Delhi High Court - Orders
Charmi M Shah vs National Financial Reporting ... on 27 February, 2026
$~65
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 2685/2026, CM APPL. 13040/2026 & CM APPL.
13041/2026.
CHARMI M SHAH .....Petitioner
Through: Mr. Sudhir Makkar, Sr.
Advocate, Mr. Karan Malhotra,
Mr. Anant Shankar Tripathi,
Mr. Anant Sharma, Advocates.
versus
NATIONAL FINANCIAL REPORTING AUTHORITY &
ANR. .....Respondents
Through: Mr Zoheb Hossain, Spl.
Counsel (NFRA) Mr. Satyam,
Mr. Pranjal Tripathi, Advocates
for NFRA.
Ms. Pallavi Talwar (GP).
CORAM:
HON'BLE MR. JUSTICE ANISH DAYAL
ORDER
% 27.02.2026
1. This petition has been filed challenging order dated 9th September 2025 passed by National Financial Reporting Authority ('NFRA') [hereinafter, 'impugned order'] in respect of Show Cause Notice ('SCN') dated 30th December 2024. A brief conspectus of the sequence of events would be necessary to appreciate the factual background.
2. Petitioner contends that she was a partner of M/s M. H. Dalal & Associates, a Chartered Accountant firm and was appointed as an This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 13/03/2026 at 21:30:06 Engagement Quality Control Reviewer ('EQCR') with respect to the statutory audit of Man Industries (India) Ltd. (hereinafter, 'the Company') to conduct engagement quality control review of the audit.
3. Mr. Sudhir Makkar, Senior Counsel for petitioner states that the role of an EQCR, by its very definition, does not fall within the ambit of the definition of an auditor as provided in Rule 2 (d) of National Financial Reporting Authority Rules, 2018 (hereinafter, 'NFRA Rules'). The constitution of NFRA has been done pursuant to Section 132 of Companies Act, 2013 ('Companies Act').
4. Despite this, said SCN dated 30th December 2024 was issued by NFRA in relation to the audit of company.
5. Petitioner approached this Court in W.P.(C)1135/2025 and order dated 30th January 2025 was passed, which is extracted herein for reference:
"W.P.(C) 1135/2025
3. The present writ petition has been filed by the petitioner, inter alia, challenging the jurisdiction of the National Financial Reporting Authority, New Delhi ('NFRA') to issue a show cause notice dated 30.12.2024 under Section 132(4)(c) of the Companies Act, 2013 ('Companies Act') and Rule 11 of the National Financial Reporting Authority Rules, 2018 ('NFRA Rules') to the petitioner in her capacity of Engagement Quality Control Reviewer ('EQCR').
4. The show cause notice has been issued with regard to the statutory audit of M/s. MAN (India) Industries Limited ('MIIL') for the financial year 2020-21.
5. The petitioner being a partner of the firm was appointed as an EQCR for the audit of MIIL for the financial year 2020-21. The appointment of an EQCR is in terms of the relevant accounting standard i.e., SA 220* which deals with "Quality Control for an Audit of Financial Statements". In terms This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 13/03/2026 at 21:30:06 thereof "Engagement Quality Control Reviewer" is defined as under:-
"Definitions
7. For purposes of the SAs, the following terms have the meanings attributed below:
xxx xxx xxx
(c) Engagement quality control reviewer - a partner, other person in the firm, suitably qualified external person, or a team made up of such individuals, with sufficient and appropriate experience and authority to objectively evaluate, before the report is issued, the significant judgments the engagement team made and the conclusions they reached in formulating the report. However, in case the review is done by a team of individuals, such team should be headed by a member of the Institute."
6. It can be seen that an engagement quality control reviewer can either be a person within the same firm which is conducting the audit or even an external person.
7. The relevant accounting standards (SA 200*) also provide as under :-
"(d) Auditor - "Auditor" is used to refer to the person or persons conducting the audit, usually the engagement partner or other members of the engagement team, or, as applicable, the firm. Where an SA expressly intends that a requirement or responsibility be fulfilled by the engagement partner, the term "engagement partner" rather than "auditor"
is used. "Engagement partner" and "firm" are to be read as referring to their public sector equivalents where relevant."
