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TMI Blog2024 (10) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... t era of technology and modern communications, where e-mails are accessible across the globe and on any instrument including mobile and laptops, it is extremely difficult for anyone to believe such submissions of the Appellant and therefore such submissions of the Appellant are rejected - Similarly, the grounds that his mobile was not accessible being in Nepal, is also not convincing. It is strange that during the entire process of the disciplinary proceedings initiated by NFRA through various modes of communications and for considerable period of time, the Appellant has claimed that he did not notice anything or anything was brought to his notice by anyone but immediately after the issue of the impugned order dated 5th January, 2024, someone informed him about the imposition of penalty by NFRA on him and he filed the present Appeal in February, 2024. Thus, such bogus claims of Appellant regarding non-accessibility and non-receipt of communications and therefore not replying to NFRA cannot be accepted. NFRA during pleading has confirmed that they have followed the due process of law and principles of natural justice and also examined all records and came to conclusion regarding est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RDER ( HYBRID MODE ) The Appellant CA Anil Chauhan, the sole proprietor of the firm M/s. Anil Chauhan Associates, has filed the present Appeal under Section 132 (5) read with Section 410 of the Companies Act, 2013 against the Impugned Order dated 5th January, 2024 bearing Order No.002/2024 passed by the National Financial Reporting Authority (in short, NFRA)/Respondent). 2. Heard the Counsel for the parties and perused the records made available. 3. It has been brought out that the Impugned Order has been passed by NFRA in respect of statutory audit of SEYA Industries Ltd. (SIL/Company) for the financial years i.e. 2018-2019 and 2019-2020. The Appellant was appointed as a statutory auditor of company for financial year 2018-2019 and 2019-2020 and as such he was responsible for audit of the said company. 4. We note that Securities and Exchange Board of India (in short, SEBI) vide their letter dated 28th March, 2023, issued a letter to NFRA under subject SEBI Order dated 20th March, 2023 in matter of SEYA Ltd. where the SEBI indicated that they have investigated the matter of SEYA Industries Ltd. and passed the Order on 20th March, 2023 in the matter of SEYA Industries Ltd. The SEBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Mr. Anil Chauhan as the engagement partner. The details of the charges were included in the Show Cause Notice and the Appellant was asked to show cause by 22.10.2023 vide provision of Section 232(4) of the Companies Act, 2013 read with relevant Rules made thereunder as to why action should not be taken against the firm and the Appellant. The said show cause notice was signed by the Executive Body , NFRA which included the Chairperson and two fulltime Members of NFRA. 9. We observe that since no Reply was received, it has been pleaded by NFRA before us that based on the information available with NFRA and based on the complaint of SEBI, NFRA issued detailed Impugned Order No.002 of 2024 dated 5th January, 2024 under which, after proving the charges of professional misconduct by the Appellant, NFRA imposed a penalty of Rs.20 lakhs on the Appellant and also debarred the Appellant as well as audit firm for 10 years from being appointed as an Auditor or internal auditor or from undertaking any audit in respect of financial statement for internal audit of functions and activities of any company or body corporate. 10. The Appellant pleaded that it did not receive any information since h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BI in this regard. 16. We also note that the NFRA gave all possible opportunities to the Appellant to submit the relevant audit files and the documents in order to examine the allegations. However, despite several letters, as discussed in earlier paragraph, the Appellant did not Reply or cooperated with NFRA. Here we also note that NFRA not only wrote letters and speed post but also continuously sent on the emails of the Appellant and also tried several times on the mobile number of the Appellant. However, the Appellant did not respond to any of e-mails or calls. 17. Only plea of the Appellant in his defence is that he relocated himself in Nepal in 2021 and therefore he could not receive any letters and also since in Nepal his telephone was not working and his e-mail was also not accessible. In this regard, it is interesting to find that as a defence he has quoted SEBI s letter according to which the Appellant claims in the present Appeal that he has replied to SEBI in 2021 stating that he was residing in Nepal. We quote the exact submissions made by him in writing in the Appeal which reads as under:- A. BECAUSE the impugned order has been passed solely on account of the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mobile number of the Appellant remained unreachable. It is submitted that the mobile number remains switched off inasmuch as the same cannot work in Nepal and as a consequence. the Appellant is not reachable on his mobile. F. BECAUSE the Appellant was not continuing with his work actively as a CA and had begun work as a supply chain consultant in Nepal, the Appellant did not access his e-mail and was therefore unaware of the letters/ SCN. G. BECAUSE the Appellant was unable to respond to the letters for the reasons mentioned above and the same was inadvertent and not deliberate or willful. It is submitted that on account of the peculiar circumstances stated above, the Appellant remained unaware of the letters and can provide the Respondent with the requisite documents. H. BECAUSE without prejudice to the aforesaid. it is submitted that the penalty in the present case is wholly excessive and arbitrary as it imposes the highest prescribed penalty for debarment without any reasons or satisfaction. It is submitted that the statutory scheme of Section 132(4)(c) of the Companies Act grants the Respondent with ample discretion with respect to imposition of penalty. It is submitted that gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and incidentally the Appellant also did not cooperate with SEBI which was communicated to NFRA. We tend to agree with the submissions made by the NFRA and therefore without going any further details, we do not find any error in the impugned order. 22. This Appellate Tribunal asked the Appellant about his present nationality, passport status and Indian PAN. The Appellant conceded that he continues to be Indian citizen and has Indian passport and PAN. Therefore, the various pleadings regarding his immigration to Nepal and consequently not knowing what was happening in India by his earlier professional deeds, are not found convincing. 22. Only another point raised by the Appellant was regarding quantum of penalty and cited the Judgement of this Appellate Tribunal in the matter of Mr. Harish Kumar (supra). 23. It is true that the principles of proportionality is relevant for any Authority like NFRA, in deciding quantum of punishment in the disciplinary proceeding. It is well settled principle of law that judicial review, generally speaking, is directed against the decision making process . In other words, the type and the quantum of penalty is by and large remains within the jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hartered Accountants, various stakeholders including the Government, bankers and public etc. decide about their interaction or participation in the affairs of the Company. In this regard, we note that the Appellant could not prove that he applied any of the standards in Audit work. We note the conduct of the Appellant was for absolute non-cooperation and non-submissions of any documents whatsoever to NFRA. 27. The Appellant is eligible for relief and concessions based on principle of proportionality, in case he is able to satisfy the concerned authority like NFRA herein, about his due diligence and not otherwise and in absence of any submission or interaction with NFRA the Appellant is well aware of the consequences he has to face. The Appellant, being Chartered Accountant, is well qualified and understands the legal implications of his conduct. 28. In view of our discussion, we do not find any illegality in the Impugned Order. We will restrain ourselves in interference regarding quantum of the punishment, since the Appellant himself was not compliant, non-cooperative, evasive and has chosen to take misleading, irrational and unbelievable defences even before this Appellate Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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