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Untitled Document

AS INTRODUCED IN THE RAJYA SABHA
6TH DECEMBER, 2005

Bill No . CXXIII of 2005.

THE COMPANY SECRETARIES (AMENDMENT) BILL, 2005

A

BILL

Further to amend the Company Secretaries Act, 1980

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

Short title and commencement.

1. (1) This Act may be called the Company Secretaries (Amendment) Act, 2005.

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

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

Amendment of section 2.

2. In the Company Secretaries Act, 1980 (hereinafter referred to as the principal Act), in sub-section (1) of section (2),- 56 of 1980.

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

'(aa) "Authority" means the Appellate Authority referred to in section 22A;

(aaa) "Board" means the Quality Review Board constituted under section 29A;';

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

'(ga) "notification" means a notification published in the Official Gazette;';

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

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

(jb) "Tribunal" means a Tribunal established under sub-section (1) of section 10B;'.

Amendment of Section 4.

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

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

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

Amendment of section 5.

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

"(3) A person, being an Associate who has been in continuous practice in India as a Company Secretary for at least five years and a person who has been an Associate for a continuous period of not less than five years and who possesses such qualifications or practical experience as the Council may prescribe with a view to ensuring that he has experience equivalent to the experience normally acquired as a result of continuous practice for a period of five years as a Company Secretary shall, on payment of such fees, as may be determined, by notification, by the Council, which shall not exceed rupees five thousand, and on application made and granted in the prescribed manner, be entered in the Register as a Fellow:

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

Explanation I.- For the purposes of this sub-section, a person shall be deemed to have practised in India for any period for which he held a certificate of practice under section 6, notwithstanding that he did not actually practise during that period.

Explanation II.- In computing the continuous period during which a person has been an Associate of the Institute, there shall be included any continuous period during which the person has been an Associate of the dissolved company immediately before he became an Associate of the Institute.".

Amendment of section 6.

5. In section 6 of the principal Act,-

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

"(2) A member who desires to the entitled to practise shall make an application in such form and pay such annual fee, for this certificate as may be determined by notification, by the Counsel, which shall not exceed rupees three thousand, and such fee shall be payable on or before the 1st day of April in each Year :

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

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

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

Amendment of section 9.

6. In Section 9 of the principal Act, -

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

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

(a) not more than fifteen person elected by the members of the Institute, from amongst the Fellows of the Institute chosen in such manner and from such regional constituencies as may be specified :

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

(i) in case of misconduct falling under the First Schedule of this Act, for a period of three years;

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

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

(b) not more than five persons nominated in the specified manner by the Central Government."

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

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

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

Substitution of new section for section 10.

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

Re-election or re-nomination to Council.

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

Provided that no member shall hold the office for more than two consecutive terms :

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

Insertion of new sections 10A and 10B.

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

Settlement of disputes regarding election.

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

Establishment of Tribunal.

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

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

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

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

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

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

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

Amendment of section 12.

9. In section 12 of the principal Act,-

(i) in sub-section (2), for the words “Chief Executive Authority”, the word “Head” shall be substituted;

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

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

“(4) On the expiration of the duration of the Council, or of the term of office of the President and the Vice-President thereof, the President and the Vice-President shall continue to hold office until such time as a new President and the Vice-President is elected and takes over charge of their duties.”

Amendment of Section 13.

10. In section 13 of the principal Act,-

(i) in sub-section (2), after the words “meeting of the Council”, the words “or he has been found guilty of any professional or other misconduct and awarded penalty of fine,” shall be inserted;

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

Amendment of section 14.

11. In Section 14 of the principal Act, in sub-section (1), for the words “three years”, the words “four years” shall be substituted.

Substitution of new section for section 15.

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

Functions of Council.

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

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

(a) to approve academic courses and their contents;

(b) the prescribing of fees for the examination of candidate as for enrolment;

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

(d) the recognition of foreign qualifications and training for purposes of enrolment;

(e) the prescribing of guidelines for granting or refusal of certificates of practice under this Act;

(f) the levy of fees fro members, examinees and other persons;

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

(h) the carrying out, by granting financial assistance to persons other than members of the Council or in any other manner, of research in such matters of interest to Company Secretaries as may be prescribed;

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

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

(k) Consideration of the recommendations of the Quality Review Board made under clause (a) of section 29B and details of action taken thereon in its annual report; and

(l) To ensure the functioning of the Institute in accordance with the provisions of this Act and in performance of together statutory duties as may be entrusted to the Institute from time to time.”.

Insertion of new sections 15A and 15B

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

Functions of Institute.

“15A. The functions of the Institute shall include –

(a) the examination of candidates for enrolment;

(b) the regulation of training of students;

(c) the maintenance and publication of a Register of persons qualified to practice s Company Secretaries;

(d) collection of fees from members, examinees and other persons;

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

(f) the maintenance of a library and publication of books and periodicals relating to management of companies and allied subjects;

(g) the conduct of elections to the Council of the Institute; and

(h) the granting or refusal of certificates of practice as per guidelines issued by the Council.

Imparting education by Universities and other bodies.

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

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

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

Substitution of new section for section 16.

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

Officers and employees, salary, allowance, etc.

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

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

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

(c) designate an officer of the Council or the Institute to carry out the administrative functions of the Institute as its chief executive.

(2) The Council may also-

(a) appoint such their officers and employees to the Council and the Institute a sit considers necessary;

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

(c) prescribed the salaries, fees, allowances of the officers and employees of the Council and the Institute and their terms and conditions of service;

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

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

Amendment of section 17.

