse of process.

Judgement

The Delhi High Court Division Bench dismissed the appeal completely. Here’s their reasoning:

1. No Jurisdiction: Once the CA’s report became part of judicial proceedings and was accepted by the Karnataka High Court, ICAI had no jurisdiction to investigate the same report
2. Lack of Standing: The appellant had no connection to the companies involved in the merger and therefore no right to file the complaint
3. Abuse of Process: The court found this was essentially re-litigation of the same issues that had already been rejected by the Karnataka High Court
4. Pattern of Frivolous Litigation: The court noted the appellant’s history of filing multiple unsuccessful cases and not paying court-imposed costs

The court imposed costs of Rs.50,000 to be paid to the Delhi State Legal Service Authority and scheduled a compliance hearing for January 7, 2022.

FAQs

Q1: Can anyone file a complaint against a Chartered Accountant with ICAI?

A: While the Chartered Accountants Act doesn’t explicitly restrict who can file complaints, this case establishes that you need to have some legitimate connection or standing related to the matter. You can’t just be a complete stranger filing complaints.

Q2: What happens when a CA is appointed by a court?

A: When a High Court appoints a CA and accepts their report as part of judicial proceedings, that report gains a form of judicial protection. ICAI cannot subsequently investigate the same report for professional misconduct.

Q3: Can you challenge a court-accepted CA report through ICAI?

A: No, not directly. The ICAI order specifically states that they can only take action “if an order to this effect is passed by the Hon’ble High Court of Karnataka”.

Q4: What are the consequences of filing frivolous litigation?

A: Courts can impose heavy costs, refuse to list future petitions until costs are paid, and in extreme cases, even restrict parties from filing further cases on the same subject matter.

Q5: Does this mean CAs appointed by courts are immune from all disciplinary action?

A: Not exactly. The immunity applies specifically to reports that become part of judicial proceedings. If there are separate instances of misconduct unrelated to the court-appointed work, those could potentially still be investigated.

CM APPL. 31910/2021& 31766/2021(Exemption)

Allowed, subject to all just exceptions.

Applications stand disposed of.

CM APPL. 31909/2021(Intervention)

Present application has been preferred by M/s Hasham Investment

and Trading Company Private Limited, seeking intervention in the present

Appeal.

For the reason stated in application, the same is hereby allowed and

intervener is permitted to argue and assist the Court.

Application is disposed of.

LPA 208/2021 & CM APPL. 29368/2021(Clarification of order dated

02.08.2021), 31765/2021(Addl. Doc.)

1. Being aggrieved and feeling dissatisfied with the judgment and order

dated 13.05.2021, passed by the learned Single Judge in W.P.(C) 376/2021,

present Letters Patent Appeal has been preferred by the Appellant. Writ

petition was filed by the Appellant, impugning order dated 16.12.2020,

passed by the Institute of Chartered Accountants of India (hereinafter

referred to as ‘ICAI’), whereby the complaint preferred by the Appellant

against Respondent No. 3, a Chartered Accountant, was dismissed.

Appellant herein was the Petitioner in the writ petition and the Chartered

Accountant against whom the complaint was filed was Respondent No.3 and

has been impleaded in the present appeal as Respondent No.3. For the sake

of convenience, parties are hereinafter referred to by their litigating status before this Court.

Factual Matrix

i. A petition for merger was filed before the High Court of Karnataka by

three Companies viz. a) M/s Napean Trading and Investment Company

Private Limited; b) M/s Regal Trading and Investment Company Private

Limited;and c) M/s. Vidhya Trading and Investment Company Private

Limited. The three Companies were to be amalgamated into the fourth

Company, namely, M/s Hasham Investment and Trading Company Private

Limited.

ii. High Court of Karnataka appointed Respondent No.3/Chartered

Accountant for verification of the books and other documents of the three

Transferor Companies and to submit his report.

iii. Report was submitted by Respondent No.3 on 25.11.2014 before the

Karnataka High Court and was thus a part of the judicial record in

Company Petitions bearing Nos.182-185/2014.

iv. The Karnataka High Court after taking cognizance of the Report and

deliberating thereon, sanctioned the Scheme of merger vide order dated

26.03.2015.

