Delhi High Court Halts NFRA Proceedings Against CA Amid Allegations of Professional Misconduct

Delhi High Court Halts NFRA Proceedings Against CA Amid Allegations of Professional Misconduct

The Delhi High Court has put a temporary hold on professional misconduct proceedings against a Chartered Accountant (CA) accused of irregularities in claiming tax deductions under Section 80 of the Income Tax Act, potentially throwing a wrench in the National Financial Reporting Authority's (NFRA) investigation.

A show cause notice under Section 132(4)(c) of the Companies Act was issued by the NFRA to CA Unnikrishnan Menon in relation to the deduction claimed for Queens Corp Limited (QUESS).

Menon presented his case to the High Court, contending that according to the National Financial Reporting Authority Rules, 2018, the NFRA is authorised to issue a show cause notice solely to the auditor of a company under investigation.

Menon argued that neither he nor the company of which he is a member serves as the auditor for QUESS, the company under investigation. Consequently, he asserted that the show cause notice should not have been issued to him based on this premise.

Citing Rule 4(1) of the NFRA Rules, Menon asserted that investigations can only be conducted in relation to the auditor of the company under scrutiny.

After reviewing the case, Justice Subramonium Prasad found that a prima facie case was established in favour of the petitioner. Consequently, he ordered a stay on the proceedings related to the show cause notice until the next scheduled hearing on May 7. Additionally, the Court issued a notice to the NFRA.

Menon was represented by Senior Advocate Sanjeev Puri, along with the legal team from AZB & Partners, including Managing Partner Ajay Bahl and Partner Vinati Kastia, along with Aditya Jalan and Raghav Seth.

The NFRA was represented by Advocate Zoheb Hossain, while the Central government was represented by its standing Counsel Asheesh Jain and advocate M Theepa.