NEW DELHI: The National Company Law Appellate Tribunal (NCLAT) has upheld the National Financial Reporting Authority’s (NFRA) orders on DHFL branch auditors, dismissing the appeals and finding no error in the decisions.
The NCLAT emphasised the importance of giving effect to the NFRA orders, stating that it is crucial to inform the public and assist them in making sound financial decisions.
NFRA had imposed fines of Rs 1 lakh each on 18 auditors of DHFL in October. Out of the 18 auditors, 14 were barred for a period ranging from six months to one year due to misconduct in branch audits. DHFL was accused of fraud amounting to Rs 31,000 crore, with its directors facing allegations of banking fraud totalling nearly Rs 4,000 crore. It saw four of its auditors challenging the NFRA order. These auditors, who were penalised and a one-year debarment, denied any wrongdoing and questioned the NFRA’s jurisdiction over audits conducted before its establishment, as the audit in question pertained to the five years until 2018-19.
NCLAT further clarified that the NFRA possesses retrospective jurisdiction to initiate proceedings against auditors or audit firms, even for audits conducted before the NFRA coming into force. The NCLAT stated that there was no violation in NFRA orders due to the non-constitution of divisions.It also highlighted that the NFRA holds significantly more powers and authority over the professional misconduct of members of the Institute of Chartered Accountants of India (ICAI).