Draft Rules (3nd phase) under Companies Act 2013

DRAFT RULES UNDER THE COMPANIES ACT, 2013

CHAPTER V

ACCEPTANCE OF DEPOSITS BY COMPANIES

G.S.R -- In exercise of the powers conferred by sub-section (31) of section 2, sections 73 and 76, read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (…. of 2013), the Central Government, in consultation with the Reserve Bank of India, hereby makes the following rules, namely: -

Short title and commencement.

1.(1) These rules may be called the Companies (Acceptance of Deposits) Rules, 2013.

(2) They shall come into force on the date of their publication in the Official Gazette.

(3) These rules shall apply to a company other than

(i) a banking company and

(ii) a non-banking financial company (as defined in the Reserve Bank of India Act, 1934) registered with the Reserve Bank of India.

Definitions.

2. (1) In these rules, unless the context otherwise requires, ___

(a) “Act” means the Companies Act, 2013;

(b) “Deposit” includes any receipt of money by way of deposit or loan or in any other form, by a company, but does not include-

(i) any amount received from the Central Government or a State Government, or any amount received from any other source whose repayment is guaranteed by the Central Government or a State Government;

(ii) any amount received from foreign Governments, foreign/international banks, multilateral financial institutions (including, but not limited to, International Finance Corporation, Asian Development Bank, Commonwealth Development Corporation and International Bank for Industrial and Financial Reconstruction), foreign government owned development financial institutions, foreign export credit agencies, foreign collaborators, foreign bodies corporate and foreign citizens subject to the provisions of Foreign Exchange Management Act, 1999 and rules and regulations made there under;

(iii) any amount received as a loan or facility from any banking company or from the State Bank of India or any of its subsidiary banks or from a banking institution notified by the Central Government under section 51 of the Banking Regulation Act, 1949 (10 of 1949), or a corresponding new bank as defined in clause (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or from a co-operative bank as defined in clause (b-ii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934) ;

(iv) any amount received as a loan or financial assistance from Public Financial Institutions notified by the Central Government in this behalf in consultation with the Reserve Bank of India, regional financial institutions, Insurance Companies, Scheduled Banks and Mutual Funds registered with SEBI .

(v) any amount received against issue of commercial paper or any other instrument issued in accordance with the guidelines or notification issued by the Reserve Bank of India; (vi) any amount received by a company from any other company;

(vii) any amount received and held pursuant to an offer made in accordance with the provisions of the Act towards subscription to any securities, including share application money or advance towards allotment of securities pending allotment, so long as such amount is appropriated only against the amount due on allotment of the securities applied for;

Explanation

If the securities for which application money or advance for such securities was received cannot be allotted within 60 days from the date of receipt of the application money or advance for such securities and such application money or advance is not refunded to the subscribers within 15 days from the date of completion of sixty days, such amount shall be treated as a deposit under these rules.

For the purpose of this rule any adjustment of the amount for any other purpose will not be treated as refund.

(viii) any amount received by a private company from a person who, at the time of the receipt of the amount, was a director of the company or any amount received from its shareholders: Provided that the director or shareholder, as the case may be, from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others: Provided further that in case of joint shareholders of a private company, monies received from any one or more or all of the joint shareholders whose name/s is/are recorded in the register of members of the company shall be eligible to be treated as monies received from a shareholder of the company;

(ix) any amount raised by the issue of bonds or debentures secured by a first charge or a charge ranking pari passu with the first charge on any assets referred to in Schedule III of the Act excluding intangible assets of the company or bonds / debentures compulsorily convertible into shares of the company within five years Provided that if such bonds or debentures are secured by the charge of any assets referred to in Schedule III of the Act excluding intangible assets, the amount of such bonds or debentures shall not exceed the market value of such assets as assessed by a registered valuer. (x) any amount received from an employee not exceeding his annual salary, under a contract of employment with the company in the nature of non-interest bearing security deposit;

(xi) any non-interest bearing amount received or held in trust;

(xii) any amount received in the course of or for the purposes of the business of the company:

(a) as an advance for the supply of goods or provision of services provided that such advance is appropriated against supply of goods or provision of services within a period of one hundred and eighty days from acceptance of such advance.

(b) as advance received under an agreement for sale of property provided that such agreement is duly registered under the applicable Registration Act(s).

(c) as security deposit for the performance of the contract for supply of goods or provision of services.

(d) As advance received under long term projects or for supply of capital goods. Provided that if the amount received under (a) to (d) above becomes refundable (with or without interest) because the company accepting the money does not have necessary permission or approval to deal in the goods or properties or services for which the money is taken, the amount received shall be deemed to be a Deposit under these rules.

(xiii) any amount brought in by the promoters of the company by way of unsecured loan in pursuance of the stipulation of any lending financial institution or a bank subject to fulfillment of the following conditions:-

(a) the loan is brought in pursuance of the stipulation imposed by the lending institutions on the promoters to contribute such finance; and

(b) the loan is provided by the promoters themselves and/or by their relatives.

Explanation: Any amount received from a person with promise or offer to give returns in cash or in kind on completion of the period defined in the promise or offer or during the period of payment of instalments over and above the amount actually paid shall be treated as deposit.

(c) ‘Depositor’ means-

(i) any member of the company who has made a deposit with the company in accordance with sub-section (2) of section 73 of the Act, or

(ii) any person who has made a deposit with a public company in accordance with section 76 of the Act.

(d) “Eligible company” means a public company as referred to in subsection

(1) of section 76, having a net worth of not less than one hundred crore rupees or a turnover of not less than five hundred crore rupees and which has obtained the prior consent of the company in general meeting by means of a special resolution and also filed the said resolution with the Registrar of Companies and where applicable, with the Reserve Bank of India before making any invitation to the Public for acceptance of Deposits;

(e) “Trustee” means the Trustee as defined in section 3 of the Indian Trusts Act, 1882.

Acceptance of deposits by companies.

3. On and from the commencement of these rules,—

(1) no company under sub-section (2) of section 73 and no Eligible company shall accept or renew any deposit, whether secured or unsecured, which is repayable on demand or upon receiving a notice within a period of less than six months or more than thirty-six months from the date of acceptance or renewal of such deposit: Provided that a company may, for the purpose of meeting any of its short-term requirements of funds, accept or renew such deposits for repayment earlier than six months from the date of deposit or renewal, as the case may be, subject to the condition that-

(a) such deposits shall not exceed ten per cent of the aggregate of the paid up share capital and free reserves of the company,

and

(b) such deposits are repayable not earlier than three months from the date of such deposit or renewal thereof.

(2) Where depositors so desire, deposits may be accepted in joint names not exceeding three, with or without any of the clauses, namely, “Jointly”, “Either or Survivor”, “First named or Survivor”, “Anyone or Survivor”.

4. (i) No company under sub-section (2) of section 73 shall accept or renew any deposits if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal of such deposits exceeds 25 per cent of the aggregate of the paid-up share capital and free reserves of the company.

(ii) No Eligible company shall accept or renew:

(a) any deposit from its members, if the amount of such deposit together with the amount of deposits outstanding as on the date of acceptance or renewal of such deposits from members exceeds ten per cent of the aggregate of the paid-up share capital and free reserves of the company;

(b) any other deposit, if the amount of such deposit other than the deposit referred to in (a) above, together with the amount of deposits outstanding on the date of acceptance or renewal exceeds twenty-five per cent of aggregate of the paid-up share capital and free reserves of the company.

5. No Government company eligible to accept deposits under section 76 shall accept or renew any deposit, if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal exceeds thirty five per cent of the aggregate of its paid up share capital and free reserves.

Rate of interest of deposits.

6. No company under sub-section (2) of section 73 or any Eligible company shall invite or accept or renew any deposits in any form, carrying a rate of interest or pay brokerage thereon at a rate exceeding the maximum rate of interest or brokerage prescribed by the Reserve Bank of India for acceptance of deposits by non-banking financial companies.

Explanation: Only the person who is authorized, in writing, by a company to solicit deposits on its behalf and through whom deposits are actually procured will be entitled to the brokerage and payment of brokerage to any other person for procuring deposits shall be deemed to be in violation of these Rules.

Form and particulars of advertisements/circulars.

7. For the purposes of clause (a) of sub-section (2) of section 73, every company under sub-section (2) of section 73 intending to invite deposit from its members shall issue a circular to all its members by registered post with acknowledgement due or speed post or by electronic mode or publish the circular in the form of an advertisement in Form No. 1.

Provided that such circular shall also be published at least once in English language in a leading English newspaper and in vernacular language in one vernacular newspaper having wide circulation in the State in which the registered office of the company is situated.

8. Every Eligible company intending to invite deposits shall issue an advertisement in Form No. 1 for the purpose at least once in English language in a leading English newspaper and in vernacular language in one vernacular newspaper having wide circulation in the State in which the registered office of the company is situated.

9. Every company inviting deposits from the public shall upload a copy of the circular on its website, if any.

10. No company shall issue or allow any other person to issue or cause to be issued on its behalf, any circular or a circular in the form of advertisement inviting deposits, unless such circular or circular in the form of advertisement is issued on the authority and in the name of the Board of directors of the company.

11. No circular or a circular in the form of advertisement shall be issued by or on behalf of a company unless, not less than thirty days before the date of such issue, there has been delivered to the Registrar for registration a copy thereof signed by a majority of the directors of the company as constituted at the time the Board approved the circular or circular in the form of advertisement, or their agents, duly authorized by them in writing.

12. A circular or circular in the form of advertisement issued in accordance with sub-section (2) of section 73 or section 76 shall be valid until the expiry of six months from the date of closure of the financial year in which it is issued or until the date on which the financial statement is laid before the company in general meeting or, where the annual general meeting for any year has not been held, the latest day on which that meeting should have been held in accordance with the provisions of the Act, whichever is earlier, and a fresh circular or circular in the form of advertisement shall be issued, in each succeeding financial year, for inviting deposits during that financial year. Explanation: For the purpose of this rule, the date of the issue of the newspaper in which the advertisement appears shall be taken as the date of issue of the advertisement and the effective date of issue of circular shall be the date of dispatch of the circular.