v. A complaint was filed by the Appellant before the ICAI on

24.10.2016, alleging professional misconduct against Respondent No.3,

appointed by the Karnataka High Court, for verification of the documents,

etc.

vi. Complaint was dismissed by the Disciplinary Committee of ICAI on

16.12.2020 and the said order was challenged before the learned Single

Judge of this Court, in a writ petition being W.P.(C) 376/2021. The writ

petition was dismissed and from the said order, the present appeal emanates.

vii. Separately, a Recall application was filed by an entity called ‘India

Awake for Transparency’ before the Karnataka High Court seeking recall of

the order 26.03.2015, by which the Scheme of merger was sanctioned.

viii. Recall application was dismissed by the learned Single Judge of the

Karnataka High Court on 17.03.2021 holding therein that since the

Applicant was not a party to the main petition, it had no locus standi to file a review application.

ix. An appeal was preferred against the order of the learned Single Judge

before the Division Bench of the Karnataka High Court being OSA

No.1/2021, which was dismissed vide judgment dated 22.04.2021.

x. Special Leave Petition against the judgment of the Division Bench

being SLP (Civil) No. 17185/2021 is stated to have been filed by the

Appellant, as stated by counsel for the Appellant during the hearing, but is

not listed so far.

xi. Writ petition preferred by the Appellant being W.P.(C) 376/2021

challenging the order dated 16.12.2020 passed by the ICAI, dismissing the

complaint filed by the Appellant against Respondent No.3, was dismissed

by the learned Single Judge vide judgment dated 13.05.2021 imposing costs

of Rs.50,000/- on the Appellant. It is this judgment which is impugned

before this Court in the present appeal.

Arguments canvassed by counsel for the Appellant

xii. It is submitted by learned counsel appearing on behalf of the

Appellant that the ICAI has erroneously dismissed the complaint of the

Appellant and the learned Single Judge has erred in upholding the order in

as much as it is the Disciplinary Committee of the ICAI which has the

original jurisdiction to take cognizance of a professional misconduct of a

Chartered Accountant. Learned Single Judge could not have relied on the

judgments of the Karnataka High Court as the proceedings before the

Karnataka High Court, relating to recall of merger, were wholly unrelated to

the complaint of professional misconduct by Respondent No.3, filed before

the ICAI.

xiii. Learned Single Judge failed to appreciate that there is no restriction

on who can file a complaint under the Chartered Accountants Act, 1949 and

the Rules framed thereunder and therefore, the question of locus of the

Appellant in filing the complaint before ICAI did not even arise. Direction

of the learned Single Judge requiring the Appellant to file an affidavit

indicating his connection with the Companies, in respect of which the audit

was conducted by Respondent No.3, was unsustainable in law. In case there

is a professional misconduct by a Chartered Accountant, the complaint can

be filed by any person and it is not necessary that the complainant should be a shareholder of a Company, for which the audit has been conducted by the

concerned Chartered Accountant. The Appellant therefore had the locus

standi to file a complaint against Respondent No.3 and the complaint ought

to have been investigated and enquired into by the ICAI and disciplinary

action should have been initiated.

xiv. Learned Single Judge has erroneously linked the Company ‘India

Awake for Transparency’ with the present Appellant, whereas, both are

separate legal entities and the commonality of the advocate representing the

two Companies cannot have any bearing on the merits of the present case.

Learned Single Judge failed to appreciate that the Appellant had valid

authorisation to file a complaint against Respondent No.3. The impugned

order before the learned Single Judge therefore deserved to be set aside and

mere non-deposit of costs imposed by the various Courts could not be a

ground, either to dismiss the writ petition or for a further direction by the learned Single Judge to the Registry that no petition filed by the Appellant shall be listed, till the Appellant deposited the costs.

xv. Learned Single Judge failed to appreciate that the mere fact that the

Report rendered by Respondent No.3 was before the Karnataka High Court

was not enough to oust the Appellant and decline to entertain the complaint.

