ICAI seeks to keep NFRA under MCA as Centre reworks Corporate Laws Bill
Sep 23, 2026
A majority of the suggestions made by the ICAI on changes to NFRA have been accepted by the government, according to a senior ICAI official, as the Centre continues work on the revised legislation ahead of its expected introduction during the Winter Session.
The Institute of Chartered Accountants of India (ICAI) has sought to retain the National Financial Reporting Authority (NFRA) as an authority under the Central Government through the Ministry of Corporate Affairs (MCA), rather than having it constituted as a separate body corporate, as the government works on a revised version of the Corporate Laws (Amendment) Bill, 2026.
ETCFO has learnt that the government is continuing work on the revised legislation and is expected to consider the recommendations of the Joint Parliamentary Committee before introducing the Bill in Parliament during the Winter Session.
“Majority of the suggestions have been accepted by the government and they are still working on the Bill,” a senior ICAI official told ETCFO.
The JPC submitted its report on the Corporate Laws (Amendment) Bill on August 3, 2026. The Bill, introduced in the Lok Sabha on March 23 and subsequently referred to the committee, proposes several changes to the Companies Act, including provisions relating to the powers and functioning of NFRA.
ICAI seeks to retain NFRA under MCA
ICAI has proposed that NFRA should continue to function as an authority under the Central Government through the MCA rather than being constituted as a separate body corporate.
The proposal comes as the government considers changes to the regulatory framework governing NFRA under the Corporate Laws (Amendment) Bill. The Bill had proposed changes to NFRA’s regulatory and investigative powers, including provisions relating to the manner in which investigations would be carried out.
The JPC has recommended deleting a proposed amendment that would have empowered NFRA to make regulations prescribing the manner of investigation. Under the existing framework, NFRA is empowered to investigate professional or other misconduct, while the manner of investigation is prescribed through rules made by the Central Government.
Rule making powers in focus
ICAI has also sought clearer boundaries between NFRA’s regulatory powers and the rule making powers of the Central Government.
The institute has proposed that NFRA’s powers and functions should be exercised with the approval of its governing body, while rule making powers should remain with the Central Government.
The JPC report has proposed changes to provisions dealing with NFRA’s investigative and enforcement framework, including deletion of the proposed provision allowing NFRA to prescribe the manner of investigation through its own regulations.
Five year limit proposed for investigations
ICAI has also proposed a five year limitation period for initiating NFRA investigations, along with an appellate mechanism before the National Company Law Tribunal or the National Company Law Appellate Tribunal.
The institute has further suggested provisions allowing a stay during the pendency of an appeal and a settlement mechanism under the Companies Act for matters involving NFRA penalties.
These suggestions form part of ICAI’s proposals for procedural safeguards around NFRA’s investigative and enforcement powers.
No imprisonment for NFRA penalty default
ICAI has also proposed that failure to pay an NFRA penalty should not result in imprisonment.
The JPC has separately recommended removing imprisonment for failure to comply with an NFRA order or for non payment of an NFRA penalty, while retaining a criminal fine. The committee said such imprisonment provisions were not aligned with the broader objective of decriminalisation under the legislation.
Government works on revised Bill
The Corporate Laws (Amendment) Bill, 2026 was introduced in the Lok Sabha on March 23, 2026 and referred to a Joint Parliamentary Committee. The committee presented its report on August 3.
During its examination of the Bill, the committee consulted professional bodies including ICAI, the Institute of Company Secretaries of India and the Institute of Cost Accountants of India. ICAI, ICSI and ICMAI made presentations before the committee on June 12, while NFRA appeared before the committee on June 24.
With the JPC report now submitted, the government is working on the revised legislation before its proposed consideration in Parliament during the Winter Session.
The final shape of the NFRA provisions will determine how the regulator’s institutional status, rule making powers, investigative framework and enforcement mechanisms are incorporated into the revised legislation.
[ET CFO]