8. It appears that an EQCR is not part of the engagement team which actually conducts the audit.
9. Rule 3 of the NFRA Rules, inter alia, provides for jurisdiction of NFRA to conduct investigation under Section 132(4) of the Companies Act and provides for class of companies and bodies corporate governed by NFRA.
10. Importantly, Rule 3 of the NFRA Rules confines the jurisdiction of NFRA only on 'auditors' of certain class of This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 13/03/2026 at 21:30:06 companies and bodies corporate.
11. The definition of "auditor' in the NFRA Rules is as under:-
"2. (d) "auditor" means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being in force, who has been appointed as an auditor of a company or a body corporate under Section 139 of the Act or under any other Act for the time being in force;"
12. Thus, it appears, prima facie, that the EQCR partner would not fall within the ambit of the aforesaid definition inasmuch as the EQCR partner is neither appointed as the statutory auditor under Section 139 of the Companies Act.
13. Importantly, Rule 11 of the NFRA Rules which deals with the power to initiate disciplinary proceedings contemplates that a show cause notice shall be issued "to the auditor" ; it does not contemplate taking of disciplinary action against any other professional/s.
14. In the present case, the respondent no.1 has issued the impugned show cause notice to the petitioner based on alleged shortcomings on the part of the auditor (Firm) and/or engagement partners of MIIL against whom action has already been taken by NFRA vide order dated 28.06.2023.
15. Given the statutory framework, it is strenuously contended by the learned counsel for the petitioner that the NFRA has no jurisdiction to issue notice to the petitioner.
16. Reliance is also placed on the order dated 12.01.2024 passed by a coordinate Bench of this Court in W.P.(C) 15614/2023, where, this Court after taking note of the scope and ambit of Section 132(4) of the Companies Act, has held as under :-
"3. He, therefore, states that show cause notice can only be issued to an Auditor of the Company which is under investigation. He states that neither the Petitioner nor the firm of which the Petitioner is Member, is the Auditor for QUESS, which is the company under investigation, and, therefore, the show cause notice could not have been issued to the This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 13/03/2026 at 21:30:06 Petitioner. Attention is also drawn to Rule 4(1) of the 2018 Rules, which also indicates that the investigation can be done only for an Auditor of the company under investigation."
17. In the said case, the Court had also issued interim directions as under:-
"7. Since the learned Senior Counsel for the Petitioner has made out a prima facie case, the further proceedings in the show cause notice shall remain stayed till the next date of hearing."
18. Issue notice.
19. Learned counsel, as aforesaid, accepts notice on behalf of the respondents.
20. Learned counsel for the respondents controverts the submissions of the learned counsel for the petitioner.
21. The issue involved viz. jurisdiction of NFRA to issue a show cause notice dated 30.12.2024 under Section 132(4)(c) of the Companies Act and Rule 11 of the NFRA Rules, to the petitioner in her capacity of an EQCR requires further consideration.
22. Let a counter-affidavit be filed by the respondents within a period of four weeks from today. Rejoinder thereto, if any, be filed within a period of two weeks thereafter.
23. List on 07.05.2025.
24. In the meantime, considering the prima facie case made out by the petitioner, there shall be a stay of further proceedings pursuant to the impugned show cause notice."
(emphasis added)
6. NFRA challenged this order before the Supreme Court in S.L.P. No.5468/2025. Supreme Court by order dated 7th March 2025 passed the following directions:
"We dispose of this Special Leave Petition by reserving liberty to the respondents herein to file their objections to the Show Cause Notice issued by the petitioner herein This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 13/03/2026 at 21:30:06 within a period of four weeks from today. Should such a reply be given by the first respondent to the petitioner herein, the same shall be considered both on the issue of jurisdiction, if any, as well as on any other aspect and pass a speaking order thereon. Consequently, the Special Leave Petition as well as the Writ Petition filed by the first respondent herein before the High Court stand disposed of.
We state that we have not made any observation on the merits of the case.
Till the order is made by the petitioner on the issue of jurisdiction raised by the first respondent herein, no coercive steps shall be taken as against the first respondent herein.