Once the Appellant had levelled serious allegations of offences relating to

professional misconduct, it ought to have been adjudicated as it is a well

settled law that in matters of professional misconduct, even suo moto action

can be taken by the Disciplinary Committee. Appellant found serious fraud

in the audits certified by Respondent No.3, inasmuch as records of the three

Companies revealed that there were various egregious transactions entered

into by the three Transferor Companies between the period 2009-2014. The

Companies and the Partnership Firms in which they had stake had jointly

settled a Private Trust under the name Azim Premji Trust. The accounts of

the Companies and its wholly owned Subsidiaries reveal that the assets of

the three Companies have been misused in the said five year period, for the

benefit of the Director, to the extent of tens of thousands of crores of assets being gifted to a private Trust. Despite this, a false certificate had been given by Respondent No.3, in order to suppress the misuse and misappropriation. Arguments canvassed by Learned Senior Counsel for Respondent No. 3-Chartered Accountant

xvi. Mr. Dayan Krishnan, learned Senior Counsel submits that no error has

been committed by the learned Single Judge while passing the impugned

judgment dated 13.05.2021 and upholding the order dated 16.12.2020

passed by the ICAI, whereby the complaint of the Appellant was dismissed.

xvi. Respondent No.3 was appointed by the Karnataka High Court in the

Company Petitions, wherein Scheme of Merger of the three Companies into

M/s. Hasham Investment and Trading Company Private Limited, was

sanctioned. Respondent No.3 was appointed to verify the books and papers

of the three Transferor Companies and the report was given by Respondent

No. 3 on 25.11.2014, which became a part of the judicial record of the

Karnataka High Court. The report was duly considered by the Court and

thereafter, the Scheme of Merger was sanctioned. Once the report has been

accepted by the Karnataka High Court, it was not open to the ICAI to reopen

and reconsider the report and initiate any proceedings against Respondent

No.3 and thus, the complaint filed by the Appellant was rightly dismissed.

xvii. Supporting the order of ICAI, it is further submitted that the

allegations made in the complaint were more or less the same as those

averred in the Recall application filed by India Awake for Transparency

before the Karnataka High Court and the Recall application was dismissed

vide a detailed order dated 17.03.2021 by the Court, after due deliberation.

Against the order of dismissal of the recall application, India Awake for

Transparency filed an appeal being OSA No.1/2021 before the Division

Bench of the Karnataka High Court, which too was dismissed on

22.04.2021. Placing reliance on various paragraphs of the said judgment,

more particularly, paragraph 23 onwards, it is submitted that once the report has passed the test of judicial scrutiny, there was no reason why the ICAI should have again adjudicated the allegations, which were more or less

similar to the ones in the recall application. In fact, there was nothing further remaining to be enquired by ICAI after the judgments of the Karnataka High Court.

xviii. It is emphasized and highlighted that the Appellant is a chronic

litigant and has no other work but to file petitions and/or other litigations and target a particular Company. Not less than three dozen litigations have been initiated by the Appellant and India Awake for Transparency, in which Mr. R. Subramanian is a common link. In fact, several proceedings including criminal cases are pending against Mr. R. Subramanian and in some matters, costs have been imposed and barring one case, in all the others, even the costs have not been deposited. Even in one case where the cost was paid, it was only because this Court had directed the arrest of one of the Directors in case of non-payment of costs.

Arguments canvassed by Learned Senior Counsel for the Intervener

xix. Mr. S.Ganesh, learned Senior Advocate appearing on behalf of the

intervener, submits that a Scheme of amalgamation was filed before the

Karnataka High Court for amalgamation of three Transferor Companies into

M/s. Hasham Investment and Trading Company Pvt. Ltd., which is a Non-

Banking Finance Company and a part of the closely held Group of Private

Companies promoted by Sh. Azim Hasham Premji. Respondent No.3 was

appointed by the Karnataka High Court for looking into the books and

papers of the three Transferor Companies and to submit his report. After the

report was rendered by the Chartered Accountant, the same was placed

before the Court. Report was deliberated upon and after the same was duly

considered, the Scheme of Merger was sanctioned by the Court. A recall

application was filed by India Awake for Transparency, but the same was

dismissed and the appeal before the Division Bench also met the same fate.