Deposit insurance.

13. (1) Every company under sub-section (2) of section 73 and every other Eligible company inviting deposits shall enter into a contract providing for deposit insurance at least thirty days before the issue of circular or advertisement as the case may be as specified in clause (d) of sub-section (2) of section 73 of the Act.

(2) The deposit insurance contract shall specifically provide that in case the company defaults in repayment of principal amount and interest thereon, the depositor shall be entitled to the repayment of principal amount of deposits and the interest thereon by the insurer up to the aggregate monetary ceiling as specified in the contract; Provided that in the case of any deposit not exceeding twenty thousand rupees, the deposit insurance contract shall provide for payment of the full amount of the deposit and in the case of any deposit in excess of twenty thousand rupees, the deposit insurance contract shall provide for payment of an amount not less than twenty thousand rupees for each depositor.

Explanation- The amount as specified in the deposit insurance contract shall be deemed to be in respect of both principal amount and interest due thereon.

(3) The amount of insurance premium paid on the insurance of such deposits shall be borne by the company itself and shall not be recovered from the depositors by deducting the same from the principal amount or interest payable thereon.

(4) If any default is made by the company in complying with the terms and conditions of the deposit insurance contract which makes the insurance cover ineffective, the company shall either rectify the default immediately or enter into a fresh contract within 30 days. In case of non-compliance, the amount of deposits covered under the deposit insurance contract shall be repaid within the next fifteen days. If such a company does not repay the amount of deposits within fifteen days it shall pay fifteen per cent interest per annum for the period of delay and shall be treated having defaulted and liable to be punished in accordance with the Act.

Creation of security.

14. (1) For the purposes of clause (f) of sub-section (2) of section 73 and second proviso of sub-section (1) of section 76, every company under sub-section (2) of section 73 and every Eligible company inviting secured deposits shall provide for security by way of a charge on its assets as referred to in Schedule III of the Act excluding intangible assets of the company for the due repayment of the amount of deposit and interest thereon for an amount which shall not be less than the amount remaining unsecured by the deposit insurance as provided in pursuance of clause (d) of sub-section (2) of section 73. Provided that in the case of deposits which are secured by the charge on the assets referred to in Schedule III of the Act excluding intangible assets, the amount of such deposits and the interest payable thereon shall not exceed the market value of such assets as assessed by a registered valuer.

Explanation- The company shall ensure that the total value of the security either by way of deposit insurance and/ or by way of charge on company’s assets shall not be less than the amount of deposits accepted and the interest payable thereon.

(2) The security (not being in the nature of a pledge) for deposits shall be created in favor of a trustee for the deposit holders on:

a. specific movable property of the company, or

b. specific immovable property of the company wherever situate, or any interest therein.

Appointment of deposit trustees.

15. (1) No company under sub-section (2) of section 73 or any Eligible company shall issue a circular or advertisement inviting secured deposits unless the company has appointed one or more deposit trustees for creating security for the deposits: Provided that a written consent shall be obtained from the deposit trustee(s) before their appointment and a statement shall appear in the circular or circular in the form of advertisement with reasonable prominence to the effect that the deposit trustee(s) have given their consent to the company to be so appointed.

(2) The company shall execute a deposit trust deed in Form No. 2 at least 7 days before issuing the circular or circular in the form of advertisement.

(3) No person including a company that is in the business of providing trusteeship services shall be appointed as a trustee for the deposit holders, if the proposed trustee -

(a) is a director, key managerial personnel or any other officer or an employee of the company or of its holding, subsidiary or associate company or a depositor in the company;

(b) is indebted to the company, or its subsidiary or its holding or associate company or a subsidiary of such holding company;

(c)has any material pecuniary relationship with the company;

(d) has entered into any guarantee arrangement in respect of principal debts secured by the deposits or interest thereon;

(e) is related to any person specified in clause (a) above.

(4) No deposit trustee may be removed from office after the issue of circular or advertisement and before the expiry of his term except with the consent of all the directors present at a meeting of the board.

Provided that in case the company is required to appoint independent directors, at least one independent director shall be present in such meeting of the Board

Duties of deposit trustees.

16. It shall be the duty of every deposit trustee to-

(1) ensure that the assets of the company on which charge is created together with the amount of deposit insurance are sufficient to cover the repayment of the principal amount of secured deposits outstanding and interest accrued thereon;

(2) satisfy himself that the circular or advertisement inviting deposits does not contain any information which is inconsistent with the terms of the deposit scheme or with the trust deed and is in compliance with the rules and provisions of the Act;

(3) ensure that the company does not commit any breach of covenants and provisions of the trust deed;

(4) take such reasonable steps as may be necessary to procure a remedy for any breach of covenants of the trust deed or the terms of invitation of deposits;

(5) take steps to call a meeting of the holders of depositors as and when such meeting is required to be held; (6) supervise the implementation of the conditions regarding creation of security for deposits and the terms of deposit insurance;

(7) do such acts as are necessary in the event the security becomes enforceable;

(8) carry out such acts as are necessary for the protection of the interest of depositors and to resolve their grievances.

17. The meeting of all the depositors shall be called by the deposit trustee on-

(1) requisition in writing signed by at least one-tenth of the depositors in value for the time being outstanding;

(2) the happening of any event, which constitutes a default or which in the opinion of the deposit trustee affects the interest of the depositors.

Form of application for deposits.

18.(i) On and from the commencement of these rules, no company shall accept, or renew any deposit, whether secured or unsecured, unless an application, in the form prescribed by the company, is submitted by the intending depositor for the acceptance of such deposit.

(ii) The application referred to in rule 18(i) shall contain a declaration by the intending depositor to the effect that the deposit is not being made out of any money borrowed by him from any other person.

19. A depositor may, at any time, make a nomination and the provisions of section 72 shall, as far as may be, apply to the nomination made under this sub-rule.

Furnishing of deposit receipts to depositors.

20. Every company shall, on the acceptance or renewal of a deposit, furnish to the depositor or his agent a deposit receipt for the amount received by the company, within a period of two weeks from the date of receipt of money or realization of cheques.

21. The deposit receipt referred to in rule 20 shall be signed by an officer of the company duly authorized by the Board in this behalf and shall state the date of deposit, the name and address of the depositor, the amount received by the company as deposit, the rate and periodicity of interest payable thereon and the date on which the deposit is repayable.

Maintenance of liquid assets and creation of Deposit Repayment Reserve Account.

22. Every company under sub-section (2) of section 73 and every Eligible company shall on or before the 30th day of April of each year deposit a sum which shall not be less than fifteen per cent of the amount of the deposits, whether secured or unsecured, maturing during the current financial year and next financial year in a deposit repayment reserve account, with any scheduled bank which shall be kept free from charge or lien.

23. The amount deposited in deposit repayment reserve account under rule 22 shall not be utilized for any purpose other than for the repayment of deposits:

Provided that the amount remaining deposited, as the case may be, shall not at any time fall below fifteen per cent of the amount of deposits maturing until the current financial year and the next financial year.

Alteration of any terms or conditions.

24. (1) The company shall not reserve to itself either directly or indirectly a right to alter, to the prejudice or disadvantage of the depositor, any of the terms and conditions of the deposit after advertisement/circular is issued and deposits are accepted.

(2) No term or condition of the deposit (whether secured or unsecured), trust deed or deposit insurance contract shall be altered or modified after they have been issued.

Registers of deposits.

25. (1) Every company accepting deposits shall, from the date of such acceptance, keep at its registered office one or more separate registers for deposits accepted/renewed, in which there shall be entered separately in the case of each depositor the following particulars, namely:

(a) Name, address and PAN of the depositor/s;

(b) Particulars of guardian, in case of a minor;

(c) Particulars of the nominee;

(d) Deposit receipt number;

(e) Date and amount of each deposit;

(f) Duration of the deposit and the date on which each deposit is repayable;

(g) Rate of interest;

(h) Due date(s) for payment of interest;

(i) Mandate and instructions for payment of interest and for non-deduction of tax at source, if any;

(j) Date or dates on which payment of interest will be made;

(k) Details of deposit insurance including extent of deposit insurance;

(l) Particulars of other security/ charge created;

(m) Any other particulars relating to the deposit;

(2) Entries in the register shall be made within seven days from the date of issuance of the deposit receipt and such entries shall be authenticated by a director or secretary of the company or by any other officer authorized by the Board for this purpose.

(3) The register or registers referred to in sub-rule (1) shall be preserved in good order for a period of not less than eight years from the financial year in which the latest entry is made in the register.

General provisions regarding premature repayment of deposits.

26. Where a company, which has accepted deposits under these Rules and the Act, on the request of the depositor makes any repayment of a deposit after the expiry of a period of six months from the date of such deposit but before the expiry of the period for which such deposit was accepted by the company, the rate of interest payable by the company on such deposit shall be reduced by one per cent from the rate which the company would have paid had the deposit been accepted for the period for which such deposit had actually run or the contracted rate, whichever is lower and the company shall not pay interest at any rate higher than the rate so reduced :

Provided that nothing contained in this rule shall apply to the repayment of any deposit before the expiry of the period for which such deposit was accepted by the company, if such repayment is made solely for the purpose of:—

(a) complying with the provisions of the Non-Banking Nonfinancial Companies (Reserve Bank) Directions, 1966;

or

(b) complying with the provisions of rule 3 ; or

(c) providing war risk or other related benefits to the personnel of the naval, military or air forces or to their families, on an application made by the associations or societies formed by such personnel, during the period of emergency declared under article 352 of the Constitution :

Provided further that where a company under sub-section (2) of section 73 or any Eligible company permits a depositor to renew his deposit, before the expiry of the period for which such deposit was accepted by the company, for availing of a higher rate of interest, the company shall pay interest to such depositor at the higher rate if such deposit is renewed in accordance with the other provisions of these rules and for a period longer than the unexpired period of the deposit. Explanation: For the purposes of this rule, where the period for which the deposit had run is part of a year, then, if such part is less than six months, it shall be excluded and if such part is six months or more, it shall be reckoned as one year.

