Classification between proprietary and partnership firm was held to be arbitrary - Tender

respondent was a sole proprietorship firm of Chartered Accountant. One of the statutory functions assigned to the appellant was to get the accounts of Public Sector Undertakings and Government Concerns audited by the Chartered Accountants. The audit work of the Government and Public Sector Undertaking was assigned to only those Chartered Accountants who were enrolled on the panel maintained by the appellant. Vide advertisement issued in May, 1981, applications from the firms of Chartered Accountants for empanelment for audit of the Government companies were invited. Except a few states, only the partnership firms of the Chartered Accountants were eligible for enrolment on the panel and the proprietor firms of the Chartered Accountants were made ineligible. Upon an analysis of the matter, it was concluded that appellant itself erroneously assumed that the partnership firms were more efficient than the proprietor concern in the matter of audit of accounts of the Public Sector Undertakings or of the Government concerns. In any event, it would not follow as a categorical imperative that a partnership is better placed for auditing simply because “two minds are better than one”. Further, if the proprietary concern of Chartered Accountants were really inefficient, there is no reason why they were made eligible to conduct audits in few of the specified states, such as Orissa, Jammu & Kashmir, Assam, Manipur, Meghalaya, Nagaland and Tripura. Therefore, the classification between proprietary and partnership firm was held to be arbitrary and unfair on the anvil of Article 14 of the Constitution.

Comptroller and Auditor General v. Kamlesh Vadilal Mehta 2003(2) SCC 349