xx. The complaint filed by the Appellant before Respondents No.1 and 2

related to allegations that the report filed by Respondent No.3 before the

Karnataka High Court was incorrect and the Appellant also sought

disciplinary action against Respondent No.3. Respondents No.1 and 2

rightly dismissed the complaint, noting that once the appointment of

Respondent No.3 was made under orders of the Karnataka High Court and

the report was considered by the Court, only the said High Court could pass

any order on the same and the Committee had no jurisdiction to take

cognizance of the same. Thus, no error has been committed by the ICAI

while dismissing the complaint and accordingly, the impugned judgment

passed by the learned Single Judge upholding the said order, suffers from no

infirmity.

xxi. Appellant or for that matter Mr. R.Subramanian have no connection

whatsoever either with Hasham Investment and Trading Company Pvt. Ltd.

or the other three entities which have merged with it, by virtue of the

Scheme of Amalgamation sanctioned by the Karnataka High Court vide

order dated 26.03.2015. Further, Mr. Subramanian and the Appellant are

neither creditors nor shareholders in the Applicant Company, which is an

undisputed fact. The action of filing the complaint is malafide and motivated to interfere in the affairs of the Applicant Company by filing complaints against the Chartered Accountant and thereby also indirectly seeking to question the order of the Karnataka High Court, approving the Merger Scheme.

xxii. Two such writ petitions being W.P.(C) Nos. 8071/2019 and

8081/2019 were dismissed by two separate orders 01.08.2019 by a learned

Single Judge of this Court with costs. Attention of the Court is drawn to

paragraphs 11 and 12 of the order passed in W.P.(C) No. 8081/2019,

wherein the Court took notice of the observations in the decision rendered in W.P.(C) No.8071/2019, that the use of a Corporate facade by the Petitioner therein through its Directors or Promoters for pursuing complaints against various Chartered Accountants, unconnected with his business, could not be countenanced. A Letters Patent Appeal being LPA 586/2019 was preferred against the said order and the appeal was dismissed by the Division Bench of this Court vide judgement dated 11.09.2019. Applying the same principle, the present Appellant has nothing to do with the aforesaid four Companies and thus has no locus whatsoever to file the complaint. Moreover, there was neither a Resolution of the Company nor any authorization in favour of the Appellant for filing the complaint. It is also highlighted that the Appellant herein was the Petitioner even in the above two writ petitions and the four Companies herein against whom allegations were levelled in the complaint were amongst the seven Companies therein. Thus, the judgments of Karnataka High Court would apply with equal vigour to the present case.

xxiii. Mr. R. Subramanian promoted a Company by the name of Subiksha

Trading Service Ltd. and entered into certain business dealings with the

Applicant, wherein the Applicant invested around Rs. 240 crores and

extended a loan of Rs. 40 crores. Subiksha defaulted on payment of debts

owed to the Applicant Company, as a consequence of which the Applicant

resorted to remedies for recovery of money and also filed complaints under

Section 138 of the Negotiable Instruments Act, 1881 for dishonour of

cheques worth Rs.39.32 Crores. As a matter of vendetta, Mr. Subramanian

has been filing cases against the Applicant Company, its Associate

Companies, Directors, etc. as a matter of harassment and coercion. Cases

have been filed in various Forums across the Country in different names,

either in the name of Appellant or through India Awake for Transparency,

which is a Company controlled by Mr. Subramanian. In the last five years,

more than 36 cases have been filed and most of them have been dismissed

with exemplary costs. In fact, the Karnataka High Court while dismissing a

petition under Section 482 Cr.P.C. seeking quashing of a complaint under

Section 138 of Negotiable Instruments Act, has observed that the petition

was a clear abuse of process of the Court and the proceedings instituted were frivolous and vexatious, deserving to be curbed with an iron hand and the Petitioner required to be mulcted with exemplary costs.

Reasons and Analysis

2. We have heard the learned counsel appearing on behalf of the

Appellant as well as learned Senior Counsels appearing on behalf of

Respondent No.3 and the Intervener, respectively. We have also examined

the impugned judgment as well as perused the judgments of the Karnataka

High Court, along with the other documents, placed on record by the

respective parties.