15. In section 17 of the principal Act,-

(a) in sub-section (1), for clause (b), the following clause shall be substituted, namely : -

“b) a Finance Committee; and”;

(b) for sub-section (3), the following sub-section shall be substituted, namely :

“(3) Each of the Standing Committee shall consist of the President and the Vice-President ex officio, and minimum of three and maximum of five members to be elected by the Council from amongst its members.”;

(c) sub-section (4) and (5) shall be omitted;

(d) in sub-section (6), for the words “two-thirds of the total membership of the Committee”, the words “one-third of the total membership of the Committee” shall be substituted.

Amendment of section 18.

16. In section 18 of the principal Act,-

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

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

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

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

Provided that no member of the Council or a person who has been a member of the Council during the last four years or a person who is in partnership with such members shall be eligible for appointment as an auditor under this sub-section :

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

Provided also that if such information, that the accounts of the Council do not represent a true and actual view of its finances, is sent to the Council by the Central Government, then, the Council may cause a special audit and such furnish an action taken report on it to the Central Government.”;

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

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

(5B) The Council shall cause to the published in the Gazette of India for later than the 30th day of September of the year next following, a copy of the audited accounts and the Report of the Council for the year duly approved by the Council and copies of the said accounts and Report shall be forwarded to the Central Government and to all the members of the Institute.”.

Amendment of section 19.

In section 19 of the principal Act,-

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

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

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

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

Amendment of section 20.

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

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

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

Substitution of new section for section 21.

19. For section 21 of the principal Act, the following section shall be substitute, namely : -

Disciplinary Directorate.

“21. (1) The Council shall, by notification, establish a Disciplinary Directorate headed by an officer of the Institute designated as Director (Discipline) and such other employees for making investigations in respect of any information or complaint 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 the Board of Discipline and where the Director (Discipline) is of the opinion that a member is guilty of any professional or other misconduct mentioned in the Second Schedule or in both the Schedule, he shall place the matter before the Disciplinary Committee.

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

(5) Where a complaint withdraws the complaint, the Director (Discipline) shall place such withdrawal before the Board of Discipline or as the case may be, the Disciplinary Committee, and the said authorities may, if it is of the view that the circumstances so warrant, permit the withdrawal at any stage.”

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

20. After section 21 of the principal Act, the following sections shall be inserted, namely : -

Board of Discipline.

‘21A. (1) The Council shall constitute a Board of Discipline consisting of –

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

(b) two members on of whom shall be a member of the Council elected by the Council and the other member shall be the person designated under clause (c) of sub-section (1) of section 16;

(c) the Director (Discipline) shall function as the Secretary of the Board.

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

(a) reprimand the members;

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

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

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

Disciplinary Committee.

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

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

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

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

(a) reprimand the member;

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

(c) impose such fine as it may think fit, which may extent to rupees five lakhs.

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

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

21C. For the purposes of an inquiry under the provisions of this Act, the Authority, the Disciplinary Committee, Board of Discipline and the Director (Discipline) shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, in respect of the following matters, namely : - 5 of 1908.

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

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

(c) receiving evidence on affidavit.

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

Transitional provisions.

21D. All complaints pending before the Council or any inquiry initiated by the Disciplinary Committee or any reference or appeal made to a High Court prior to the commencement of the Company Secretaries (Amendment) Act, 2005 shall continue to be governed by the provisions of this Act, as if this Act had not been amended by the Company Secretaries (Amendment) Act, 2005.”.

Substitution of new section for section 22.

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

Professional or other misconduct defined.

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

Insertion of new section 22A, 22B, 22C, 22D and 22e.

22. After section 22 of the principal Act, the following sections shall be inserted, namely : -

Constitution of Appellate Authority.

‘22A. The Appellate Authority constituted under sub-section (1) of section 22A of the Chartered Accountants Act, 1949, shall be deemed to be the Appellate Authority for the purpose of this Act subject to the modification that for clause (b) of said sub-section (1), the following clause had been substituted, namely : -

“(b) the Central Government shall be notification appoint two part-time members from amongst the persons who have been members of the Council of the Institute of Company Secretaries of India for at least one full term and who is not a sitting member of the Council;”.

Terms of office of members of Authority.

22B. A person appointed as a member shall hold office for a term of three years from the date on which he enters upon his office or until he attains the age of sixty-two yeas, whichever is earlier.

Procedure etc., of Authority.

22C. The provisions of section 22C, section 22D and section 22F of the Chartered Accountant Act, 1949 shall apply to the Authority in relation to allowances and terms and conditions of service of its chairperson and members, and in the discharge of its functions under this Act as they apply to it in the discharge of its functions under the Chartered Accountants Act, 1949.

Officers and other staff of Authority.

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

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

Appeal to Authority.

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

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

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

(2) The Authority may, after calling for the record of any case, revise any order made by the Board of Discipline or the Disciplinary Committee under sub-section (3) of section 21A and sub-section (3) of section 21B and may –

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

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

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

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

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

Amendment of section 25.

23. In section 25 of the principal Act, sub-section (3) shall be omitted.

Amendment of Section 27.

24. In section 27 of the Principal Act, for sub-section (2) the following sub-section shall be substituted, namely :

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

Insertion of new Chapter VIIA

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

"CHAPTER VIIA

QUALITY REVIEW BOARD

Establishment of Quality Review Board.

29A. (1) The Central Government shall, by notification, constitute a Quality Review Board consisting of a Chairperson and four other members.

