The Telangana High Court recently ruled that the National Financial Reporting Authority (NFRA) can investigate chartered accountants for audits conducted before its creation in 2018..The decision came in a batch of writ petitions challenging the jurisdiction of NFRA to issue show-cause notices for financial years prior to October 1, 2018.Justice CV Bhaskar Reddy upheld the regulator’s powers to do so and dismissed the petitions..The Court said that while NFRA may be permitted to initiate disciplinary inquiries for misconduct committed before its constitution, it cannot impose enhanced punishments that were not in force at the time..The petitioners had argued that Section 132 of the Companies Act, 2013, under which NFRA was constituted, could not apply retrospectively. They also cited Article 20(1) of the Constitution to argue that enhanced penalties introduced in 2018 could not be imposed for earlier conduct.The Court acknowledged the constitutional bar on retrospective punishment, but clarified that show-cause notices by themselves do not violate this protection..It referred to the amended Section 132(4)(c), which introduced significantly higher penalties. However, it concluded that issuance of notices alone does not amount to final action.“The information sought from the petitioners under the show causes would lead to commencing an enquiry and consequential action thereon...Deciding these issues at this stage is premature.”.The judgment also noted that the National Company Law Appellate Tribunal had already upheld NFRA’s retrospective jurisdiction. The Supreme Court dismissed challenges to that view earlier this year..Senior Advocates D Prakash Reddy and Vikram Pooserla along with Advocates S Vamsi Krishna, Ankit Agarwal, P Sai Prashanth, Rajeev Reddy, and P Pranay Reddy appeared for the petitioners..For the respondent NFRA, arguments were advanced by Advocates Zoheb Hussain, Vivek Gurnani, Pranjal Tripathi, V Suradhish and T Srujan Kumar Reddy..[Read Judgment]
