Case Law Details
CA Unnikrishnan Menon Vs National Financial Reporting Authority And Another (Delhi High Court)
Introduction: The Delhi High Court recently became the stage for a legal battle as CA Unnikrishnan Menon challenged a show cause notice issued by the National Financial Reporting Authority (NFRA) under Section 132(4)(c) of the Companies Act. The notice alleged irregularities in the deduction claimed under Section 80JJAA of the Income Tax Act by M/s Quess Corp Limited (QUESS). This article delves into the key arguments presented, the legal framework invoked, and the court’s interim decision.
Legal Background: The crux of CA Unnikrishnan Menon’s argument lies in Section 132(4) of the Companies Act, empowering the NFRA to investigate professional or other misconduct by firms or firms of Chartered Accountants registered with the Act. The National Financial Reporting Authority Rules, 2018 (2018 Rules) outline the scope of such investigations. Rule 3 of the 2018 Rules classifies companies and bodies corporate governed by the NFRA, providing the framework for investigations.
Key Arguments:
1. Jurisdictional Limitations: CA Unnikrishnan Menon contends that the NFRA’s power to investigate is limited to the auditors of the company under scrutiny. Rule 3(1) of the 2018 Rules specifies that the NFRA can investigate auditors of companies falling within certain categories, including those listed on stock exchanges, unlisted public companies meeting specific criteria, insurance companies, banking companies, and others.
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