Return of deposits to be filed with the Registrar.

27. Every company to which these rules apply, shall on or before the 30th day of June, of every year, file with the Registrar, a return in Form No. 3 along with the fee as provided in Annexure ‘B ‘ and furnish the information contained therein as on the 31st day of March of that year duly audited by the auditor of the company who shall give his report as per Form.

Provided that a copy of the return shall also be simultaneously furnished to the Reserve Bank of India, wherever applicable:

Penal rate of interest.

28. A penal rate of interest of eighteen per cent per annum shall be payable for the overdue period in case of deposits, whether secured or unsecured, matured and claimed but remaining unpaid.

Power of Central Government to decide certain questions.

29. If any question arises as to whether these Rules are or are not applicable to a particular company, such question shall be decided by the Central Government in consultation with the Reserve Bank of India.

Applicability of sections 73, 74 and 75 to eligible companies

30. Pursuant to provisions of sub-section (2) of section 76 of the Act, the provisions of sections 73, 74 and 75 shall, mutatis mutandis, apply to acceptance of deposits from public by eligible companies. Explanation.- It is hereby clarified that

(i) In case of an eligible company which had accepted or invited public deposits under the relevant provisions of the Companies Act, 1956 and rules made under that Act (hereinafter known as “Earlier Deposits”) and has been repaying such deposits and interest thereon in accordance with such provisions, the provisions of section 74(1)(b) of the Act shall be deemed to have been be complied with if the company continues to repay such deposits and interest due thereon timely for the remaining period of such deposit in accordance with the terms and conditions and period of such Earlier Deposits; Provided that in case the company fails to repay such Earlier deposits or interest due thereon timely as above, the company shall immediately comply with the provisions of section 74(2) failing which action as provided under section 74(3) and 75 of the Act shall be initiated; Provided further that the fresh deposits by every eligible company shall have to be in accordance with the provisions of chapter V of the Act and these rules;

(ii) Without prejudice to (i) above, in case of deposits accepted by an eligible company under section 76 of the Act, the provisions of subsection (3) and (4) of section 73, provisions of sub-sections (2) and (3) of section 74 and provisions of section 75 shall be applicable irrespective of the fact that such deposits were not accepted by the company before the commencement of this Act.

Punishment for contravention

31. If any company under section 73 or any Eligible company inviting deposits or any other person contravenes any provision of these Rules for which no punishment is provided in the Act, the company and every officer of the company who is in default or such other person shall be punishable with fine which may extend to ten thousand rupees and where the contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first day during which the contravention continues.

32. If the Registrar is satisfied on the basis of information available to him or any document filed with him under these rules or on a representation made to him by any person that the deposits are being or have been accepted by a company for a fraudulent or unlawful purpose or are not in compliance with the provisions of the Act, the Registrar may initiate action against the company and its officers under sub-section (4) of section 206 of the Act.

 

DRAFT RULES UNDER THE COMPANIES ACT, 2013

CHAPTER XIV

INSPECTION, INQUIRY AND INVESTIGATION

14.1 For the purposes of clause (viii) of sub-section (2) of section 211, the Central Government may appoint persons having expertise in the fields of investigations, cyber forensic, financial accounting, management accounting, cost accounting and any other fields as may be necessary for the efficient discharge of Serious Fraud Investigation Office (SFIO) functions under this Act.

14.2 The terms and conditions of service of Director, experts and other officers and employees of the Serious Fraud Investigation Office under sub-section (5) of section 211 shall be as under:-

a) The terms and conditions of appointment of Director shall be governed by the deputation rules under the Central Staffing Scheme of Government of India

b) The terms and conditions of service of experts from Central or State or Union Territory (UT) Government, Public Sector Undertaking (PSU), Autonomous Bodies and such other organizations shall be as per the Recruitment Rules which may be duly notified by the Central Government under article 309 of the Constitution of India

c) The terms and conditions of service of other officers and employees from Central or State or UT government, PSU, Autonomous Bodies and such other organizations shall be as per the Recruitment Rules which may be duly notified by the Central Government under article 309 of the Constitution of India

d) The Central Government may appoint Experts or Consultants or other professionals or professional firms on contractual basis as per the Scheme of engagement of Experts or Consultants laid down in the General Financial Rules of the Government of India.

14.3 For the purposes of sub-sections (8) and (9) of section 212 of the Act-

(i) The Authorized Officer shall send a copy of the arrest memo in Form 14.1 appended to these Rules along with the material in possession and all the documents to the office of Director, SFIO in a sealed envelope with a forwarding letter after signing on each page of these documents latest by the next working day through the quickest possible means including a special messenger or by way of secured electronic means, if required.

(ii) Authorized Officer of the Serious Fraud Investigation Office shall keep copy of the arrest memo along with the documents upto two years after disposal of the last appeal in the Court.

(iii) An Arrest register shall be maintained at every office of the SFIO for the purposes of this rule and the Arresting Officer shall ensure that necessary entries are made in the Arrest register.

(iv) An Arrest register to the Rules shall also be maintained in the office of Director, SFIO for the purposes of this rule and the Director or any officer nominated by Director shall ensure that necessary entries are made in the Arrest register in respect of all arrests made by the Authorized Officers of the SFIO.

14.4 For the purpose of Investigation, SFIO shall follow the procedure contained in the “Manual of Investigation” duly approved by the Central Government.

14.5 For the purposes of section 214, the Central Government may before appointing an inspector under sub-section (3) of section 210 or clause (b) of section 213, require the applicant to give a security not exceeding Rs. twenty-five thousand for payment of the costs and expenses of investigation as per the criteria given below:

	Turnover as per previous year balance sheet (Rs.)	Amount of security (Rs.)
a.	Turnover upto Rs. 50 crore	Rs. 10,000
b.	Turnover more than Rs. 50 crore and upto 200 crore	Rs. 15,000
c.	Turnover more than Rs. 200 crore	Rs. 25,000

 

The security shall be refunded to the applicant if the investigation results in prosecution.

14.6 If the company, other body corporate or person concerned is not satisfied with the objection raised by the Tribunal under sub-section (1) of section 218, it may within the period of thirty days of receipt of notice of the objection, prefer an appeal to the Appellate Tribunal under sub-section(3) of section 218 setting forth the grounds of appeal in Form No.14.2. It shall be accompanied with a certified copy of the objection letter, against which the appeal is sought.

Every appeal filed under this rule shall be accompanied by such fee as may be prescribed in Annexure B.

Annexures

 

Annexure-B

 

 DRAFT RULES UNDER THE COMPANIES ACT, 2013

Draft National Financial Reporting Authority (Composition and the manner of selection of Chairperson and Members) Rules, 2013.

In exercise of the powers conferred by sub-section (3) of section 132 of the Companies Act, 2013 (18 of 2013) the Central Government hereby makes the following rules, namely:-

1. Short title and commencement –

(1) These rules may be called the National Financial Reporting Authority (Composition and manner of selection of Chairperson and Members) Rules, 2013.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. Definitions –

(1) In these rules, unless the context otherwise requires, –

(a) ‘Act’ means the Companies Act, 2013 (18 of 2013);

(b) 'Authority' means the National Financial Reporting Authority established under subsection (1) of section 132 of the Act;

(c) ‘Committee’ means the Selection Committee constituted under and pursuant to rule

3 of the National Financial Reporting Authority (Constitution of Selection Committee)

Rules, 2013.

(d) “Full time member” has the same meaning as in sub-rule (1) of Rule 7 of the these

Rules;

(e) “Part time member” has the same meaning as in sub-rule (2) of Rule 7 of these

Rules;

(2) Words and expressions used but not defined in these rules and defined in the Companies

Act, 2013 (18 of 2013) shall have the same meaning assigned to them in that Act.

3. Composition of National Financial Reporting Authority

(1) The Authority shall consist of a chairperson and a maximum of fifteen other members as specified under sub-section (3) of Section 132 of the Act.

(2) All Members of the Authority, before being appointed, shall submit a declaration to the Central Government confirming that they have no conflict of interest or lack of independence in being appointed to such position, failing which their appointment shall not be considered.

(3) The qualifying criteria for the Chairperson shall be that he or she is -

(i) a Citizen of India;

(ii) a Chartered Accountant;

(iii) having expertise and experience of not less than 25 years in the field of accountancy, auditing, finance or law; and

(iv) having experience in auditing large listed companies.

(4) The qualifying criteria for Full-time Members shall be that they are -

(i) Citizen of India;

(ii) In the case of Member- Accounting or Member- Auditing, a Chartered Accountant

(iii) Having expertise and experience of not less than 20 years in the field of accountancy or auditing and

(iv) Having experience

(A) in the case of Member – Accounting, auditing large listed companies or having held a position not below the level of CFO in a large company;

(B) in the case of Member – Auditing, auditing large listed companies;

(v) The Member – Enforcement shall be a person who has been the Judge of a High Court;

(5) The following persons shall not be eligible to be appointed as Members of the Authority:

(i) A person who is associated with any audit firm (including related consultancy firms) during the course of their appointment;

(ii) An employee or Executive Director of any Company;

(iii) A person who is aged 70 years and above;

(iv) A person holding any official position in the Institute of Chartered Accountants of India, except the ex-officio Members of the Authority and its various committees;

(v) A person if

(A) he is of unsound mind and stands so declared by a competent court;

(B) he is an undischarged insolvent;

(C) he has applied to be adjudicated as an insolvent and his application is pending;

(D) he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence

Provided that is a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a Member

(E) he being a professional, has been debarred for a period exceeding 3 years, for professional or other misconduct by any professional body to which he

belongs

(6) Any member who, after his appointment, fails to meet any of the criteria provided in this rule, shall be deemed to have vacated his office forthwith.

