Lok Sabha clips NFRA's wings
Company secretaries, cost accountants exempt from the purview of the new body
The National Financial Reporting Authority (NFRA), proposed to be set up under the new Companies Bill, saw its wings clipped even before it came into being. This is because the Companies Bill was passed in the Lok Sabha with amendments, leaving certain professionals out of NFRA’s ambit. The Lok Sabha also put caps on the penalties that can be levied on chartered accountants, the only set of professionals to be covered by the new body.
The Bill will become law after the Rajya Sabha, too, passes it. The upper house is likely to take up the Bill in the Budget session early next year. The upper house had considered the Bill in the winter session, but it was deferred to the next session after some members sought time for discussion.
After the amendments, the NFRA will have the power to investigate in the matters of professional or other misconduct committed only by a firm or a member of chartered accountants under the CA Act, 1949.
The lower house also capped the penalty for professional or other misconduct to five times of the fees received in case of individual and 10 times of the fees received for firms. The minimum penalty is Rs 10 lakh.
There was no cap on penalty in the original Bill.
The amendments also provide that appeal for cases from NFRA will go to an appellate authority constituted by a notification by the Central government for hearing appeals arising out of the orders of the NFRA.
Earlier, there was a provision that allowed the appeals to be heard by the chartered accountants body, Institute of Chartered accountants of India (ICAI).
The qualifications for appointment of the chairperson and members of the Appellate Authority, the manner of selection, the terms and conditions of their service and the requirement of the supporting staff and procedure (including places of hearing the appeals, form and manner in which the appeals shall be filed) to be followed by the Appellate Authority will be as prescribed under the law.
Other key amendments to the Bill made in the Lok Sabha include a change in the definition of private placement to exclude qualified institutional buyers and allotments to employees under stock option plans.