3. The undisputed facts are that the Appellant filed a complaint before

the ICAI against Respondent No.3, who being a Chartered Accountant was

appointed by the Karnataka High Court, in Company Petitions alluded to

above, for the purpose of verification of the books and papers of three

Transferor Companies, pending the Scheme of Amalgamation with the

fourth Company. Report was rendered by Respondent No.3 and was placed

before the Karnataka High Court. It was considered by the Court and

thereafter, the Scheme of Amalgamation was sanctioned vide order dated

26.03.2015.

4. Complaint was dismissed by the Disciplinary Committee of ICAI on

16.12.2020, primarily on the ground that the report was considered by the

Karnataka High Court and it was only that Court which could take a view on

the same and that the Disciplinary Committee had no jurisdiction to take

cognizance on the same report. The order was challenged by the Appellant

herein before the learned Single Judge but the writ petition was dismissed

with costs of Rs.50,000/-. Aggrieved by the judgment, Appellant approached

this Court by way of the present appeal.

5. In our considered view, this appeal deserves to be dismissed for the

following reasons :-

I. Respondent No. 3 was appointed by the Karnataka High Court

vide order dated 04.09.2014 in Company Petitions, preferred

with respect to amalgamation of three Companies, viz. -

(a) M/s Napean Trading and Investment Company Private

Limited;

(b) M/s Regal Trading and Investment Company Private

Limited and

(c) M/s Vidya Trading and Investment Company Private

Limited into M/s Hasham Investment and Trading Company

Private Limited and a detailed report was furnished by

Respondent No.3 on 25.11.2014, before the learned Single

Judge of Karnataka High Court.

II. The report was thus a part of the judicial proceedings before the

said Court and it was duly considered and deliberated upon by

the Karnataka High Court. The Court sanctioned the Scheme of

Amalgamation vide judgment dated 26.03.2015 and it is

apparent that the Court found no fault with or falsity in the

report.

III. Once the report passed the threshold of judicial scrutiny, there

was no reason why the Disciplinary Committee of ICAI should

have adjudicated the correctness or otherwise of the Report. In

fact, the Disciplinary Committee rightly refrained from

interfering in the report by observing that it had no jurisdiction

to even delve into the report, once it had received approval

from the Karnataka High Court. Hence, no error was committed

by ICAI in dismissing the complaint filed by the Appellant. For

ready reference, relevant paras of the order passed by the

Disciplinary Committee of ICAI are as under:-

“5. The Committee further noted that the

Respondent conducted the audit on behalf of the

Respondent firm whereby he, on verification of

records, gave his opinion in the reports to the

official liquidator. Thus, the Committee viewed

that the appointment of the Respondent was made

under the Orders of the Hon’ble High Court of

Karnataka and that the reports prepared by him

were placed before and considered by the Hon’ble

High Court of Karnataka. Accordingly, the

Committee was of the view that the said report of

the auditor was the property of the Hon’ble High

Court of Karnataka which alone could pass any

order on the same. It also noticed that the matter

was sub judice and the Committee had no

jurisdiction to take cognizance of the same. It is

only the Hon’ble High Court of Karnataka which

can take a view on the Report of the Respondent.

The Committee can take any action in the matter

only if an order to this effect is passed by the

Hon’ble High Court of Karnataka and its

continuing with an inquiry in the present complaint

would not be appropriate. Accordingly, the extant

complaint was dismissed by the Committee.

Conclusion:

6. Thus, the Committee dismissed the extant

Complaint. However, the Complainant has right to

file case before the Disciplinary mechanism of the

Institute with the copy of Order of the Hon’ble

High Court of Karnataka.”

IV. It needs to be highlighted that the order of the Karnataka High

Court sanctioning the Amalgamation Scheme was sought to be

recalled by India Awake for Transparency, however, the recall

application, being in the nature of a review petition, was

dismissed vide order dated 17.03.2021. Relevant paragraphs of

the order are as under:-

“(h) Merely because the applicant has made

allegations of fraud and collusion, it cannot be

said that applicant has locus standi to invoke

inherent powers of this Court to recall the

impugned order; in order words, even to seek

recall of the impugned order by invoking inherent

powers of this Court by alleging fraud, it is

absolutely imperative and incumbent that the

applicant is an aggrieved person having locus

standi to file the application and in the absence

thereof, the present application is not maintainable.