4. Manner of Selection of a panel of names –

(1) The Chairperson and Full-time Members shall be nominated by the Central Government from the panel of names recommended by the Committee.

(2) The first Chairperson and Full-time Members of Authority to be notified by the Central Government under provisions of sub section (1) of Section 132 of the Act and shall be comprised on the same basis as provided for under rule 3 and as recommended by the Committee.

(3) Whenever any vacancy of Chairperson or Full-time Members of the Authority exists or as and when such vacancy arises or is likely to arise, the Central Government may make a reference to the Committee in respect of such vacancy or vacancies for recommendation of a panel of names.

(4) The Committee shall suggest for inclusion in the panel of names to be recommended for appointment as the Chairperson or a Full-time Member of the Authority on a same basis as provided as in rule 3 above and such other persons as the Committee may deem appropriate

(5) The Committee shall make its recommendations to the Central Government, within a

period not exceeding one hundred and twenty days from the date of reference made to it under these rules.

5. Functions of Committee:

(1) The Committee shall recommend a panel of not more than three persons, selected under rule 4, in respect of each vacancy that has been referred to the Committee.

(2) If the members of the Committee differ in making its recommendation, the

recommendations of selection of Chairperson or a Full-time Member of the Authority shall be decided by the majority of the Members of the Committee.

(3) The Committee shall devise its own procedure for selecting the persons to be

recommended for appointment as the Chairperson or a Member of the Authority.

6. Vacancy etc., not to invalidate proceedings of Authority: -

No act or proceeding of the Authority shall be invalid merely by reason of -

(a) any vacancy in, or any defect in the constitution of the Authority; or

(b) any defect in the appointment of a person acting as a Chairperson or as a

Member; or

(c) any irregularity in the procedure of the Authority not affecting the merits of the

case.

7. Full time member and part time member

(1) The Chairperson, “Member – Accounting”, “Member-Auditing” and “Member –

Enforcement” shall be the “Full-time Members” of the Authority;

(2) The Members of the Authority other than those mentioned in the sub rule (1) of this rule shall be the “Part-time Members” of the Authority.

8. Removal of a Member from the Board of the Authority

(1) The Central Government, may remove the Chairperson or a Full-time Member before the expiry of the period of his appointment, where it is of the opinion that such Chairperson or Member has contracted any of the disqualification criteria or fails to continue to meet the qualification criteria specified in this rules, after giving such member a reasonable opportunity of being heard;

(2) The Central Government shall also, where it is of the opinion that it is in public interest or where it is of the opinion that the continuance of the Chairperson or a Full-time Member would be construed as a conflict of interest or lack of independence, it may remove such Chairperson or the Member from the Authority at its absolute discretion.

9. Lien of Central Government Officers in case of selection:- The officers of the Central Government on their selection as Chairperson or Members may retain his lien with his parent cadre or Ministry or Department, as the case may be, while holding office as such for a period not exceeding one year.

10. Interpretation.- If any question arises relating to the interpretation of these rules, the same shall be referred to the Central Government for its decision.

11. Saving.- Nothing in these rules shall affect reservation, relaxation of age limit and other concession required to be provided for the Schedule Castes, Scheduled Tribes, Ex-Servicemen and other special categories of persons in accordance with the orders issued by the Central Government from time to time in this regard.

12. Other conditions of service.- The conditions of service of a Member in respect of

matters for which no provision is made in these rules shall be the same as may for the time being be applicable to other employees of the Government of India of a corresponding status.

13. Other matters:

Matters relating to selection of Chairperson and other Members (Full time and Part time) with respect to which no express provision has been made in these rules shall be referred by the Authority to the Central Government for its decision and the decision of the Central Government thereon shall be final.

 

DRAFT RULES UNDER THE COMPANIES ACT, 2013

Draft National Financial Reporting Authority (Constitution of Selection Committee) Rules, 2013.

In exercise of the powers conferred by sub section (3) of section 132 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules, namely:

1. Short title and commencement -

(1) These rules may be called the National Financial Reporting Authority (Constitution of Selection Committee) Rules, 2013.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. Definitions –

(1) In these rules, unless the context otherwise requires:

(a) 'Act' means the Companies Act 2013 (18 of 2013);

(b) 'Authority' means the National Financial Reporting Authority established under sub section (1) of section 132 of the Act;

(c) ‘Part-time Members’ means members of the Authority other than Full-time Members;

(d) ‘Selection Committee' means the Committee constituted under sub rule (1) of rule 3 for the purposes of recommending panel of names of Chairperson and Fulltime Members of the Authority to the Central Government;

(e) ‘Full-time Members’ shall mean the ‘Member-Accounting’, ‘Member-Auditing’ and ‘Member-Enforcement’ provided under National Financial Reporting Authority Rules, 2013.

(2) Words and expressions used but not defined in these rules and defined in the Companies Act, 2013 (18 of 2013) shall have the same meaning assigned to them in that Act.

3. Constitution of Selection Committee.

(1) The Central Government shall constitute a Selection Committee consisting of:

(a) Chief Justice of India or his nominee…….Chairperson;

(b) the Secretary in the Ministry of Corporate Affairs,.…Member

(c) the Secretary in the Ministry of Law and Justice…….Member;

(d) one expert of repute who is a Chartered Accountant and has special knowledge and professional experience of twenty five years or more in accountancy, auditing, management, finance, public affairs or administration; … Member

(2) An officer not below the rank of Joint Secretary nominated by the Ministry of Corporate Affairs shall be the Convener of the Committee.

4. The composition and manner of selection of panel of members of the Authority shall be such as prescribed under the National Financial Reporting Authority (Composition and manner of selection of members) Rules, 2013.

5. The term of the Committee constituted under and pursuant to Rule 3 shall be for a period of one year from the date of its constitution.

6. Other matters: Matters relating to constitution of the Selection Committee with respect to which no express provision has been made in these rules, shall be referred by the Authority to the Central Government for its decision, and the decision of the Central Government thereon shall be final.

 

DRAFT RULES UNDER THE COMPANIES ACT, 2013

Draft National Financial Reporting Authority (Salary, Allowances and other Terms and Conditions of Service of Chairperson and other Members) Rules, 2013.

In exercise of the powers conferred by sub section (3) of section 132 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules, namely: -

1. Short title and commencement–

(1) These rules may be called the National Financial Reporting Authority (Salary, Allowances and other Terms and Conditions of Service of Chairperson and other Members) Rules, 2013.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. Definitions–

(1) In these rules, unless the context otherwise requires:

(a) “Act” means the Companies Act, 2013 (18 of 2013);

(b) “Chairperson” means the Chairperson of the Authority appointed under sub-section (3) of Section 132 of the Companies Act, 2013;

(c) “Authority” means the National Financial Reporting Authority constituted under sub-section (1) of section 132 of the Act;

(d) “Full-time Member” means a Full time Member of the Authority as per National Financial Reporting Authority Rules, 2013.

(e) “Part-time Member” means a Part time Member of the Authority as per National Financial Reporting Authority, Rules, 2013.

(2) All other words and expressions used in these rules but not defined, shall have the same meanings respectively assigned to them in the Act.

3. Salary–

The Chairperson shall be paid a consolidated monthly salary of rupees three lakh and every Full-time Member shall be paid a consolidated monthly salary of rupees two lakh fifty thousand rupees. They shall not be entitled to house and car.

4. Contributory Provident Fund–

(1) The Chairperson and other Full-time Members shall be governed by the provisions of the Contributory Provident Fund Rules (India), 1962 and no option to subscribe under the General Provident Fund (Central Services) Rules, 1960 shall be available.

(2) No additional pension and gratuity shall be admissible for service rendered.

5. Leave–

(1) The Chairperson and every other Full-time Member shall be entitled to thirty days of Earned Leave for every year of service.

(2) The payment of leave salary during leave shall be governed by rule 40 of the Central Civil Services (Leave) Rules, 1972.

(3) The Chairperson and every other Full-time Member shall be entitled to encashment of fifty per cent of Earned Leave standing to their credit at any time.

6. Travelling and Daily Allowances–

The Chairperson and other Full-time Members of the Authority while on tour within India or on transfer (including the journey undertaken to join the Authority or on the completion of their tenure with the Authority to proceed to their home town) shall be entitled to the travelling allowance, daily allowance, transportation of personal effects and other similar matters at the same rates [as are prescribed for the Secretary to the Government of India.

7. Official visits abroad–

Official visits abroad by the Chairperson or Members shall be undertaken only in accordance with orders issued by the Central Government and they shall be entitled to draw such allowances in respect of such visits as are prescribed for the Secretary to the Government of India.

8. Leave Travel Concession–

The Chairperson and other Full-time Members of the Authority shall be entitled to Leave Travel Concession (LTC) at the same rates as are prescribed for the Secretary to the Government of India.

9. Facility for Medical Treatment–

The Chairperson and other Full-time Members shall be entitled to medical treatment and hospital facilities as provided in the Central Government Health Scheme (CGHS) to a retired Government servant. At places where the said Scheme is not in operation, the Chairperson and other Full-time Members shall be entitled to the facilities as provided in the Central Service (Medical Attendance) Rules, 1944.

10. Declaration of independence and lack of conflict of interest:- (1) The Chairperson and other Members of the Authority shall, submit a declaration to the Central Government confirming specifically that their appointment, if made, would not create any lack of independence or conflict of interest.

(2) The Chairperson or any Member shall not participate in any matter before the Authority or any of its Committee in case he has any interest or concern in such matter.

11. Term of office of Chairperson and Members of Authority–

The Chairperson or a Full-time Member of the Authority shall hold office as such for a term of three years from the date on which he enters upon his office, and shall be eligible for re-appointment:

Provided that no Chairperson or Full-time Member shall hold office after such person has attained the age of seventy years.

