Delhi HC issues notice in challenge to National Financial Reporting Authority’s power to investigate, punish Chartered Accountants

The Delhi High Court has issued notice in a petition challenging the constitutional validity of Sections 132(2) and 132(4) of the Companies Act 2013 which empowers the National Financial Reporting Authority (NFRA) to investigate professional misconduct by Chartered Accountants and take disciplinary action against them..Notice to the Central Government, Institute of Chartered Accountants of India (ICAI) and the NFRA was issued by a Division Bench of Chief Justice DN Patel and C Hari Shankar in a petition preferred by Federation of Chartered Accountants Association (petitioner)..It is the petitioner’s case that Section 132(2) and Section 132(4) facilitate arbitrary and illegal regulation and control of professionals registered under the Chartered Accountants Act, 1949 by the NFRA to the exclusion of the ICAI..The petitioner has submitted that a Chartered Accountant registered by the ICAI under the Chartered Accountant Act, 1949 which is a special act for Chartered Accountants and therefore, it is the ICAI which has the authority and right to regulate his/her conduct..Arguing that an authority which has not issued the license to practice would have no authority to affect the fundamental right of a professional to work, the petitioner has submitted,.“..Any contrarian view would be violative of Article 19(1)(g) and Article 21 of the Constitution of India, because a professional cannot be authorized to practice by one body and his conduct be allowed to be regulated by another body which has nothing to do with the regulation of the profession as such..”.Since NFRA is primarily a body of appointees of the Central Government, the petitioner has also raised concerns of issues of independence from the Central Government, especially while auditing Government companies/PSUs..“.. a qualified professional has to act independently and for this independence, it is necessary that his license to practice is controlled and regulated by an autonomous body unaffected by government control/interference.. (any interference) would definitely affect the ability to perform the functions and duties as professionals..”, it is submitted..The petitioner has also asserted that the “sweeping powers” to investigate and punish CAs for professional misconduct to the exclusion of the ICAI have no relation to the object and functions of NFRA and is a case of excessive delegation due to lack of legislative policy or guidance..Therefore, arguing that Section 132(2) and (4) would have the chilling effect on the freedom of profession of the CAs, the petitioner has sought for an order declaring the Sections as unconstitutional and void..The petitioner was filed through Advocates Dr Anurag Kumar Agarwal, Sangeeta Agarwal, Umesh Mishra, Tushar Prashar, Chetna Chhikara, Himanshu Gupta, Manasi Bhushan, Raghav Gumbeer, Aman Bahl and Ratul Mahajan..The matter would be heard next on December 22.