The Delhi High Court has refused to entertain the plea for interim relief in the writ petition filed against penalties imposed by the National Financial Reporting Authority (NFRA) on two Chartered Accountants and CA Firm, owing to the nature of misconduct and the observations in the NFRA Order.
The Petitioners were aggrieved by the order dated 12 April 2024 whereby the National Financial Reporting Authority [NFRA] has debarred CA Parimal Kumar Jha and CA Vishal D Shah for 10 years and 5 years respectively from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
NFRA had also imposed a penalty of INR 3 crores on PHD and penalties of INR 1 crore and INR 50 lakhs on CA Parimal Kumar Jha and CA Vishal D Shah respectively.
The Petitioners also assailed the constitutional validity to Section 132(4) of the Companies Act, 2013 and Rules 10, 11 and 12(4) of the NFRA Rules, 2018.
The Delhi High Court Division Bench noted that, “RCL was jointly audited by M/s Price Waterhouse & Co LLP [PW] and PHD for FY 2018-19. PW resigned from the audit, without issuing an audit report. Subsequently on 11 June 2019, PW filed a report to the Ministry of Corporate Affairs, alleging fraud in RCL. However, on examination of the matter, it was noted that the audit report issued by PHD on 14 August 2019 reported no irregularities.”
PW had issued a letter dated 24 April 2019 to RCL, as well as the Audit Committee and PHD, regarding its observations concerning loans disbursed, investments, and disposal of Compulsory Convertible Debentures of group companies having a cumulative carrying value of approximately INR 12,571 crore.
The bench cited the observations in the NFRA Order to substantiate its decision to not entertain the plea at this stage.
Read More: Audit Misconduct: NFRA debars CAs from Audits, slaps Rs. 4.5 Cr Penalty [Read Order]
“Bearing in mind the aforesaid facts and conclusions which the NFRA has come through record, we find no ground to grant any interim relief at this stage”, the bench of Justices Yashwant Varma and Dharmesh Sharma noted.
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