NCLAT Dismisses Appeal Against NFRA Order on Finding No Reasons for Delay of 147 days in Re-filing
It was evident that as per Rule No. 26 of the NCLAT Rules, 2016, the refiling delay can be condoned, if sufficient reasons are brought out by the Appellant to the satisfaction of the Appellant Tribunal
In a recent case, the NCLAT New Delhi Zoheb Hossain of the National Company Law Appellate Tribunal (NCLAT) dismissed the application filed against the NFRA Order on the grounds that no reasons were mentioned justifying the delay of 147 days in re-filing.
The Appellant , Amit Somani field the appeal under Section 132(5) of the Companies Act, 2013 (“the Act”), challenging the Impugned Order dated 19.08.2024 passed by the National Financial Reporting Authority, New Delhi (NFRA) ‘in the matter of M/s BSR & Associates LLP, CA Aravind Maiya and CA Amit Somani, under section 132 (4) (c) of the Companies Act, 2013’, Order No. 020/2024).
The Impugned Order dated 19.08.2024 pertains to the statutory audit of M/s Coffee Day Enterprises Ltd. (CDEL) for the financial year 2018-19, conducted by M/s BSR & Associates LLP, with CA Aravind Maiya as the Engagement Partner (EP) and CA Amit Somani as the Engagement Quality Control Reviewer (EQCR).
On 17.01.2024, the NFRA issued a Show CauseNotice (SCN) alleging deficiencies in the EQCR’s role. It has been brought out that a comprehensive reply was filed by the Appellant on 29.03.2024, addressing each allegation and detailing compliance with SA 220 and SQC 1. A personal hearing was conducted on 31.05.2024, where, with legal counsel, the Appellant clarified the distinct roles of the EP and EQCR, emphasizing adherence to applicable standards. Written submissions by the Appellant dated 14.06.2024 reiterated these points, collectively forming the Responses.
It has been brought to our notice that the Impugned Order dated 19.08.2024 charged the Appellant i.e. CA Amit Somani with professional misconduct under Clause 7, Part I of the Second Schedule of the Chartered Accountants Act, 1949, for alleged failure to exercise due diligence or gross negligence. The Impugned order imposed: (a) a 5-year debarment from being appointed as an auditor, internal auditor, or undertaking valuations under Section 247 of the Companies Act, 2013; and (b) a monetary penalty of INR 25,00,000 (collectively, the "Sanctions").
The Impugned Order indicate the failure of the Appellant to report the CDEL’s non-compliance with Section 185 of the Companies Act, 2013, and violations of the Companies (Auditor’s Report) Order (CARO). The Appellant stated that the role of the EQCR, as defined by SA 220, is limited to objectively evaluating significant judgments and conclusions of the Engagement Team (ET) or EP before the audit report’s issuance. The Appellant argued that the primary responsibility for verifying compliance with Section 185 and CARO rested with the EP, CA Aravind Maiya, who performed the audit procedures and issued the report.
It was evident that as per Rule No. 26 of the NCLAT Rules, 2016, the refiling delay can be condoned, if sufficient reasons are brought out by the Appellant to the satisfaction of the Appellant Tribunal.
It was submitted that the delay in re-filing is due to factors and circumstances beyond the reasonable control of the Appellant and his counsel. While the counsel for the Appellant cleared all defects marked by the registry within the prescribed period of 7 days of marking of each defect on every occasion, there is an inevitable delay of 147 days in refiling the present Appeal. It is submitted that the circumstances causing the aforesaid delay are bona fide and genuine.
It was viewed that no limitation prescribed for refiling of appeal and party who is exercising its right to file the statutory appeal in time has not to be shut out on procedure or technical defects however, they should be justifiable cause for delay. The larger bench also held that representation of appeal after expire of period of 7 days or after extended period was not to be a fresh filing and shall only be refiling/ representation.
The bench of Justice Rakesh Kumar Jain, Member (Judicial) and Mr. Naresh Salecha, Member (Technical) found that there are no reasonable reasons for justifying delay of 147 days in re-filing and curing the defects. Further observed that in spite of multiple intimations made by the Registry, same defects remained uncured, which shows the carelessness on the part of the Appellant. Defects that could have been cured together were unnecessarily prolonged by the Appellant, without any justifiable reason.
Since, the Application for condonation of delay in refiling fails and rejected , the main appeal is treated as legally not constituted, the same stands dismissed without examining and going into merits of the case.
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