12. Vacancy. (1) A vacancy caused by the resignation or removal of the Chairperson or any other Full Member under rule 13 or by death or otherwise shall be filled by fresh appointment in accordance with the provisions of sub-section (3) of section 132 read with National Financial Reporting Authority (Composition and the manner of selection of members) Rules, 2013.

(2) In the event of the occurrence of a vacancy in the office of the Chairperson by reason of his death, resignation or otherwise, the senior-most Full time Member shall act as the Chairperson, until the date on which a new Chairperson, appointed in accordance with the provisions of this Act or rules made thereunder to fill such vacancy, enters upon his office.

(3) When the Chairperson is unable to discharge his functions owing to absence, illness or any other cause, the senior-most Full time Member shall discharge the functions of the Chairperson until the date on which the Chairperson resumes the charge of his functions.

13. Resignation, removal and suspension of Chairperson and other Full time Members

(1) The Chairperson or any other Full time Member may, by notice in writing under his hand addressed to the Central Government, resign his office:

Provided that the Chairperson or a Full time Member shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest.

(2) Central Government may, by order, remove the Chairperson or any other Full time Member from his office if such Chairperson or Full time Member, as the case may be,—

(i) is, or at any time has been, adjudged as an insolvent; or

(ii) has engaged at any time, during his term of office, in any paid employment; or

(iii) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude; or

(iv) has acquired such financial or other interest as is likely to affect prejudicially his functions as a Full time Member; or

(v) has so abused his position as to render his continuance in office prejudicial to the public interest; or

(vi) has become physically or mentally incapable of acting as a Full time Member.

14. Administrative powers of Chairperson

The Chairperson shall have the powers of general superintendence, direction and control in respect of all administrative matters of the Authority:

Provided that the Chairperson may delegate such of his powers relating to administrative matters of the Authority, as he may think fit, to any other Full time Member or officer of the Authority.

15. Terms and Conditions of service of part time Members

(1) Fees and allowances of Part-time Members –

(a) A part-time Member shall be entitled to receive remuneration by way of a fee of rupees ten thousand only for each meeting attended by him.

(b) A part-time Member while on tour including the journey undertaken to attend a meeting shall also be entitled to travelling allowance and daily allowances at the same rates and scale as are applicable to the Secretary to the Government of India.

(2) Removal of Part time Members:- A Part time Member may be removed by the Central Government in following cases:-

(a) in case of resignation by the Part time Director or in case of withdrawal nomination by the relevant body/authority which had earlier nominated him

(b) has so abused his position as to render his continuance in office prejudicial to the public interest.

(3) The part-time members of the Committee on Accounting Standards, Committee on Auditing Standards and Committee of Enforcement shall be entitled to such fees, travelling, conveyance and other allowances as are admissible to the Additional Secretary in the Central Government.

16. Other Conditions of Service–

Matters relating to the terms and conditions of service of the Chairperson or other Members, with respect to which no express provision has been made in these rules, shall be referred by the Authority to the Central Government for its decision, and the decision of the Central Government thereon shall be final.

17. Power to Relax

The Central Government shall have the powers to relax the provisions of any of these rules with respect to any class or category of persons.

 

DRAFT RULES UNDER THE COMPANIES ACT, 2013

Draft National Financial Reporting Authority Rules, 2013

In exercise of the powers conferred by clause (b) to (d) of sub section (2) of section 132, clause, sub section (3) of section 132, clause (a) of sub section (4) of section 132 and sub section (5) of section 132, of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules, namely:

1. Short title and commencement -

(1) These rules may be called the National Financial Reporting Authority Rules, 2013.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. Definitions

(1) In these rules, unless the context otherwise requires:

(a) 'Act' means the Companies Act 2013 (18 of 2013);

(b) 'Authority' means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act;

(c) Chairperson’ means the Chairperson of the Authority;

(d) “Full-time Members” means the Chairperson, “Member – Accounting”, “Member – Auditing” and “Member-Enforcement”;

(e) “Firm” means a firm or a limited liability partnership registered with the Institute of Chartered Accountants of India (ICAI) under Chartered Accountants Act or Regulations made thereunder, and shall include such entities which were registered with the Institute of Chartered Accountants of India at the time of the misconduct;

(f) “Member – Accounting” means the whole-time Member appointed as such by the Central Government under sub-section (3) of section 132 in accordance with NFRA (Composition and manner of selection of Members) Rules, 2013;

(g) “Member – Auditing” means the whole-time Member appointed as such by the Central Government under sub-section (3) of section 132 in accordance with NFRA (Composition and manner of selection of Members) Rules, 2013;

(h) “Member -Enforcement” means the whole-time Member appointed as such by the Central Government under sub-section (3) of section 132 in accordance with NFRA (Composition and manner of selection of Members) Rules, 2013;

(i) “Part-time Members” means members of the Authority other than Full-time members and includes Members representing Ministry of Corporate Affairs (MCA), Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI), Institute of Charted Accountants of India (ICAI) and others who are appointed as Members of the Authority;

(j) “Professional” means a Chartered Accountant registered under Chartered Accountant Act, 1949 or regulations made thereunder;

(k) “Professional Address” means -

(i) the last registered address where a chartered accountant is carrying on his profession (or when he is carrying on his profession at more than one place, the principal place); or

(ii) the last registered place of employment or at his option, the place of his residence (if the chartered accountant is employed); or

(iii) the last registered place of residence (if the chartered accountant neither carried on the profession nor is employed); or

(iv) the last registered overseas address or at his option, the place of residence in India which shall be deemed to be the professional address for the purposes of these rules.

(2) Words and expressions used but not defined in these rules and defined in the Companies Act, 2013 (18 of 2013) or Chartered Accountant Act, 1949, shall have the same meaning assigned to them in that Act.

3. Composition of the Authority:- (1) For the purposes of sub-section (1) and sub-section (3) of section 132, the Central Government may, by notification, constitute the Authority consisting of following, namely:-

(i) Chairperson being a Chartered Accountant who is a person of eminence having expertise in accountancy, auditing, finance or law;

(ii) Member – Accounting;

(iii) Member – Auditing;

(iv) Member - Enforcement;

(v) One representative of the MCA not below the rank of Joint Secretary or equivalent (ex-officio);

(vi) One representative of RBI, being a Member of the RBI Board, to be nominated by RBI;

(vii) One representative of SEBI, being the Chairman of SEBI or whole-time Member of SEBI, to be nominated by SEBI;

(viii) A retired Chief Justice of a High Court or a person who has been the Judge of a High Court for 5 years or more, to be nominated by the Central Government;

(ix) President of the Institute of Chartered Accountants of India (ex-offico)

(2) The Chairperson may invite any other person to the meeting of the Authority as and when required to give expert opinion.

Structure of the Authority

4. The Authority shall have thee Committees namely:-

(i) Committee on Accounting Standards,

(ii) Committee on Auditing Standards,

(iii) Committee on Enforcement,

5. Functions of the Authority

(1) Standard Setting: The Authority shall -

(a) receive recommendations from the Committee on Accounting Standards and Committee on Auditing Standards;

(b) consider and review the recommendations;

(c) give an opportunity of being heard to the Committee on any clarification that may be sought;

(d) make amendments as may be required;

(e) recommend the standards to the Central Government for being considered and notified.

(2) Monitoring, compliance review and overseeing quality of service: The Authority shall

(a) receive reports from the Committee on Accounting Standards and Committee on Auditing Standards;

(b) approve the report to be issued on the investigated companies or their branches;

(c) forward reports to the Committee on Enforcement for further action, if required, along with its recommendations.

(3) Enforcement: The Authority may -

(a) receive any reference from the Central Government for investigation;

(b) receive, consider and decide upon any recommendation from the Member – Accounting and Member – Auditing for any investigation to be carried out based on the monitoring and compliance review or investigation of auditor or audit firm undertaken by them;

(c) suo motu determine any investigation to be undertaken by the Authority;

(d) forward such requirements to the Committee on Enforcement;

(e) receive the final investigation report from the Committee on Enforcement on matters referred to them whether arising out of the Quality Review process or based on investigation requests made to the Committee on Enforcement;

(f) issue a notice in writing to the company or its branch investigated or the Professional on whom action is proposed to be taken;

(g) provide the opportunity of being heard to the company or its branch

investigated or the professional concerned;

(h) accept or overrule, in writing, clarifications received and objections raised;

(i) take suitable action or pass orders imposing penalty or debarring the Professional or firm concerned.

(4) The Authority shall undertake investigation or conduct quality review of audit of following class of companies-

a) Listed Companies;

b) Unlisted companies with net worth not less than Rs.500 crores or paid up capital not less than Rs.500 crores or annual turnover not less than Rs.1,000 crores as on 31st March of immediately preceding financial year; or

c) Companies having securities listed outside India

(5) The Authority shall undertake investigation in accordance with the provisions of sub-section (4) of section 132 of the Act and rules made thereunder against the auditors or audit firms which conduct the audit of the following category of companies or their branches (including through the network or brand to which it belongs), whether “directly or indirectly”, as defined in Explanation to Section 144 of the Act -

a) audit of 200 companies or more in a year;

b) audit of 20 or more listed companies;

c) company or companies (including listed company or companies), having net worth not less than Rs.500 crores or paid up capital not less than Rs.500 crores or annual turnover not less than Rs.1,000 crores as on 31st March of immediately preceding financial year ; or

d) company or companies having securities listed outside India

Provided further that the provisions in respect of class or classes of companies provided under sub-rule (4) and sub-rule (5) shall not be applicable where a reference is made by the Central Government or any Regulator or where the Authority, in public interest, suo motu decides to exercise powers under sub-rule (4) or (5), as the case may be.

(6) In cases where the Authority comes to the conclusion that any company has not complied with the requirements under this Act or rules, it shall refer the matter to the Central Government.

(7) Where any officer of the Central Government or the Regional Director or the Registrar of Companies has any information in respect of any auditor or audit firm who or which is not complying with the provisions of section 132 or rules made thereunder, he shall refer the matter to the Authority.