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

(3) Two members of the Board shall be nominated by the Council and other two members shall be nominated by the Central Government.

Functions of Board.

29B. The Board shall perform the following functions, namely: -

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

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

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

Procedure of Board.

29C. The Board shall meet at such time and place and follow in its meetings such procedure as may be specified.

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

29D. (1) The terms and conditions of service of the Chairperson and the members of the Board, and their allowance shall be such as may be specified.

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

Omissioner of section 30.

26. Section 30 of the principal Act shall be omitted.

Substitution of new section for section 36.

27. For section 36 of the principal Act, the following section shall be substituted, namely :

Protection of action taken in good faith.

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

Insertion of new section 36A.

28. After section 36 of the principal Act, the following section shall be inserted, namely : -

Members, etc. to be public servants.

"36A. The Chairperson, Presiding Officer, members and other officers and employees of the Authority, Disciplinary Committee, Tribunal, Board, Board of Discipline or the Disciplinary Directorate shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code.".

Insertion of new section 38A.

29. After section 38 of the principal Act, the following section shall be inserted, namely : -

Power of Central Government to make rules.

"38A. (1) The Central Government may, by notification, make rules to carry out the provisions of this Act.

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

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

(b) the terms and conditions of service of the Presiding Officer and Members of the Tribunal, place of meeting and allowance to the paid to them under sub-section (3) of section 10B;

(c) the procedure of investigation under sub-section (4) of section 21;

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

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

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

Amendment of section 39.

30. In section 39 of the principal Act, sub-section (4) shall be omitted.

Insertion of new section 40.

31. After section 30 of the principal Act, the following section shall be inserted, namely :

Rules, regulations and notifications to be laid before Parliament.

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

Substitution of new Schedules for First Schedule and second Schedule.

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

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

PART I

Professional misconduct in relation to company secretaries in practice

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

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

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

Explanation. – In this item, “partner” includes a person residing outside India with whom a Company Secretary in practice has entered into partnership, which is not in contravention of item (4) of this (Part);

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

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

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

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

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

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

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

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

(ii) a member from responding to renders or enquiries issued by various users of professional services or organization from time to time and securing professional work as a consequence;

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

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

(8) accept a position as a Company Secretary in practice previously held by another Company Secretary in practice without first communicating with him in writing;

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

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

Provided that nothing contained herein shall disentitle a company secretary from being a director of a company except as provided in the Companies Act, 1956; - 1 of 1956

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

PART II

Professional misconduct in relation to members of the Institute in service

A member of the Institute (other than a member in practice) shall be deemed to be guilty of professional misconduct, if he being an employee of any company, firm or person –

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

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

PART III

Professional misconduct in relation to members of the Institute generally

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

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

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

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

PART IV

Other misconduct in relation to members of the Institute generally

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

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

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

THE SECOND SCHEDULE
[See section 21(3), 21B(3) and 22]

PART I

Professional misconduct in relation to company secretaries in practice

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

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

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

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

(4) expresses his opinion on any report or statement given to any business or enterprise in which he, his firm, or a partner in his firm has a substantial interest;

(5) fails to disclose a material fact known to him in his report or statement but the disclosure of which is necessary in making such report or statement, where he is concerned with such report or statement in a professional capacity;

(6) fails to report a material mis-statement known to him and with which he is concerned in a professional capacity;

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

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

(9) fails to invite attention to any material departure from the generally accepted procedure relating to the secretarial practice;

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

PART II

Professional misconduct in relation to members of the Institute generally

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

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

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

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

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

PART III

Other misconduct in relation to members of the Institute generally

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

STATEMENT OF OBJECTS AND REASONS

The necessity to bring out amendments in the Company Secretaries Act, 1980 (the CS Act) arose on account of the changes in the economic and corporate environment in the country over the years. These changes include, inter alia, the developments in the capital markets, their growth, the dismantling of the system of economic controls and the need to enable development of an institution that would focus on goods corporate governance practices and disseminate the same through instruction and training of its qualified professionals serving in the corporate sector or advising it in professional capacity.

2. Moreover, changes in the CS Act were necessitated by the need to bring about systematic changes in the institutions governed by the Act, including disciplinary procedures to deal with cases of professional misconduct; to ensure quality instruction in the related disciplines and to enable institutional growth and professional development of is members.

3. The proposals to brings out amendments in the CS Act have been prepared on the basis of experience gained in administration of the Act, the recommendations of the High Level Committee "on Corporated Audit and Governance" set up under the Chairmanship of Shri Naresh Chandra and other inputs on the subject made available to the Central government from time to time.

4. A Bill, namely the Company Secretaries (Amendment) Bill, 2005 was introduced in the Rajya Sabha on 23.12.2003. The Bill was, thereafter referred to the Parliamentary Standing Committee on Finance, whose report was presented to Parliament in February, 2005. Taking into account the recommendations of the Committee, proposals in the Bill have been revised and the Bill is now being introduced as a fresh Bill.