(m) The conduct of the applicant in repeatedly

filing applications, petitions, complaints appeals

etc., before various forums including this Court

including a public interest petition in

W.P.3635/2020 (PIL) which was also withdrawn

unconditionally by the applicant on 01.10.2020 as

well as the orders passed by this Court in

W.P.13838/2020 dated 08.01.2021 W.P.No.

11482/2020 dated 18.01.2021 and

W.P.No.172/2021 dated 12.02.2021, all filed by the

applicant which were dismissed with costs is

sufficient to establish that the applicant is not

entitled to any relief in the present application

also; in fact, in the aforesaid W.P.No.172/2021

dated 12.02.2021, while dismissing the petition

after noticing the conduct of the applicant, and

imposing exemplary costs of Rs. 10 lakhs on the

applicant, this Court held as under:

27. Thus, there remains no doubt that

petitioner is indulging in forum shopping on

the very same cause of action. As held in

Udyami, this amounts to criminal contempt

as the core issue in all these writ petitions is

one and the same.

28. In the result, this writ petition is not only

devoid of merits, but an absolute abuse of

process of law. Though Petitioner was

forewarned, he chose to argue this writ

petition as a stand-alone petition, wasting

the valuable time of this Court to deal with

such frivolous cases. Therefore, imposition

of punitive cost is necessary.

29. In view of the above, the preliminary

objection raised by Shri S. Ganesh and Shri

C.V. Nagesh are sustained and this writ

petition is dismissed with cost of Rs.

10,00,000 (Rupees Ten lakhs) payable by

petitioner to the Registrar General, High

Court of Karnataka, Bengaluru within four

weeks from today.

(n) A perusal of the aforesaid orders passed by this

Court clearly indicates that the applicant is guilty

of abuse of process of law and his conduct

disentitles him from any relief in the present

petition also. In fact, as noticed by this Court in the

earlier orders, the claim of the applicant has been

rejected not only by the Ministry of Corporate

Affairs but also by the Reserve bank of India.

Under these Circumstances also, I am of the

considered opinion that the present application is

not maintainable and the same is liable to be

dismissed.”

V. The order was unsuccessfully challenged before the Division

Bench of the Karnataka High Court and the appeal was

dismissed by a detailed judgment dated 22.04.2021. Although

Mr. Subramanian informed the Court during the course of

hearing that against the order of the Division Bench, a Special

Leave Petition has been filed, but it was also conceded that it is

yet to be listed. Thus, the order of the Division Bench holds the

field at present. For ready reference paragraphs 23, 24, 25, 26

and 27 of the Division Bench of Karnataka High Court

judgment dated 22.04.2021 passed in Original Side Appeal No.

1/20121 are extracted as under:-

“23. We find considerable force in the submission

of learned Senior counsel inasmuch as when a

company is seeking to file an appeal for a

proceeding, then the Board of Directors of the

company has to authorise a person who would

verify the pleadings or file the proceeding on

behalf of the Company as it authorised signatory at

the risk in toto. In the instant case, it is not known

as to how a “Volunteer” of the appellant-company

could have volunteered to verify the pleadings by

the verifying affidavit and file this appeal The

status of this volunteer Sri. P. Sadanand vis-a-vis

the Company is not known whether he is a

shareholder, director or an employee of the

company. At any rate, there can be no

authorisation for him to volunteer to file this

appeal. On this ground also, we find that the

appeal filed by the appellant is not in accordance

with the legal procedural requirement and hence

cannot be entertained.

24. Despite the above circumstances, we have

considered the order of learned Single Judge in

light of the submission made by the learned

counsel for the appellant and learned senior

counsel for respondent No.1 and we find that the

learned single judge was justified in dismissing the

application filed in Company Application

No.185/2016 seeking recall of the order dated

26.03.2015, by which, the scheme of the

amalgamation of the three companies with

respondent No.1 was sanctioned in Company

Petition No.182/2014 as the appellant had no locus

standi to file such an application hence, we find no

merit in this appeal and the appeal is hence liable

to be dismissed.

