Supreme Court upholds NFRA's 10-year ban and Rs 20 lakh fine for auditor Anil Chauhan over Seya Industries' misconduct
Aug 1, 2024
Synopsis
The Supreme Court upheld the National Financial Reporting Authority's 10-year audit ban and Rs 20 lakh penalty on Anil Chauhan for misconduct during the audit of Seya Industries. Chauhan's appeal was dismissed as he was found to be non-compliant and non-cooperative in meeting the required accounting and auditing standards.
The Supreme Court has upheld a National Financial Reporting Authority's January order that barred a chartered accountant from conducting any audit work for 10 years and also imposed a penalty of Rs 20 lakh for professional misconduct in respect of statutory audit of Seya Industries.
Anil Chauhan, a chartered accountant, had challenged the NCLAT’s order that refused to interfere with NFRA’s January 5 decision imposing “harsh punishment” on him. He alleged that the authority imposed “maximum penalty which is very harsh and has not followed principle of proportionality.”
SEBI had investigated the affairs of Seya Ltd and found irregularities, especially in non-compliance of accounting standards. It had also made adverse comments about the conduct and non-cooperation of the auditor in this regard. Chauhan was the statutory auditor of Seya for FY 2018-2020 and was responsible for audit of the company.
The chartered accountant pleaded that it did not receive any information since he moved to Nepal. However, he said he worked sincerely during course of audit of the company and followed all accounting standards and maintained proper record.
“We do not find any good ground and reason to interfere with the impugned judgment; hence, the present appeal is dismissed,” a Bench led by Justice Sanjiv Khanna said.
The NCLAT in its order noted that it didn’t find any illegality in the NFRA order as Chauhan deliberately chose to be non-compliant, non-cooperative, evasive and had taken misleading, irrational and unbelievable defences and deliberately avoided any submission of record to justify compliance of relevant standards like SA 230.
In the present era of technology and modern communications, where emails are accessible across the globe and on any instrument including mobile and laptops, it is extremely difficult for anyone to believe such submissions of the chartered accountant, and therefore we reject his submissions, NCLAT observed.
The appellate tribunal had reiterated the need for a Chartered Accountant to be conscious keeper and not to become part of any direct or indirect wrong doings by the companies in non-compliance of the laid down accounting and auditing standards which may result into incorrect, misleading and sometimes fraudulent financial statements. “We have also noted that it is on the faith of the certified financial statements by the Chartered Accountants, various stakeholders including the Government, bankers and public etc. decide about their interaction or participation in the affairs of the Company. In this regard,” the NCLAT said.
[The Economic Times]