5. Some of the main amendments proposed in the Bill are as follows :

(a) Provisions for an instituionalised Disciplinary Mechanism within the framework of the Institute of Company Secretaries of India, which would ensure well considered yet expeditious disposal of complaints against members of the Institute on professional or other misconduct and ensuring faster delivery of justice. The proposals provide for appointment of a Director (Discipline), establishment of a Disciplinary Directorate to investigate complaints, constitution of a Board of Discipline to deal with the cases of minor offence, Disciplinary Committee to deal with cases of major offences within the institutional framework of the Institute;

(b) providing for an Appellate Authority headed by a person, who is or has been a judge of a High Court, to deal with appeals arising from decisions of Disciplinary authorities;

(c) establishment of a Quality Review Board, which would also include outside experts to review the quality of services provided by the members of the Institute;

(d) providing enhanced autonomy to the Council in the matter of fixing various fees within prescribed board limits;

(e) provisions for bringing transparency in financial affairs of the Institute and preparation of annual financial statement (the budget) by the Council; and

(f) enabling the members of the Institute to form multi-disciplinary firms and offer multi-professional services in a competitive and commercial manner.

6. The Bill seeks to achieve the above objects.

NEW DELHI
The 30th November, 2005.

PREM CHAND GUPTA.

Notes on clauses

Clause 2 seeks to define various expressions used in the Bill.

Clause 3 seeks to provide that the Council may determine the fee, for entry of names in the Register of the Institute, up to rupees three thousand which may be increased up to rupees six thousand with the prior approval of the Central Government.

Clause 4 seeks to provide that the Council may determine the fee of fellow members of the Institute up to rupees five thousand which may be increased up to rupees ten thousand with the prior approval of the Central Government.

Clause 5 seeks to provide that the Council may determine the annual fee for the certificate or practice up to rupees three thousand which may be increased up to rupees six thousand with the prior approval of the Central Government. This clause also contains provisions which provides for cancellation of certificate of practice under such circumstances as may be prescribed.

Clause 6 seeks to provide for enhancing the strength of the Council of the Institute by making provisions for elected members from twelve to fifteen and for nominated members from four to five and makes provision for the manner of election and nomination to be specified by rules. The clause also contain provisions debarring persons holding post under the Central Government or the State Government; and for a certain period auditor and a fellow of the Institute, who has been found guilty of any professional or other misconduct under the First Schedule and the Second Schedule, from contesting election of the Council.

Clause 7 seeks to provide that a member of the Council shall be eligible for re-election and re-nomination for a maximum of two consecutive terms. The clause also contains provision which will debar sitting and former Presidents of the Council from contesting elections to the Council.

Clause 8 seeks to provide for settlement of election disputes and for that purposes, establishment of an election Tribunal consisting of a Presiding Officer and two members. It also provides that the terms and conditions of service of the Presiding Officer and Members of the Tribunal, their place of meeting and allowances shall be such as may be specified.

Clause 9 seeks to provide that the President shall be head of the Council and also provide for the continuation in office by the Vice-President as well on expiration of duration of the Council, till his successor takes charge.

Clause 10 seeks to provide that a member shall be deemed to have vacated his sear if he has been found guilty of professional or other misconduct and awarded penalty of fine. The clause also seeks to change the period from “six months” to “one year” for not filling up a cause vacancy occurring within this extended period of one year, prior to the date of expiration of the duration of the Council.

Clause 11 seeks to provide for enhancement of duration of the Council from three to four years.

Clause 12 seeks to enumerate the functions of the Council and also provides that the Institute shall function under the overall control, guidance and supervision of the Council and the duty of carrying out the provisions of the Company Secretaries Act, 1980 (the CS Act) shall be vested in the Council.

Clause 13 seeks to enumerate the functions of the Institute. It also provides that any University established by law or body affiliated to the Institute, may impart education on the subjects covered by the academic courses of the Institute, and also ensure that the award of degree, diploma, etc., or designation do not resemble or is identical to one awarded by the Institute.

Clause 14 seeks to, inter alia, provides that the Council shall appoint a Secretary of the Council, Director (Discipline), designate an officer as chief executive to carry out the administrative functions and appoint such other officers and employees as it considers necessary.

Clause 15 seeks to, inter alia, provide for constitution of a Finance Committee, increasing the strength of the Executive Committee and the Examination Committee, and reduction of strength of co-opted members in other Committee constituted by the Council from two-thirds to one-third.

Clause 16 seeks to provide that the Council shall keep accounts in the prescribed manner. It provides for preparation of annual financial statement (the budget), and the annual accounts in the prescribed manner. It also provides that the Council may circulate audited accounts to its members at least fifteen days in advance, and shall cause to be published in the Gazette of India, the audited accounts and the Report of the Council not later than 30th September of the year next following.

Clause 17 seeks to provide that the list of members of the Institute cane be supplied to the members on payment of the prescribed amount. The clause also provides that the Council may determine annual membership fee, differing in amounts according as he is an associate or a fellow of the Institute, up to rupees five thousand which may be increased up to rupees ten thousand with the prior approval of the Central Government.

Clause 18 seeks to provide that the Council may re-enter the name of the member of the Institute, if his name has been removed for non-payment of the requisite fee, on payment of arrears of such fees and an additional fee up to rupees two thousand as may be determined by the Council, which may be increased up to rupees four thousand with the prior approval of the Central Government.

Clause 19 and 20 seeks to provide that the Council may establish a Disciplinary Directorate headed by Director (Discipline) and constitution of Board of Discipline and Disciplinary Committee, the manner of dealing with complaints relating to professional or other misconduct and awarding penalties. While exercising their powers under the CS Act they shall have the powers of a civil court in respect of the matters specified therein.

Clause 21 seeks to add the expression “or other misconduct” in section 22 of the CS Act, to bring it in line with the modifications proposed in the Schedules and proposes to make Director (Discipline) responsible for such matters.

