Perhaps uniquely among white-collared professions, chartered accountants (CAs) are now confronted with a judicial diktat that behavioural ‘lapses’ even outside their field of work can be reason enough to face disciplinary action.

A two-judge Supreme Court (SC) bench, comprising Justice Rohinton Fali Nariman and Justice Navin Sinha, in a recent judgement said that action can be taken against CAs if their conduct brought ‘disrepute’ to the profession — even if such an action was not related to his/her professional work. The judgement was published last Friday.

CA licences are issued by the Institute of Chartered Accountants of India (ICAI). The SC judgement was given in acase that pitted the ICAI against a CA, Gurvinder Singh. The point of contention was Singh’s conduct following a sale of 100 shares. The specifics of the conduct Singh had allegedly indulged in were not mentioned in the order. An earlier Delhi High Court order had rejected the premise that action can be taken against a CA for ‘lapses’ in conduct outside his/her field of work.

People familiar with the profession said post SC judgement, CAs deemed to have brought the profession to ‘disrepute’ may end up losing his/her license to practice and face a ban from ICAI.

Manoj Fadnis, former president of ICAI and the body’s head when the case was filed, told ET: “This judgement now settles and vindicates ICAI’s position. The example that we normally use is if a CA drinks and drives or creates a scene in public space that can bring disrepute to the profession, action should be taken against him whether or not it was in his professional capacity or not.”

He added the ICAI council had removed Singh from its rolls for six months and as per the regulations the matter was referred to the Delhi High Court.

After the SC judgement, he said, “The position is now settled and will lead to more such disciplinary action.”

ICAI president ND Gupta did not respond to multiple calls and messages, and ICAI vice-president Prafulla Chhajed refused to comment.

Some CAs agree that expectation norms for their profession have changed. Dilip Lakhani, a CA, told ET: “CAs are expected to ensure that their behaviour in the profession or otherwise is in compliance with laws and also follow accepted norms of social behaviour-…people look at CAs as watchdogs.”

The SC bench had zeroed in on the high court’s reading of a critical section in the law governing CAs. “We are afraid that the high court has not correctly appreciated Section 21(3) of the Chartered Accountants Act, 1949,” SC observed.

Section 21(3) says if a CA is accused of any crime that attracts penal code punishment of less than 6 months, disciplinary action can be taken against him by the institute.

Some CAs said the SC judgement will boost ICAI’s regulatory powers. A new regulator, the National Financial Reporting Authority, is tasked with taking action against audit firms and CAs for professional lapses. ICAI’s responsibilities mainly include conducting CA examinations.