The Supreme Court has dismissed an appeal challenging the retrospective jurisdiction of the National Financial Reporting Authority ( NFRA ) in line with the earlier decision of the National Company Law Appellate Tribunal ( NCLAT ).
In the significant 2023 ruling, the National Company Law Appellate Tribunal (NCLAT) dismissed appeals from four Chartered Accountants ( CAs ) challenging penalties imposed by the National Financial Reporting Authority ( NFRA ). The penalties were related to lapses in conducting branch audits for Dewan Housing Finance Ltd ( DHFL ) at seventeen branches.
The NFRA found that the CAs had violated various auditing standards and accepted their audit engagements without meeting the legal requirements under the Companies Act, 2013. As a result, each CA was fined ₹1 lakh and barred from performing audit functions for a year. The CAs contested these penalties before the NCLAT.
The appellants argued that the NFRA lacked the authority to investigate actions predating its formation in October 2018, as the alleged misconduct occurred in 2017-18. However, the NCLAT upheld the NFRA’s decision, affirming its jurisdiction over actions occurring before its establishment and asserting its authority over the Institute of Chartered Accountants of India (ICAI) in such matters.
“We hold that NFRA has clear and required retrospective jurisdiction over the alleged offences by delinquent Chartered Accountants for the period prior to the formation of NFRA or prior to the coming into effect of the relevant portion of Section 132 of the Companies Act, 2013,” the NCLAT stated.
One of the affected CAs, Harish Kumar T.K., appealed the NCLAT’s ruling to the Supreme Court. On May 17, the Supreme Court dismissed the appeal, finding no grounds to overturn the NCLAT decision.
Senior Advocate P.H. Arvindh Pandian and advocate on record Goutham Shivshankar represented the appellant, while Advocate Zoheb Hossain represented the NFRA.
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“We do not find any good ground and reason to interfere with the order of the National Company Law Appellate Tribunal dated 01.12.2023 in Company Appeal (AT) No. 68 of 2023 and hence, the present appeal is dismissed”, the Supreme Court two-judge bench of Justice Sanjiv Khanna and Justice Dipankar Datta noted.
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