CA Sansaar
Auditors raise concerns over proposed expansion of NFRA powers under Companies Act
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India’s audit community has raised concerns over a proposed amendment to the Companies Act that seeks to strengthen the authority of the National Financial Reporting Authority (NFRA).
As per the proposal, civil courts may be restricted from admitting or staying matters that come within NFRA’s jurisdiction. It also suggests that NFRA orders may be challenged before courts only on limited grounds, mainly where there is an alleged violation of the principles of natural justice. Such challenges are generally made through writ petitions.
The proposed changes may also expand NFRA’s scope by bringing valuation services and valuers within its regulatory framework.
Industry observers believe that, if these amendments are approved, auditors facing NFRA proceedings may find it more difficult to obtain interim relief or stay orders from courts. At the same time, supporters of the move argue that limiting judicial intervention during ongoing proceedings could help NFRA complete investigations more efficiently, as mid-stage court interventions often delay regulatory action.
The proposal forms part of the Companies Act amendment bill, which was introduced in Parliament during the last session and has since been referred to a Joint Parliamentary Committee for further examination.
At present, similar restrictions on court intervention are available only in limited regulatory frameworks, such as matters handled by the Securities and Exchange Board of India (SEBI) and the National Company Law Tribunal (NCLT). In securities market matters, SEBI acts as the primary regulator, and courts generally do not stay ongoing investigations.
In such cases, the affected party usually has to wait for the final adjudication order and then challenge it through appropriate legal proceedings, including writ petitions where applicable. Similarly, matters relating to schemes of arrangement of companies fall within the domain of the NCLT, and other bodies generally cannot halt that approval process.
As per the proposal, civil courts may be restricted from admitting or staying matters that come within NFRA’s jurisdiction. It also suggests that NFRA orders may be challenged before courts only on limited grounds, mainly where there is an alleged violation of the principles of natural justice. Such challenges are generally made through writ petitions.
The proposed changes may also expand NFRA’s scope by bringing valuation services and valuers within its regulatory framework.
Industry observers believe that, if these amendments are approved, auditors facing NFRA proceedings may find it more difficult to obtain interim relief or stay orders from courts. At the same time, supporters of the move argue that limiting judicial intervention during ongoing proceedings could help NFRA complete investigations more efficiently, as mid-stage court interventions often delay regulatory action.
The proposal forms part of the Companies Act amendment bill, which was introduced in Parliament during the last session and has since been referred to a Joint Parliamentary Committee for further examination.
At present, similar restrictions on court intervention are available only in limited regulatory frameworks, such as matters handled by the Securities and Exchange Board of India (SEBI) and the National Company Law Tribunal (NCLT). In securities market matters, SEBI acts as the primary regulator, and courts generally do not stay ongoing investigations.
In such cases, the affected party usually has to wait for the final adjudication order and then challenge it through appropriate legal proceedings, including writ petitions where applicable. Similarly, matters relating to schemes of arrangement of companies fall within the domain of the NCLT, and other bodies generally cannot halt that approval process.
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