25. Before parting with this judgment, we would

like to remind ourselves that in recent years there

has emerged a trend of filing speculative litigation

before various courts of law, not just in the Court

of first instance, but also in the High Court. It is

the duty of the Courts to ensure that such

speculative litigation is weeded out at the first

instances rather than allowing it to be festered and

thereby coming in the way of genuine litigants

seeking justice in their cases. We find that this is

one stark instance of speculative litigation being

filed not just by this appeal, but repeatedly over the

years has been started, filing of litigation has been

firstly, before the Court Hon’ble of the Chief

Justice in the form of a public interest litigation

and thereafter in separate writ petitions on the

same cause of action after withdrawing

unconditionally the public interest litigation and

not being successful in those cases and not being

able to get over the order passed by the learned

Company Judge of this Court sanctioning the

amalgamation of the three companies with

respondent No.1 this is without having any locus

standi to do so.

26. In the circumstances, we dismiss the appeal as

being without merit. However, we refrain from

imposing any cost.

27. But, having regard to the checkered history

with regard to this controversy, we refrain the

appellant herein, India Awake for Transparency,

from filing any proceeding with regard

amalgamation of the three companies with

respondent No.1 herein in future before any court

or authority or forum. We are constrained to pass

such an order having regard to the loss of precious

public time of this court and other courts by raking

up such a controversy by the appellant company,

without having any locus standi to do so. The same

is an instance of gross abuse of the process of law

as well as of this court.”

(emphasis supplied)

VI. A bare reading of the aforesaid observations of the Division

Bench, leads to an inevitable conclusion that the Appellant had

no locus standi to file a complaint against Respondent No. 3.

Moreover, the three Transferor Companies which have already

merged into Hasham Investment and Trading Private Ltd. a 4th

Company have 100% shareholding by the Azim Premji Group.

The Transferee Company, i.e. M/s Hasham Investment and

Trading Private Limited, does not have any public shareholding

and also has 100% shareholding by the Azim Premji Group.

Therefore, a stranger can have nothing to do with the Company,

least of all to make allegations of fraud or professional

misconduct against a Chartered Accountant.

VII. We also find merit in the argument of learned Senior Counsel

for the intervener and Respondent No.3 that the grounds urged

in the complaint before the ICAI were more or less similar to

the one raised by India Awake for Transparency in the recall

application before the Karnataka High Court. Mr. R.

Subramanian, Advocate was the lawyer for the Petitioner in the

recall application and beyond a doubt was conscious of the

similarity/overlap of the grounds. Having been unsuccessful in

a challenge before the Karnataka High Court, a calculated

chance was taken before this Court, to re-agitate the same issue

albeit through another Company, i.e. the present Appellant.

This, in our view, is certainly an abuse of the process of law by

the Appellant and deserves to be condemned. For ready

reference ground (h) of the Recall application is extracted

hereunder :-

“h. The Transferor companies have misled and

misrepresented factors to the Official Liquidator and

Chartered Accountant appointed by the OL, who

submitted reports dated 25.11.2014 to the OL in

respect of each of the 3 Transferors. Para 6.5 of the

said report in respect of each of the 3 Transferor

companies records that the Transferor companies had

held out to OL that they being unable to comply with

the direction of the RBI in respect of not being partners

of partnership firms, they were propounding the

scheme for amalgamation to correct the position. It is

submitted that the scheme will in no manner modify the

position of non compliance as the merged entity would

continue as a partner in the partnership firms and as

such the impugned violations set out as being sought to

be remedied would only continue as is. The accounts

for the year ended 31.3.2015 of the Transferee after

merger reveals that it continues to be a partner in the 3

partnership firms despite operating as a NBFC.”

VIII. Holistically seen, the report rendered by Respondent No.3 has

been tested and has passed the muster of judicial scrutiny

several times, both by the learned Single Judge and the

Division Bench and neither of the Courts found anything wrong

with the same. If the report had anything objectionable or was

false and contrary to the record of the Company or overlooked

any fraudulent transactions, as alleged by the Appellant, surely,

the Karnataka High Court would have taken cognizance of the

same and it would not have been accepted. In this view, the

Disciplinary Committee of ICAI had, in our view, treaded on

the right path by dismissing the complaint. The learned Single

Judge has rightly observed that no infirmity could be found in

the view taken by the Disciplinary Committee and it was only

the Karnataka High Court which could take a view on the

report submitted by Respondent No.3.