Clause 22 seeks to, inter alia, provided that the Appellate Authority constituted under the Chartered Accountants Act, 1949, shall be deemed to be the Appellate Authority under the Company Secretaries Act, 1980, to hear appeals from the orders of the Disciplinary Committee and Board of Discipline, constituted under it.

Clause 23 seeks to omit sub-section (3) of section 25 so as to make a separate provision in section 15B of the CS Act for imparting education by Universities and other bodies.

Clause 24 seeks to increase penalties for the persons, contravening the provisions as to signing of documents, etc., not authorised to sign.

Clause 25 seeks to, inter alia, provide for establishment of a Quality Review Board, its functions, procedures, the terms and conditions of service of Chairperson and members, which will review the quality of audit and other services provided by the members of the Institute.

Clause 26 seeks to omit section 30 of the principal act.

Clause 27 seeks to make provisions for protection of action taken in good faith.

Clause 28 seeks to declare members, etc., to be public servants under section 21 of the Indian Penal Code.

Clause 29 seeks to confer upon the Central Government the power to make rules to carry out the provisions proposed in the Bill. Sub-clause (2) of this enumerates the matters in respect of which such rules may be made.

Clause 30 and 31 seek to provide for laying of rules, regulations and notifications on the table of both the Houses of Parliament.

Clause 32 seeks to provide for substitution of new Schedules for the existing Schedules.

FINANCIAL MEMORANDUM

The Bill seeks to appoint a Director (Discipline), establish a Disciplinary Directorate, constitute a Board of Discipline, Disciplinary Committee, and Appellate Authority, and establish a Quality Review Board. The expenditure in this regard is to be borne by the Council of the Institute and there shall be no expenditure of recurring or non-recurring nature from the Consolidated Fund of India.

MEMORANDUM REGARDING DELEGATED LEGISLATION

Clause 3,4,5,17 and 18 of the Bill seek to amend certain provisions of the Company Secretaries Act, 1980 (the principal Act) so as to empower the Council to determine, by notification, the fee relating to entry of names in register, registration, as Fellows and Associates, annual membership fee and fee for re-entry of name in the Register, up to the limits provided in the Bill.

2. Clause 5 and 6 also seek to amend section 6 of the principal Act so as to empower the Council to cancel the certificate of practice under the circumstances prescribed by regulations; and section 9 to empower the Central Government to specify by rules, the manner of election and nomination of the members to the Council.

3. Clause 8 of the Bill seeks to insert a new section 10B so as to empower the Central Government to specify the terms and conditions of service of the Presiding Officer and Members of the Tribunal, their place of meetings, and allowances.

4. Clause 12 of the Bill seeks to substitute section 15 of the principal Act which deals with the functions of the Council. The Council may while carrying out the provisions of the Act, make regulations with respect to prescribing of qualifications for entry in Register, examination fees, etc.

5. Clause 14 of the Bill seeks to substitute section 16 of the principal Act to provide for making regulations relating to the duties of the secretary of the Council, and for salaries, allowance etc., of officers and employees.

6. Clause 16 of the Bill seeks to amend section 18 of the principal Act so as to empower the Council to prescribe by regulations, the preparation and keeping of the accounts, annual financial statement (the budget) and accounts of the Council.

7. Clause 17 of the Bill also seeks to amend section 19 of the principal Act to empower the Council to prescribe by regulations, the fees to be enclosed while making a complaint on professional or other misconduct of a member; and to empower the Central Government to specify by rules, the procedure for investigation which will be followed by the Disciplinary Directorate.

8. Clause 19 of the Bill seeks to substitute section 21 of the principal Act to empower the Council to prescribe by regulations, the fee to be enclosed while making a complaint on professional or other misconduct of a member; and to empower the Central Government to specify by rules, the procedure for investigation which will be followed by the Disciplinary Directorate.

9. Clause 20 of the Bill seeks to insert new section 21B, so as to empower the Central Government to specify, the procedure to be followed by the Disciplinary Committee while considering the cases; and the allowances payable to the nominated members of such Committee.

10. Clause 22 of the Bill seeks to extend certain provisions of the Chartered Accountants Act, 1949 (38 of 1949), relating to Appellate Authority, which shall also be the Appellate Authority for the purposes of the Company Secretaries act. It further makes enabling provisions for the salaries allowances and other condition of services of officers and other staff members of the Authority.

11. Clause 25 of the Bill seeks to insert a new Chapter VII A (relating to Quality Review Board) in the principal Act so as to empower the Central Government to specify by rules the time, place and the procedure to be followed by the Board in its meetings and the terms and conditions of service of the Chairperson and the members of the Board.

12. The matters in respect of which the said rules or regulations may be made or notification issued are matters of procedure and administrative details, and it is not practicable to provide for them in the proposed Bill itself.

13. The delegation of legislative power is, therefore, of a normal character.

ANNEXURE

EXTRACTS FROM THE COMPANY SECRETARIES ACT, 1980
(56 OF 1980)

Definitions and interpretation.

2. (1) In this Act, unless the context otherwise requires, -

Entry of names in the Register.

4. (1) **** *****

(3) Every person belonging to any of the classes mentioned in clauses ©, (d) and (e) of sub-section (1) shall have his names entered in the Register on application being made and granted in the prescribed manner and on payment of prescribed entrance fee, which shall not exceed four hundred rupees in any case.

Associates and Fellows.