6. Committee on Accounting Standards and its functions

(1) The Committee on Accounting Standards shall comprise of 8 members, namely:

1. Chairperson – Being the “Member – Accounting”;

2. One representative of MCA not below the rank of Director (I&I) or Regional Director;

3. One Member representing RBI not below the rank of Chief General Manager to be nominated by RBI;

4. One Member representing SEBI not below the rank of Executive Director to be nominated by SEBI;

5. Chairman of Accounting Standard Board of ICAI (Ex Officio);

6. An eminent academician with specialization in the field of accountancy to be nominated by Central Government on the recommendation of Authority;

7. One Chartered Accountant, being a Chief Financial Officer of a listed company to be nominated by Central Government on the recommendation of Authority;

8. One eminent Chartered Accountant with at least 20 years’ experience in accounting to be nominated by Central Government on the recommendation of Authority;

(2) The Committee on Accounting Standards shall examine the matters relating to formulation and laying down accounting standards or any amendments thereto and shall submit the same for consideration by the Authority.

(3) For the purpose of formulation of accounting standards under the Act, the Committee on Accounting Standards shall follow the process as under:

(a) Make recommendations for any new standard or amendments which the Committee on Accounting Standards may want to be examined, to the Institute of Chartered Accountants of India;

(b) Receive New Standards or amendments to standards to be recommended by the Institute of Chartered Accountants of India within a reasonable time;

(c) Examine the recommendations made by the ICAI;

(d) Where, the Committee on Accounting Standards is not in agreement with the recommendation, send the recommendations of the ICAI back to them for a final view from the ICAI on the matters on which the Committee is not in agreement, within a reasonable period;

(e) Consider the final view from the ICAI, if any, received within a reasonable time;

(f) Make recommendations to the Authority on the new standards or amendment to standards for approval by the Authority to be forwarded to the Central Government for their consideration for being notified as part of the prescribed standards.

(4) For the purpose of monitoring compliance of accounting standards under the Act, the Committee on Accounting Standards shall follow the process as under:

(a) conduct scrutiny of financial statements of such class of companies and in such manner as may be decided by the Committee or the Authority:

Provided that for a period of two years from the commencement of these rules, the Committee may conduct scrutiny under this rule through the Registrars of Companies or in cooperation with Financial Reporting Review Board set up by the ICAI;

(b) seek clarifications on observations arising from such scrutiny from the Company as well as its auditors as may be required;

(c) discuss the draft findings with the company concerned and obtain its response before the reports are finalized by the Committee;

(d) issue such reports (having a public and non public portion separately) arising from such scrutiny to the Authority for it to consider for further necessary action

(e) Refer matters to the Authority for the Authority to decide on further course of action, through the Committee on Enforcement.

7. Committee on Auditing Standards and its functions

(1) The Committee on Auditing Standards shall comprise of 7 members, namely:

1. Chairperson – Being the “Member – Auditing”;

2. One representative of MCA not below the rank of Director (I&I) or Regional Director;

3. One Member representing RBI not below the rank of Chief General Manager to be nominated by RBI;

4. One Member representing SEBI not below the rank of Executive Director to be nominated by SEBI;

5. One Member representing Comptroller and Auditor General of India (CAG) to be nominated by CAG;

6. Chairman of Auditing and Assurance Standard Board of ICAI (Ex Officio); and

7. One eminent Chartered Accountant with at least 20 years’ experience in audit of companies to be nominated by Central Government on the recommendation of the Authority.

(2) The Committee on Auditing Standards shall examine the matters relating to formulation and laying down auditing standards and shall submit the same for consideration by the Authority.

(3) For the purpose of formulation of auditing standards under the Act, the Committee on Auditing Standards shall follow the process as under:

(a) make recommendations for any new standard or amendments which the Committee on Auditing Standards may want to be examined to the Institute of Chartered Accountants of India;

(b) receive new standards or amendments to standards as recommended by the Institute of Chartered Accountants of India within a reasonable period;

(c) examine the recommendations made by the ICAI;

(d) where the Committee is not in agreement with the recommendation, send the recommendations of the ICAI back to them for a final view from the ICAI, with the suggestions or views of the Committee;

(e) consider the final view from the ICAI, if any, received within a reasonable period;

(f) make recommendations to the Authority on the new standards or amendment to standards for approval by the Authority to be forwarded to the Central Government for their consideration for being notified as part of the prescribed standards.

(4) For the purpose of monitoring compliance, Committee on Auditing Standards shall monitor the compliance of auditors including individual auditors, audit firms and audit LLPs, with the notified accounting standards and auditing standards and submit such periodical report(s) to the Authority as the Authority may specify.

Provided that for the above purpose it shall-a. investigate or review selected audit and review engagements, including specifically the working papers, of any auditor including an individual, a firm or an LLP;

b. evaluate the sufficiency of the quality control system of the auditor, and the manner of the documentation and communication of that system by the auditor;

c. perform such other testing of the audit, supervisory, and quality control procedures of the auditor as are considered necessary or appropriate;

d. carry out investigations through dedicated, qualified and whole time investigation teams. Minimum qualification for such inspectors shall be at least 10 years auditing experience and exposure to audit of the relevant industry. The Board may also seek assistance of ICAI in conducting such investigation or in any other manner as may be approved by the Authority. The Board may, subject to prior approval of the Authority, also outsource, upto a period of two years from the commencement of these rules, such resource as may be required for this purpose;

e. subject to the approval of the Authority, issue a non-public portion of the report of the company or the professional, whose books and other records have been investigated in accordance with these rules;

f. refer matters to the Authority to decide on further course of action, through Committee on Enforcement, where violations of laws, rules or professional standards have been observed triggering investigations, disciplinary action, or reference to other regulators or law enforcement agencies. There will be no direct referrals to Committee on Enforcement before referring to Authority.

(5) The Committee on Auditing Standards may take the help of resources available with Quality Review Board established under Chartered Accountants Act, 1949 until it is provided with its own resources.

8. Committee on Enforcement and its functions

(1) The Committee on Enforcement shall comprise of 7 members, namely:

1. Chairman being the Member – Enforcement

2. Member- Accounting

3. Member - Auditing

4. One representative of MCA, not below the rank of Director (I&I) or Regional Director

5. Director, Serious Fraud Investigation Office;

6. Chairman of Disciplinary Committee of ICAI (Ex Officio)

7. One eminent Chartered Accountant having at least 20 years’ experience in audit or accounting to be nominated by Central Government on the recommendation of Authority.

(2) Subject to the provisions of subsection (4) of section 132, the Committee on Enforcement shall examine the matters referred to it for investigation and shall submit its recommendations for consideration by the Authority.

(3) The functions of the Committee on Enforcement shall be:-

(i) to examine the matters referred to it by the Authority (whether emanating from the Committee on Accounting, Committee on Auditing, or otherwise) requiring further enquiry or investigation

(ii) to investigate, on a reference made by the Authority, matters relating to professional and other misconduct committed by the professional or auditor (individual or firm or LLP) and recommend to the Authority appropriate action under sub-section (4) of section 132

Provided that all the actions of the Committee on Enforcement shall be effective only on the recommendation of the Authority.

(4) Committee on Enforcement shall complete the examination or investigation on any matter referred to it within a period of 6 months and in case there is any delay in completion of the examination or investigation, specific time extension must be sought from the Authority, after placing justifications and reasons for the extension of time being sought. Examinations or investigations for which time extension is not sought or approved by the Authority shall be concluded based on the available information within a period of 30 days from the expiry of the 6 months or such extended time frame as approved by the Authority.

9. Meetings for transaction of business and their procedure. –

(1) The Authority and its Committees may hold as many meetings and at such places as may be required for the purpose of discharging its functions under the Act.

(2) The meetings of the Authority and of each of its committee shall ordinarily be held at its head office situated in New Delhi:

Provided that the Authority or each of its Committees may also hold meetings at its other offices or at any other place in India, whenever, in the opinion of the Authority or the Committee, it is expedient to do so.

(3) The Chairperson shall decide in advance, the date, time and place and the agenda for each meeting of the Authority:

Provided that an item not included in the agenda of an ordinary meeting may be taken up for consideration, on grounds of urgency shown by an applicant in writing, with the approval of the Chairperson.

(4) Procedure for meetings, –

(a) The Secretary, Members and such other officers and persons as invited by the Chairperson in relation to discussion regarding a specific item shall attend meeting;

(b) the Authority or Chairperson may, for reasons to be recorded in writing, adjourn the meeting;

(c) any Member unable to be present in a meeting for any reason, may if feasible, choose to participate in the said meeting, through video conferencing and this shall be considered as attendance by the Member for the purpose of casting vote during the meeting;

(d) the proceedings of each meeting of the Commission shall be recorded under the superintendence and guidance of the Secretary or by any other officer authorized by the Chairperson. The minutes of each matter taken up during meeting shall be given continuous serial number for a particular financial year.

(e) the quorum for the meeting of the Board of the Authority shall be 5 members. In respect of the committees the quorum shall be 3 members being present.

(5) In a situation not provided for in these rules, the Authority may, for reasons to be recorded in writing, determine the procedure in a particular case.

(6) No act or proceedings of the Authority or its Committees shall be invalid merely by reason of any irregularity in the procedure of the Authority or its Committees not affecting the merits of the case.

Procedures of Investigation related to Complaints and Information

10. Procedure for filing complaint.- (1) A complaint under section 132(4) of the Act against a professional or an auditor (including audit firm or LLP) shall be filed in Form I, in triplicate before the Member-Enforcement in person or by post or courier :

Provided that the complaint sent by post or courier under this sub-rule shall be deemed to have been presented to the Member-Enforcement on the day on which it is received in the Office of Committee on Enforcement.

(2) A complaint filed by or on behalf of the Central Government or any State Government, shall be authorized by an officer holding a post not below the rank of a Joint Secretary or equivalent and shall be signed by an officer holding a post not below the rank of an Under Secretary or equivalent in the Central or State Government, as the case may be.

