Supreme Court Greenlights NFRA Proceedings Against Chartered Accountants

NFRA Can Proceed Pending Final Orders

The Supreme Court has given the National Financial Reporting Authority (NFRA) the go-ahead to continue its proceedings against chartered accountants and firms where no audit quality review reports have been prepared and final orders are still pending.

Challenge to Delhi HC Order

• NFRA approached the SC to challenge an order by a Delhi HC bench
• The Delhi HC bench expressed concerns over NFRA not having separate divisions for audit quality review and disciplinary actions
• The Delhi HC requested a fresh evaluation in 11 cases

NFRA’s Plea in the Supreme Court

NFRA argued that the Delhi HC order contradicts previous rulings by NCLAT and the SC in similar cases. It referred to an SC judgment in the T K Harish case, involving the siphoning off of Rs 31,000 crore of public money and a bank fraud of Rs 3,700 crore being investigated by other law enforcement agencies.

NFRA’s Argument in the Snehal N Muzoomdar Case

In its appeal in the case of Snehal N Muzoomdar, NFRA contended that the auditor was an engagement partner of a branch auditor of DHFL. The Delhi HC order has led to an unusual situation where the proceedings and order passed in the case of one branch auditor have been upheld by the SC, while the proceedings and order passed in the case of an engagement partner of another branch auditor of the same company have been quashed.

Supreme Court’s Instructions to NFRA

• NFRA should not issue final orders in these cases
• Any final orders that have already been passed will not be implemented