5. (1) ***** ******** ******

(3) A person, being an Associate who has been in continuous practice in India as a Company Secretary for at least five years and a person who has been an Associate for a continuous period of not less than five years and who possesses such qualifications or practical experience as the Council may prescribe with a view to ensuring that he has experience equivalent to the experience normally acquired as acquired as a result of continuous practice for a period of five years as a Company Secretary shall, on payment of the prescribed entrance fee, which shall not exceed four hundred rupees in any case, and on application made and granted in the prescribed manner, be entered in the Register as a Fellow.

Explanation I. – For the purposes of this sub-section, a person shall be deemed to have practiced in India for any period for which he has held a certificate of practice under section 6, notwithstanding that he did not actually practise during that period.

Explanation II. – In computing the period during which a person has been an Associate of the Institute, there shall be included any continuous period during which the person has been an Associate of the Dissolved company immediately before he become an Associate of the Institute.

Certificate of practice.

6. (1) **** **** ****

(2) A member who desires to be entitled to practise shall make an application in such form and pay such annual fee, for his certificate as may be prescribed which shall not exceed two hundred rupees in any case, and such fee shall be payable on or before the 1st day of April in each year.

CHAPTER III
COUNCIL OF THE INSTITUTE

Constitution of the Council of the Institute.

9. (1) *** *****

(2) The Council shall be composed of –

(a) not more than twelve persons elected by members of the Institute from amongst the Fellows chosen in such manner and from such regional constituencies as may be notified in this behalf by the Central Government in the Official Gazette; and

(b) not more than four persons nominated by the Central Government.

Mode of election to the Council.

10. (1) Elections under clause (a) of sub-section (2) of section 9 shall be conducted in the prescribed manner.

(2) Where any dispute arises regarding any such election, the matter shall be referred by the Council to a Tribunal appointed by the Central Government in this behalf and the decision of such Tribunal shall be final;

Provided that no such reference shall be made except on an application made to the Council by an aggrieved party within thirty days from the date of the declaration of the result of the election.

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

(4) Notwithstanding anything contained in this section and in Chapter IX, the Council of the dissolved company shall, on the commencement of this Act, become the Council of the Institute and shall function as such –

(i) for a period of two years from such commencement, or

(ii) till the Council is constituted in accordance with the provisions of sub-section (2) of section 9.

Whichever is earlier.

Explanation – For the purposes of this sub-section, the Council shall be deemed to have been constituted in accordance with the provisions of sub-section (2) of section 9 with effect from such ate (not being later than thirty days from the date on which the results of the first elections, under clause (a) of the said sub-section (2) are announced) as the Central Government may notify in the Official Gazette.

President and Vice-President

12. (1) **** **** ***

(2) The President shall be the Chief Executive Authority of the Council.

(3) The President or the Vice-president shall hold office for a period of one year from the date on which he is chosen but so as not to extent beyond his term of office as a member of the Council, and subject to his being a member of the Council at the relevant time, he shall be eligible for re-election.

(4) On the expiration of the duration of the Council, or of the term of office of the President therefore, the President shall continue to hold officer until such time as a new President is elected and take over charge of his duties.

Resignation of membership and causal vacancies.

13. (1) *** *** ***

(2) A member of the Council shall be deemed to have vacated his seat if he is declared by the Council to have been absent without sufficient excuse from three consecutive meetings of the Council or of any of the committees which has been constituted by the Council and of which he is a member of if his name is, for any cause, removed from the Register under the provisions of section 20.

(3) A causal vacancy in the office of a member of the Council shall be filed by fresh election from the constituency concerned or by nomination by the Central Government, as the case may be, and the person elected or nominated to fill the vacancy shall hold officer until the dissolution of the Council :

Provided that no election shall be held to fill a casual vacancy occurring within six months prior to the date of the expiration of the term of the Council; but such a vacancy may be filled by nomination by the Central Government after consultation with the President of the Council.

Duration and dissolution of the Council.

14. (1) The duration of the Council constituted under this Act shall be three years from the date of first meetings.

Functions of the Council

15. (1) The duty of carrying out the provisions of this Act shall be vested in the Council.

(2) In particular, and without prejudice to the generality of the foregoing power, the duties of the Council shall include –

(a) the prescribing of the standards for, and conduct of examinations for enrolment of candidates in the Register and of the fees therefore;

(b) the registration and training of students;

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

(d) the recognition of foreign qualifications and training for purposes of enrolment;

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

(f) the maintenance and publication of a Register of persons qualified to practise as Company Secretaries;

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

(h) the removal of names from the Register and restoration to the Register of names which have been removed;

(i) the regulation and maintenance of the status and the standards of professional qualifications of members of the Institute;

(j) the carrying out, by granting financial assistance to persons other than members of the Council or in any other manner, of research in such matters of interest to Company Secretaries as may be prescribed;

(k) the maintenance in the prescribed manner of libraries and the publication in the prescribed manner of books and periodicals relating to management of companies and such allied subjects as may be prescribed;

(l) the granting of such financial or other assistance to students of the Institute as may be prescribed;

(m) the exercise of such disciplinary powers as may be prescribed.

Staff, remuneration and allowances.

16. (1) For the efficient performance of its during and functions, the Council shall appoint a Secretary who shall be a member of the Institute and may –

(a) appoint such other persons on the staff of the Institute as it deems necessary;

(b) prescribe the terms and conditions of service and the scales of pay of the Secretary and other employees of the Institute, including persons who have become employees of the Institute under section 33;

(c) fix the allowances of the President, Vice-President and other members of the Council and its Committee.

(2) The secretary of the Institute shall be entitled to participate in the meeting of the Council and the Committees thereof but shall not be entitled to vote thereat.