(3) A complaint filed by or on behalf of any statutory authority, such as Reserve Bank of India or Securities and Exchange Board of India or any other Regulator, shall be authorised by an officer holding a post equivalent to the post of Joint Secretary in the Government of India and shall be signed by an officer holding a post not below the rank of an Under Secretary or equivalent in the Central or State Government, as the case may be.

(4) A complaint filed by or on behalf of a company or bank or a firm, shall be accompanied by a resolution, duly passed by the Board of Directors of the company or bank or the partners of the firm, as the case may be, specifically authorizing an officer or a person to make the complaint on behalf of the company or the bank or the firm.

Explanation - In the case of a bank or financial institution, the general resolution or power of attorney authorizing an officer holding a particular position to file complaints on behalf of the bank or financial institution, shall be deemed to be the specific resolution passed by the bank or financial institution concerned, for the purposes of these rules.

(5) In case of complaints filed by any Government, statutory authority, bank or financial institution, a change in the name of complainant at any later stage, shall be duly supported by a specific authorization made by an officer holding a post equivalent to that of the original complainant.

(6) Every complaint received by the Office of Committee on Enforcement shall be acknowledged by ordinary post together with an acknowledgement number.

11. Fee for filing complaint.- (1) Every complaint, other than a complaint filed by or on behalf of the Central Government or any State Government or any statutory authority, shall be accompanied by a fee as prescribed by the Authority through regulations.

(2) The fee shall be paid in the form of a demand draft drawn on any bank in India in favour of the National Financial Reporting Authority payable at the place where the Office of Committee on Enforcement is situated.

(3) The fee once paid shall not be refunded :

Provided that no additional fee shall be payable if the complaint is resubmitted after rectification of defect under sub-rule (5) of rule 12.

12. Registration of complaint.- (1) The Member-Enforcement or an officer or officers authorized by the Member-Enforcement, shall endorse on every complaint the date on which it is received or presented and the Member-Enforcement or the officer or officers so authorized, shall sign on each such endorsement.

(2) The Member-Enforcement or an officer or officers authorized by him shall scrutinize the complaints so received.

(3) If, on scrutiny, the complaint is found to be in order, it shall be duly registered and a unique reference number allotted to it, which shall be quoted in all future correspondence, and shall be dealt with in the manner as prescribed in these rules, after obtaining approval of the Authority to proceed with the matter.

(4) If the subject matter of a complaint is, in the opinion of the Member-Enforcement, substantially the same as or has been covered by any previous complaint or information received and is under process or has already been dealt with, he shall take any of the following actions, as the case may be,-

(a) if such a previous complaint is still under the examination of the Member- Enforcement, then the new complaint may be clubbed with the previous complaint, after obtaining approval of the Authority and in such case the fact may be conveyed to the first complainant, new complainant and respondent respectively.

(b) if prima facie opinion has been formed by the Member-Enforcement in such a previous complaint and the case is pending before the Committee on Enforcement, then the Member-Enforcement shall bring the new complaint before the Committee on Enforcement, and the latter shall either club the complaint with the previous complaint or close it or ask the Member Enforcement to deal with it as a separate complaint, as it deems fit, after obtaining the approval of the Authority.

(c) if orders have already been passed by the Committee on Enforcement on such a previous complaint, then the Member-Enforcement shall present the new complaint before the Committee on Enforcement for its closure :

Provided that even in case where the new complaint is clubbed with a previous complaint under this sub-rule, only the first complainant would be the complainant for the purposes of investigation under these rules.

(5) If, the complaint, on scrutiny, is found to be defective, including the defects of technical nature, the Member-Enforcement may allow the complainant to rectify the same in his presence or may return the complaint for rectification and resubmission within such time as he may determine.

(6) If, the complainant fails to rectify the defect or defects within the time allowed under sub-rule (5), the Member-Enforcement shall form the opinion that there is no prima facie case and present the complaint before the Committee on Enforcement for its closure.

(7) The Committee on Enforcement may, after the presentation of the complaint by the Member-Enforcement under sub-rule (6), either -

(a) agree with the opinion of the Member-Enforcement and pass an order for the closure; or

(b) disagree with the opinion of the Member-Enforcement and advise him to further investigate the matter, after obtaining approval from the Authority.

13. Withdrawal of a complaint.- The Member-Enforcement, on receipt of a letter of withdrawal of a complaint by the complainant, shall place the same before the Committee on Enforcement and the Committee on Enforcement, if it is of the view that the circumstances so warrant, permit the withdrawal, at any stage, including before or after registration of the complaint:

Provided that in case the Member-Enforcement has formed his prima facie opinion on such a complaint, he shall place the same before the Committee on Enforcement, and the Committee on Enforcement may, if it is of the view that the circumstances so warrant, permit the withdrawal, after obtaining approval of the Authority.

14. Information.- (1) Any written information containing allegation or allegations against a member or a firm, received in person or by post or courier, by the Office of Committee on Enforcement, which is not in Form I under sub-rule (1) of rule 10, shall be treated as information and shall be dealt with in accordance with the provisions of these rules.

(2) On receipt of such an information, the sender of the information, including the Central Government, any State Government or any statutory authority, shall be, in the first instance, asked whether he or it would like to file a complaint in Form I apprising him or it of, the following information,-

(a) that relatively longer time is taken for disposal of any information than the complaint;

(b) that the person giving information will not have the right to be represented during the investigation or hearing of the case;

(c) that the Authority or Committee on Enforcement will be under no obligation to inform the sender the information of the progress made in respect of the information received under sub-rule (1) including the final orders :

Provided that where the sender of the information is the Central Government, any State Government or any statutory authority, a copy of final order shall be sent to such sender.

(3) An anonymous information received by the Office of Committee on Enforcement will not be entertained by the Office of Committee on Enforcement.

15. Procedure of Investigation:- (1) The Member Enforcement or an officer or officers authorized by the Member Enforcement, within sixty days of the receipt of a complaint under rule 10, shall,-

(a) if the complaint is against an individual Professional, send particulars of the acts of commission or omission alleged or a copy of the complaint, as the case may be, to that Professional at his professional address;

(b) if the complaint is against a firm, send particulars of the acts of commission or omission alleged or a copy of the complaint, as the case may be, to the firm at the address of its head office, as entered last in the Register of Offices and Firms maintained by the ICAI, with a notice calling upon the firm to disclose the name or names of the member or members concerned and to send particulars of acts of commission or omission or a copy of the complaint, as the case may be, to such members :

Provided that while disclosing the name or names of the member or members, the firm shall also send a declaration signed or, as the case may be, jointly signed by the member or members concerned to the effect that he or she or they shall be responsible for answering the complaint and that the particulars of acts of commission or omission or the copy of the complaint sent to the firm by the Member Enforcement had been duly received by him, her or them.

Explanation - A notice to the firm shall be deemed to be a notice to all the members who are partners or employees of that firm as on the date of registration of the complaint.

(2) A member whose name is disclosed by the firm shall be responsible for answering the complaint, provided such a member was associated, either as partner or employee, with the firm, against which the complaint has been filed, at the time of occurrence of the alleged misconduct :

Provided that if no member, whether erstwhile or present, of the firm, own responsibility for the allegation or allegations made against the firm, then the firm as a whole shall be responsible for answering the allegation or allegations and, as such, all the members who were partners of that firm, as on the date of occurrence of the alleged misconduct, shall be responsible for answering the allegation or allegations as contained in the complaint.

(3) A member who has been informed of the complaint filed against him (hereinafter referred to as the respondent) shall, within 21 days of the service of a copy of the complaint, or within such additional time, not exceeding thirty days, as may be allowed by the Member-Enforcement, forward to the Member-Enforcement, a written statement in his defence.

(4) On receipt of the written statement, if any, the Member-Enforcement may send a copy thereof to the complainant and the complainant shall, within 21 days of the service of a copy of the written statement, or within such additional time, not exceeding thirty days, as may be allowed by the Member-Enforcement, forward to the Member-Enforcement, his rejoinder on the written statement.

(5) On perusal of the complaint, the respondent’s written statement, if any, and rejoinder of the complainant, if any, the Member-Enforcement may call for such additional particulars or documents connected therewith either from the complainant or the respondent or any third party or parties, as he may consider appropriate :

Provided that if no reply is sent by the respondent, within the time allowed under sub-rule (3) or by the complainant within the time allowed under sub-rule (4), the Member-Enforcement shall presume that the respondent or the complainant, as the case may be, have nothing further to state and take further action as provided under these rules.

16. Examination of the Complaint.- (1) The Member-Enforcement shall examine the complaint, written statement, if any, rejoinder, if any, and other additional particulars or documents, if any, and form his prima facie opinion as to whether the member or the firm is guilty or not of any professional or other misconduct.

(2) (a) Where the Member-Enforcement is of the prima facie opinion that the member or the firm is guilty of professional or other misconduct he shall place his opinion along with the complaint and all other relevant papers before the Committee on Enforcement within 60 days of conclusion of investigation;

(b) If the Committee on Enforcement agrees with the prima facie opinion of the Member-Enforcement then the Committee on Enforcement may proceed further under these rules, after obtaining approval from the Authority.

(c) If the Committee on Enforcement disagrees with the prima facie opinion of the Member-Enforcement, it shall either close the matter or advise the Member-Enforcement to further investigate the matter.

(3) Where the Member Enforcement is of the prima facie opinion that the member or the firm is not guilty of any professional or other misconduct, he shall place the matter before the Committee on Enforcement within 60 days of conclusion of the investigation, and the Committee, -

(a) if it agrees with such opinion of the Member-Enforcement, shall pass order, for closure.

(b) if it disagrees with such opinion of the Member Enforcement, then it may either proceed under these rules, after obtaining approval from the Authority or may advise him to further investigate the matter.

