Case Law Details
Harish Kumar T. K. Vs National Financial Reporting Authority (NCLAT Delhi)
Conclusion: In present facts of the case, it was observed that deposit of 10% of the penalty shall have no effect on the order of ‘debarment’ passed against the Appellant(s) under Section 132(4)(c). Order of ‘debarment’ shall continue to operate unless an order is passed by the Appellate Tribunal.
Facts: In present facts of the case, appeal(s) have been filed by several Chartered Accountants, challenging the order passed by National Financial Reporting Authority (hereinafter referred to as the “NFRA”) imposing penalty under Section 132(4)(c) of the Companies Act, 2013. The Appellant’s Firm was engaged for conducting of Branch Audit by two appointment letter dated 27.08.2014 for its Firm at Kannur, Kotayyam Thiruvananthapura, Thrissur, Calicut and Kochi Branches. The Appellant being Partner of the Firm was assigned with the Audit work by the Firm for the Branches of the Company. In the subsequent Financial Years 2015-16, 2016-17, 2017-18 and 2018-19 also, the Firm received similar appointment letter from the Company. The Appellant received a Show Cause Notice dated 07.12.2022 from NFRA. The Appellant replied to the Show Cause Notice. The Show Cause Notice was decided by NFRA vide its order dated 13.04.2022, imposing penalties under Section 132(4)(c) of the Companies Act, 2013 on the ground of professional misconduct. The Appellant aggrieved by the order dated 13.04.2023 has e-filed this Appeal within 30 days from passing of the order. Physical copy of the order was also presented on 06.05.2023.
The learned Counsel for the Appellant relying on Rule 12 of the 2018 Rules, submits that when Appeal challenging the impugned penalty order has been filed within 30 days from the date of order, after depositing the 10% of the penalty amount as required by Rule 12, sub-rule (1), the consequence of said filing of the Appeal and deposit of 10% penalty amount is that no further action can be taken by the Authorities under Rule 12, sub-rule (2), (3) and (4). It is submitted that object of Rule 12, sub-rule (1) is to give protection to those Chartered Accountants, who have filed Appeal within 30 days and have deposited the 10% penalty amount. The consequence is that the Chartered Accountant is entitled to continue to discharge his functions in the company or body corporate, which functions, he was discharging prior to passing of the impugned order.
After taking submissions from both sides into consideration, it was observed that Rule 12, sub-rule (1) can have no application in a case where penalty of debarment has been imposed. Expression ‘debarment’ has consciously been not included in Rule 12, sub-rule (1) whereas sub- rules (3) and (4) use expression ‘debars’. Thus, rulemaking Authority was well aware that Rule 12 provides for both monetary penalty as well as debarment.
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