Committee of the Council.

17. (1) The Council shall constitute from amongst its members the following Standing Committee, namely : -

(c) a Disciplinary Committee; and

(3) The Executive committee shall consist of the President, and the Vice-President, ex-officio, and three other members of the Council elected by the Council.

(4) The Disciplinary Committee shall consists of the President, ex officio, one member to be nominated by the Central Government from amongst the members nominated to the Council by the Government and one members to be elected by the Council.

(5) The Examination Committee shall consist of the President or the Vice-President, ex officio, as the Council may decide, and two other members of the Council elected by the Council.

(6) Notwithstanding anything contained in this section, any Committee formed under sub-section (2), may, with the sanction of the Council co-opt such other members of the Institute not exceeding two-thirds of the total membership of the Committee as the Committee thinks fit, and any member so co-opted shall be entitled to exercise all the right of a member of the Committee.

Finances of the Council.

18. (1)

(3) The Council shall keep proper accounts of the funds distinguishing capital from revenue.

(4) The annual accounts of the Council shall be subject to audit by a Chartered Accountant in practice within the meaning of the Chartered Accountants Act, 1949, to be appointed annually by the Council : 38 of 1949.

Provided that no members of the Council who is a Chartered Accountant or a person who is in partnership with such member shall be eligible for appointment as an auditor under this sub-section.

(5) As soon as may be practicable at the end of each year, but not later than the 30th day of September of the year next following, the Council shall cause to be published in the Gazette of India a copy of the audited accounts and the report of the Council for that year and copies of the said accounts and report shall be forwarded to the Central Government and to all the members of the Institute.

CHAPTER IV
REGISTER OF MEMBERS

Register.

19. (1) *** **** ***

(3) The Council shall cause to be published in such manner as may be prescribed a list of members of the Institute as so the 1st day of April of each year, and shall, if requested to do so by any such members, send him a copy of such list.

(4) Every members of the Institute shall, on his name being entered in the Register, pay such annual membership fee different in amount according as he is an Associate or a Fellow as may be prescribed, which shall not exceed three hundred rupees in any case.

CHAPTER

MISCONDUCT

Procedure in inquiries relating to misconduct of members of the institute.

21. (1) Where on receipt of information by, or a complaint made to it, the Council is prima facie of opinion that any member of the Institute has been guilty of any professional or other misconduct, the Council shall refer the case to the Disciplinary Committee constitute under section 17, and the Disciplinary Committee shall thereupon hold such inquiry and in such manner as may be prescribed and shall report the result of its inquiry to the Council.

(2) If on receipt of such report the Council finds that the member of the Institute is not guilty of any professional or other misconduct, it shall record its finding accordingly and direct that the proceedings shall be filed, or the complaint shall be dismissed, as the case may be.

(3) If on receipt of such report the Council finds that the member of the Institute is guilty of any professional or other misconduct, it shall record its finding accordingly, and shall proceed in the manner laid down in the succeeding sub-sections.

(4) Where the finding is that a member of the Institute has been guilty of a professional misconduct specified in the First Schedule, the Council shall afford to the member an opportunity of being heard before orders are passed against him on the case, and may thereafter make any of the following orders, namely :

(a) reprimand the member;

(b) remove the name of the member from the Register for such period, not exceeding five years, as the Council thinks fit :

Provided that where the Council is of opinion that the case is one in which the name of the member ought to be removed from the Register for a period exceeding five years or permanently, it shall not make any order referred to in clause (a) or clause (b), but shall forward the case to the High Court with its recommendations thereon.

(5) Where the misconduct in respect of which the Council has found any member of the Institute guilty is misconduct specified in the Second Schedule, it shall forward the case to the High Court with its recommendations thereon.

(6) On receipt of any case under sub-section (4) or sub-section (5), the High Court shall fix a date for the hearing of the case and shall cause notice of the date so fixed to be given to the member of the institute concerned, the Council and to the Central Government and shall afford such member, the Council and the Central Government an opportunity of being heard and may thereafter make any of the following orders, namely : -

(a) direct that the proceedings be filed, or dismiss the complaint as the case may be;

(b) reprimand the member;

(c) remove him from membership of the Institute either permanently or for such period as the High Court think fit;

(d) refer the case to the Council thinks fit;

(7) Where it appears to the High Court that the transfer of any case pending before it to another High Court will promote the ends of justice or tend to the general convenience of the parties it may so transfer the case, subject to such conditions, if any, as it thinks fit to impose, and the High Court to which such cases transferred shall deal with it as if the case had been forwarded to it by the Council.

Explanation 1. – In this section, “High Court’ means the highest civil court of appeal, not including the Supreme Court exercising jurisdiction in the area in which the person whose conduct is being inquired into is in service or carries on his profession or has his principal place of profession at the commencement of the inquiry.

Provided that where the cases relating to two or more members of the institute have to be forwarded by the Council to different High Court, the Central Government shall, having regard to the ends of justice and the general convenience of the parties, determine which of the High Court to the exclusion of others shall hear the cases against all the members.

Explanation II.- For the purposes of this section, “member of the Institute” includes a person who was a member of the Institute on the date of the alleged misconduct although he has ceased to be a member of the Institute at the time of the inquiry.

(8) For the purpose of any inquiry under this section, the Council and the Disciplinary Committee referred to in sub-section (I) shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, in respect of the following matters, namely : -

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

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

(c) receiving evidence on affidavits.

Professional misconduct defined.