(4) The Member-Enforcement shall, after making further investigation as advised by the Committee on Enforcement under sub-rule (2) or (3) of this rule shall further proceed under this rule.

17. Mode of Sending Notice.- (1) Every notice or letter issued by the Member-Enforcement or Committee on Enforcement, under these rules shall be sent to the member or the firm or any other person, by registered post with acknowledgement due or speed post, except where specified otherwise in any rule.

(2) If any notice or letter is returned unserved with an endorsement to the effect that the addressee had refused to accept the notice or letter, the notice or letter shall be deemed to have been served.

(3) If the notice or letter is returned with an endorsement to the effect that the addressee cannot be found at the address given, the Member-Enforcement shall ask the complainant or any other person who may be in a position to provide another address of the member or firm or person whose address is found to be not correct, and on production of the correct address, a fresh notice or letter shall be issued at such address.

(4) Where the notice or letter is returned under sub-rule (3), it may be served by fixing a copy thereof in some conspicuous place at the professional address or residence of the respondent which was last registered with the ICAI or in such other manner as the Committee on Enforcement may think fit and such service shall be deemed to be sufficient service for the purposes of these rules.

18. Certain provisions relating to complaint also to be applicable for information relating to misconduct of members.- The procedure laid down for dealing with complaints in sub-rule (6) of rule 10, sub-rules (1), (2), (3) and (4) of rule 12, sub-rules (1), (2), (3) and (5) of rule 15, rule 16 and rule 17 shall also apply to information received by the Member Enforcement relating to misconduct of members.

19. Time limit on entertaining complaint or information.- Where the Member-Enforcement is satisfied that there would be difficulty in securing proper evidence of the alleged misconduct, or that the member or firm against whom the information has been received or the complaint has been filed, would find it difficult to lead evidence to defend himself or itself, as the case may be, on account of the time lag, or that changes have taken place rendering the inquiry procedurally inconvenient or difficult, he may refuse to entertain a complaint or information in respect of any misconduct made more than seven years after the same was alleged to have been committed and submit the same to the Committee on Enforcement for taking decision on it under sub-section (4) of section 132 of the Act.

20. Functioning of Committee on Enforcement.- (1) All questions which come up before the Committee on Enforcement shall be decided by a majority of the members present and voting, and in the event of an equality of votes, the Member-Enforcement or in his absence, the person presiding, shall have a second or casting vote.

(2) In the event of the Member Enforcement not being able to attend a meeting of the Committee on Enforcement, the Member of the Committee on Enforcement who is Chairman of the Disciplinary Committee of ICAI shall preside in such meeting.

21. Procedure to be followed by the Committee on Enforcement.- (1) The Committee on Enforcement shall follow summary disposal procedure in dealing with all cases before it, as laid down in these rules.

(2) If the Committee on Enforcement decides to proceed further under clause (b) of sub-rule (2) of rule 16 or under clause (b) of sub-rule (3) of rule 16, it shall expeditiously cause to deliver to the respondent and the complaint, a copy each of the following:

(a) prima facie opinion formed by the Member Enforcement; and

(b) particulars or documents relied upon by the Member Enforcement, if any, during the course of formulation of prima facie opinion.

(3) The Committee on Enforcement shall inform the respondent to file a written statement, within such time as may be specified:

Provided that the Committee on Enforcement may give him additional time for submitting his written statement on application by the respondent on his adducing sufficient reasons to the satisfaction of the Committee on Enforcement for seeking additional time:

Provided further that such additional time shall not be given more than once and if the respondent still does not submit a written statement, the Committee on Enforcement shall presume that he has no further submissions to make and shall proceed to decide the case on merits.

(4) The respondent shall send a copy of his written statement, along with supporting documents, to the Committee of Enforcement and the complainant within the stipulated time.

(5) The complainant or the Member Enforcement may, after receipt of the written statement, submit a rejoinder to the Committee on Enforcement, with a copy to the respondent, along with supporting documents, if any.

(6) The Committee of Enforcement shall fix a date, hour and place of hearing, which shall not ordinarily be later than 45 days from the date of receipt of prima facie opinion and the Committee on Enforcement shall cause a notice to be sent of such date, hour and place to the Member Enforcement, respondent and complainant and require them to appear before it in person to make oral submissions, if any.

Explanation.— For the purpose of this rule, the appearance includes, unless and otherwise directed, appearance by an advocate or through any authorized representative, who shall be a Chartered Accountant.

(7) On the date of hearing, if the respondent, in spite of the service of notice, under sub-rule (6), does not appear either in person or through his authorized representative, the Committee on Enforcement may proceed ex parte and pass such orders as it may think fit or direct fresh notice to be served.

(8) The Committee on Enforcement may, on such terms as it thinks fit, and at any stage of the proceedings, adjourn the hearing:

Provided that such adjournment shall not be given more than once at any stage of the proceedings.

(9) The Committee on Enforcement shall consider the written representations, including the written statements, rejoinder and supporting documents, and the oral submission, if any made by the Member-Enforcement, the complainant and the respondent, and arrive at a finding on whether the respondent is guilty or not of any professional or other misconduct.

22. Orders of the Committee on Enforcement.- (1) On arriving at a finding under sub-rule (9) of rule 21 that the respondent is guilty of professional or other misconduct, the Committee on Enforcement shall give the respondent an opportunity to be heard before recommending to the Authority any under sub-section (4) of section 132 of the Act. Such order may include reprimands or severe reprimands being made, order for practice to be continued with restrictions for a period of time, order waiver or refund of fees, impose penalty or debar the member or member firm from practice:

Provided that if the respondent does not appear before the Committee on Enforcement at the time directed to do so when given such an opportunity to be heard, the Committee on Enforcement shall presume that he has nothing more to represent before it and shall make recommendations to the Authority and the Authority shall pass orders under sub-section (4) of section 132 of the Act.

Provided also, that where the order includes any action to debar the professional, such order shall be communicated to the ICAI for necessary action within 45 days, failing which at the end of 45 days, such order for debarring the professional shall become effective automatically.

(2) On arriving at a finding under sub-rule (9) of rule 21 that the respondent is not guilty of professional or other misconduct, the Committee on Enforcement shall make recommendations to the Authority and the Authority shall pass orders closing the case.

(3) The Committee on Enforcement shall send, free of charge, to the Member-Enforcement, respondent and the complainant, a certified copy of the final order.

(4) Not withstanding anything contained in this rule, the Authority shall have the powers to pass such interim orders as it may deem fit during the process of the investigation, based on recommendations made by the Committee on Enforcement.

Provided, however, such interim orders shall be passed only after having given reasonable opportunity to the parties to be heard.

(5) On arriving at a finding under sub-rule (9) of rule 21 that the complainant has made a vexatious claim against the respondent with an intent to harass, the Authority shall have the powers to award costs not exceeding Rs.10,000 to the respondent.

23. Attendance of hearings by the complainant, respondent and witness.-

(1) The complainant and the respondent shall have the right to attend the hearings of the Committee on Enforcement unless ordered otherwise by the Committee on Enforcement, for reasons to be recorded in writing.

(2) The complainant and the respondent shall not be eligible for reimbursement of expenses incurred for attending the hearing.

APPELLATE AUTHORITY

24 (1) Any person aggrieved by any order of the Authority may within ninety days from the date on which the order is communicated to it or him, prefer an appeal to the Appellate Authority:

Provided that the Central Government may also appeal against the decision of the Authority within ninety days:

Provided further that the Appellate Authority may entertain any such appeal after the expiry of the said period of ninety days, if it is satisfied that there was sufficient cause for not filing the appeal in time.

(2) The Appellate Authority may, after calling for the records of any case, revise any order made by the Authority and may -

(a) confirm, modify or set aside the order;

(b) impose any penalty, order for restricting practice for a period, order for waiver or refund of fees or set aside, reduce, or enhance the penalty, restriction of practice for a period, waiver or refund of fees imposed by the order;

(c) debar the member or the firm or set aside, reduce, or enhance the period of debarment imposed by the order,

(d) remit the case to the Authority for such further enquiry as the Appellate Authority considers proper in the circumstances of the case; or

(e) pass such other order as the Appellate Authority thinks fit:

Provided that the Authority shall give an opportunity of being heard to the parties concerned before passing any order.

25. Preparation and furnishing of the Annual Report of the Authority:-

(1) The Authority shall prepare once in every year an Annual Report in the form specified in the schedule, giving a true and full account of its activities performed in the year.

(2) The Authority may also include in the Annual Report any other item, not included in the form specified in the schedule, with the prior permission of the Central Government.

(3) The Authority, shall forward the annual report to the Central Government within a period of one hundred eighty days immediately following the close of the year for which it has been prepared.

(4) The matters relating to form and time of preparation of Annual Report, with respect to which no express provision has been made in these rules, shall be referred in each case to the Central Government for its decision and the decision of the Central Government thereon shall be final.

26. Preparation and furnishing of the Annual Report of the Appellate Authority:-

(1) The Appellate Authority shall prepare once in every year an Annual Report in the form specified in the schedule, giving a true and full account of its activities performed in the year.

(2) The Appellate Authority may also include in the Annual Report any other item, not included in the form specified in the schedule, with the prior permission of the Central Government.

(3) The Appellate Authority, shall forward the annual report to the Central Government within a period of one hundred eighty days immediately following the close of the year for which it has been prepared.

(4) The matters relating to form and time of preparation of Annual Report, with respect to which no express provision has been made in these rules, shall be referred in each case to the Central Government for its decision and the decision of the Central Government thereon shall be final.

27. Residuary provision.- Matters relating to the procedure of investigation, conduct of cases and allowances to nominated members with respect to which no express provision has been made in these rules shall be referred in each case to the Central Government for its decision and the decision of the Central Government thereon shall be binding.

28. Removal of difficulty. –

In the matter of implementation of these rules, if any doubt or difficulty arises, the same shall be placed before the Central Government and the decision of the Central Government thereon shall be final.