Supreme Court Permits NFRA's Audit Regulatory Proceedings Against CAs, Stays Execution of Final Orders [Read Judgement]
The Supreme Court allowed NFRA to proceed with audit proceedings against CAs in pending cases, but stayed enforcement of final orders
![Supreme Court Permits NFRAs Audit Regulatory Proceedings Against CAs, Stays Execution of Final Orders [Read Judgement]](https://www.taxscan.in/wp-content/uploads/2025/03/Supreme-Court-NFRAs-Audit-Regulatory-CAs-Stays-Execution-Final-Orders-taxscan.jpg "Supreme Court Permits NFRAs Audit Regulatory Proceedings Against CAs, Stays Execution of Final Orders [Read Judgement]")
In a recent ruling, the Supreme Court permitted the National Financial Reporting Authority (NFRA) to continue audit regulatory proceedings against chartered accountants (CAs) in cases where no Audit Quality Review Reports (AQRRs) have been prepared and no final orders have been passed and stayed the execution of final orders already issued. National Financial Reporting Authority (NFRA),...
In a recent ruling, the Supreme Court permitted the National Financial Reporting Authority (NFRA) to continue audit regulatory proceedings against chartered accountants (CAs) in cases where no Audit Quality Review Reports (AQRRs) have been prepared and no final orders have been passed and stayed the execution of final orders already issued.
National Financial Reporting Authority (NFRA), the petitioner is the statutory audit regulator tasked with oversight of accounting and auditing standards in India. It had initiated disciplinary proceedings against Snehal N. Muzoomdar, a chartered accountant who served as an engagement partner for a branch auditor of Dewan Housing Finance Corporation Limited (DHFL), a company embroiled in one of India's largest financial frauds.
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The proceedings arose in the context of NFRA’s larger probe into professional lapses in the DHFL case, which allegedly involved siphoning off Rs. 31,000 crore of public funds and a Rs. 3,700 crore bank fraud. NFRA had issued a disciplinary order against Muzoomdar following its investigation, which was challenged before the Delhi High Court.
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The Delhi High Court, in a decision dated February 7, 2025, quashed NFRA’s proceedings on the grounds that the regulator had not maintained an adequate structural separation between its audit review and disciplinary functions. The Court directed NFRA to reconstitute its internal structure before taking further action in similar cases.
Aggrieved by this decision, NFRA approached the Supreme Court through a Special Leave Petition, arguing that the High Court’s ruling contradicted earlier judgments by the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court itself.
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The central issue before the Supreme Court was whether NFRA could continue its disciplinary proceedings in cases where audit quality review reports had not been issued and final orders were yet to be passed, notwithstanding the Delhi High Court's concerns.
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The two-judge bench of Chief Justice Sanjiv Khanna and Justice Sanjay Kumar issued notice in the matter and clarified that NFRA may continue its proceedings in such pending cases. The Court held that no final orders should be passed during the pendency of the matter, and that existing final orders already passed will not be enforced.
The Court also observed that NFRA intends to file further special leave petitions in related matters where the Delhi High Court had similarly intervened. The matter is scheduled for further hearing in the week commencing April 28, 2025.
To Read the full text of the Order CLICK HERE
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