IX. We are also in agreement with the learned Single Judge that the

Appellant cannot be permitted to start parallel proceedings to

challenge the sanction of merger by the Karnataka High Court

as also the fact that neither the Appellant nor Mr. Subramanian

have any connection or nexus to the parties to the Scheme of

Merger. That being the position, Appellant has no connection

or locus to file the complaint and the observations and findings

of the learned Single Judge cannot be faulted with.

X. Much has been argued by learned Senior Counsel appearing on

behalf of Respondent No.3 as well as by learned Senior

Counsel appearing on behalf of the Intervener that the present

litigation is only a continuation of the earlier litigation filed by

the Appellant and/or India Awake for Transparency, with a

view to victimize the intervener Company/its Associate

Companies and its Directors, etc., out of sheer vendetta. Since

the present appeal is only concerned with the impugned

judgment, which is triggered by dismissal of a complaint by the

Appellant herein, we do not wish to enter into the controversy

of the earlier litigation, except to the extent mentioned above

wherein we have noted the judgments of the Karnataka High

Court dealing with the report rendered by Respondent No.3.

XI. We may, however, note that the Appellant has repeatedly

defaulted in complying with the orders of various Courts by not

depositing the costs imposed. The learned Single Judge has

taken note of an order of the Division Bench dated 01.03.2021

wherein a list of cases was enumerated along with the costs

imposed by the Courts, which were unpaid, except in LPA

89/2021, where the costs was deposited after this Court passed

an order of arrest of one of the Directors of the Appellant.

Reference to the table is only to reflect upon the conduct of the

Appellant, who defies the orders of this Court with impunity.

For ready reference, the table is as under:-

Sl. No. Case Details Date of Order Bench Costs

1. Wholesale Trading Services Pvt. Ltd. v. UOI WP(C)

07.07.2017 Division bench of the Hon’ble Delhi High Court

Rs.10,000/- Imposed as costs on the Appellant

5602/2017

2. Wholesale Trading Services Pvt. Ltd. v. UOI;

WP(C)10536/2017 04.12.2017 Hon’ble Delhi High Court

Rs.10,000/- Payable to Delhi High Court Legal Services Committee

within a period of three weeks, imposed on the Appellant

3. Wholesale Trading Services Pvt. Ltd. v. ICAI & Ors;

WP(C) 8071/2019 04.12.2017 Hon’ble Delhi High Court

Rs.1,00,000/- Payable to Delhi High Court Legal

Services Committee within a period of two

weeks, imposed on the Appellant

4. Wholesale Trading Services Pvt. Ltd. v. ICAI &

Ors; WP(C) 8081/2019 01.08.2019 Hon’ble Delhi High

Court Rs.1,00,000/- payable to Delhi High Court Legal

Services Committee within a period of two weeks,

imposed on the Appellant. This order has been

sustained by the Hon’ble Division Bench of this Hon’ble Court

6. In view of the cumulative effect of the aforesaid facts and reasons and

judicial pronouncements, we find that no error has been committed by

learned Single Judge while deciding W.P. (C) No. 376/2021 and we are in

complete agreement with the observations, reasoning and findings rendered

in the impugned judgment.

7. There is no merit in the appeal and the same is accordingly dismissed

along with all pending applications with costs of Rs.50,000/- to be deposited by the Appellant with the Delhi State Legal Service Authority within eight weeks from today. The aforesaid amount shall be utilized for the programme ‘Access to Justice’.

8. A copy of this order be sent forthwith to the Member Secretary, Delhi

State Legal Services Authority, Patiala House Courts, New Delhi.

9. The Appeal shall be listed on 07.01.2022, only for the limited purpose

of reporting compliance with respect to deposit of costs.

CHIEF JUSTICE

JYOTI SINGH, J

NOVEMBER 11, 2021