22. 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.

Penalty for using name of the Council, or awarding degree of Company Secretary.

25. (1) **** **** ***

(3) Nothing contained in this section shall apply to any University or other institution established by law or to any body affiliated to the Institute.

Unquilified persons not to sign documents.

27. (1). *** ***** ****

(2) Any person contravening the provisions of sub-section (1) shall, without prejudice to any other proceedings which may be taken against him, be punishable on first conviction with fine which may extent to one thousand rupees, and on any subsequent conviction with imprisonment which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

CHAPTER VIII

APPEALS

Appeal.

30. (1) Any member of the Institute aggrieved by any order of the Council imposing on him any of the penalties referred to in clause (a) or clause (b) of 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 enquiry as the High Court considers proper in the circumstances of the case;

(d) pass such other order as the High Court think 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 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.

Protection of action taken in good faith.

36. No suit, prosecution or other legal proceeding shall lie against the Central Government or the Council in respect of anything which is in goods faith done or intended to be done in pursuance of this Act or of any regulations or orders made thereunder.

Power to make regulations.

39. (1)

(4) Every regulation shall, as soon as may be after it is made by the Council, be forwarded to the Central Government and the Government shall cause a copy of the same to be laid before each House of Parliament, while it is in session for a total period of thirty days, which may e comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation or both Houses agree that the regulation should not be made, the regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under the regulation.

THE FIRST SCHEDULE

(See section 21 (4) and 22)

PART 1

Professional misconduct in relation to members of the Institute in practice

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

(1) allows any other person to practise in his name as a Company Secretary unless such other person is a Company Secretary or is a member of such other recognized profession as may be prescribed in this behalf, and is in partnership with or employed by him;

(2) pays or allows or agrees to pay or allow, directly or indirectly, any share, commission or brokerage in the fees or profits of his professional work to any person, other than a member of the Institute or a partner or retired partner of the legal representative of a deceased partner.


Explanation – In this item, “partner” includes a person residing outside India with whom a Company Secretary in practice has entered into partnership which is not in contravention of item (4) of this Part;

(3) Accepts or agrees to accept, except from a member of the Institute or from any one belonging to any of the recognized professions prescribed for the purposes, any part of the profits, fees or other remuneration arising out of the work which is not of a professional nature;

(4) Enters into partnership with any person other than a Company Secretary in practice or a member of any other recognized professional as may be prescribed or a person resident without India who but for his residence abroad would have been entitled to be registered as a member of the Institute under clause (e) of sub-section (1) of section 4 or whose qualifications are recognized by the Central Government or the Council for the purposes of membership of the Institute provided that the Company Secretary shares in the fees or profit of the professional work of the partnership both within and without India;

(5) Secures, either through the services of a person not qualified to be his partner or by means which are not open to a Company Secretary, any professional work;

(6) Solicits clients or professional works, wither directly or indirectly, by circular, advertisment, personal communication or interview or by any other means;

(7) Advertises his professional attainments or services, or uses any designation or expression other than Company Secretary on professional documents, visiting cards, letter-head or sign board, unless it be a degree of a University established by law in India or recognized by the Central Government or a title indicating membership of the Institute or of any other institution that has been recognized by the Central Government or may be recognized by the Council;

(8) Accepts the position of a Company Secretary in practice previously held by another Company Secretary in practice without first communicating with him in writing;

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

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

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

(11) accepts a position as Company Secretary in practice previously held by some other Company Secretary in practice in such conditions as to constitute under-cutting;

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

PART II

Professional misconduct in relation to members of the Institute in service

A member of the Institute (other than a member in practice) shall be deemed to be guilty of professional misconduct, if he, being an employee of any company, firm or person –

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

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

(3) discloses confidential information acquired in the course of his employment otherwise than a required by any law for the time being in force or as permitted by his employer.

PART III

Professional misconduct in relation to members of the Institute generally

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

(1) includes in any statement return or form to be submitted to the Council any particulars knowing them to be false;

(2) not being a Fellow styles himself as a Fellow;

(3) does not supply the information called for or does not comply with the requirements asked for by the Council or any of its Committees;

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

THE SECOND SCHEDULE

(See sections 21 (5) and 22)

PART I

Professional misconduct in relation to members of Institute in practice requiring action by a High Court

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

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

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

(3) permits his name or the name of him firm to be used in connection with any report or statement contingent upon future transactions in a manner which may lead to the belief that he couches for the accuracy of the forecast;

(4) expresses his opinion on any report or statement given to any business enterprise in which he, his firm or a partner in his firm has a substantial interest, unless he discloses the interest also in his report;

(5) deliberately aids in or abets the concealment in his report or statement of a material fact known to him although the disclosure of which is necessary to make such statement not misleading;

(6) fails to disclose in his report a material mis-statement known to him and with which he is concerned in a professional capacity;

(7) is grossly negligent in the conduct of his professional duties;

(8) fails to obtain sufficient information to warrant the expression of an opinion or makes exceptions which are sufficiently material to negate the expression of an opinion;

(9) fails to invite attention to any material departure form the generally accepted procedure relating to the secretarial practice;

(10) falls to keep moneys of his client in a separate banking account or to use such moneys for purposes for which they are intended.

PART II

Professional misconduct in relation to members of the Institute generally requiring action by a High Court

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

(1) contravenes any of the provisions of this Act or the regulations made thereunder;

(2) is guilty of such other act or omission as may be specified by the Council in this behalf, by notification in the Official Gazette.

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