In the event of any adverse order being made by the petitioner herein as against the first respondent, liberty is reserved with the first respondent to assail the same in accordance with law."
(emphasis added)
7. Pursuant to the same, NFRA has passed the impugned order, noting the sequence of events and that the issue is being considered purely on the jurisdiction of NFRA. In the impugned order, NFRA has concluded that the petitioner was the EQCR and jurisdiction of NFRA extends to the EQCR, since she was a member of the Institute of Chartered Accountants of India ('ICAI'). The plea of lack of jurisdiction was, therefore, rejected.
8. Mr. Sudhir Makkar, Senior Counsel for petitioner states that, keeping in mind the directions of Supreme Court, as extracted above, the right to assail any adverse order passed by NFRA was provided to petitioner. Therefore, this Writ Petition has been filed.
9. At the outset, a challenge was made by Mr Zoheb Hossain, This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 13/03/2026 at 21:30:06 counsel for NFRA, basis that NFRA ought to proceed ahead and decide the issue on merits, as well. Moreover, it was stated that the issue of jurisdiction can be challenged by the petitioner before the National Company Law Appellate Tribunal ('NCLAT').
10. This was countered by Mr. Makkar, Senior Counsel for petitioner by relying upon the provision of Section 132(5) of Companies Act which reads as under:
"132. Constitution of National Financial Reporting Authority (5) Any person aggrieved by any order of the National Financial Reporting Authority issued under clause (c) of sub-section (4), may prefer an appeal before the Appellate Tribunal in such manner and on payment of such fee as may be prescribed"
11. Appellate power is restricted to orders under Section 132(4)(c) of the Companies Act, which is provided as under:
"132. Constitution of National Financial Reporting Authority (4) Notwithstanding anything contained in any other law for the time being in force, the National Financial Reporting Authority shall--
(c) where professional or other misconduct is proved, have the power to make order for- (A) imposing penalty of-
(I) not less than one lakh rupees, but which may extend to five times of the fees received, in case of individuals; and (II) not less than five lakh rupees, but which may extend to ten times of the fees received, in case of firms;
(B) debarring the member or the firm from-- (I) being appointed as an auditor or This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 13/03/2026 at 21:30:06 internal auditor or undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate; or (II) performing any valuation as provided under section 247, for a minimum period of six months or such higher period not exceeding ten years as may be determined by the National Financial Reporting Authority."
12. Considering the provision of Section 132(4)(c), as extracted above, Mr. Makkar, Senior Counsel has made an argument that the issue of jurisdiction may not be amenable to an appellate procedure under the Act, at this stage and, therefore, seeks that further proceedings be stalled.
13. Mr. Hossain, however, has relied upon the decision in Super Cassettes Industries Ltd. v. Music Broadcast Private Ltd. (2012) 5 SCC 488 which provides that the Tribunal which has the power to pass a final order, will also have the power to pass an interim order. Mr. Hossain has also relied upon the decision in Deloitte Haskins & Sells LLP v. Union of India & Anr. (2025) SCC OnLine Del 641 to contend that this issue has been considered, as regards the scope of NFRA's powers in relation to the auditors of a company.
14. Mr. Makkar points out the decision of Supreme Court in Special Leave Petition (Civil) No.4139/2025 titled as "National Financial Reporting Authority v. Snehal N. Muzoomdar & Anr.", where the following order was passed:
"Without prejudice to the rights and contentions of the This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 13/03/2026 at 21:30:06 petitioner, in cases where there were no Audit Quality Review Reports (AQRR) prepared and no final orders have been passed, the proceedings may continue but no final orders will be passed. We clarify that where final orders have been passed, such orders will not be given effect to."
15. Moreover, it is stated that the Co-ordinate Bench of this Court is considering a similar issue of jurisdiction, with respect to notices being issued to persons not auditors of the company, in W.P.(C) 15614/2023, after taking note of the scope and ambit of Section 132(4) of Companies Act. This was noted by the Court in order dated 30th January 2025 which has been extracted above.
16. Nevertheless, this matter will require to be heard; reply be filed by NFRA within the next four weeks.
17. In the meantime, proceedings before the NFRA can continue; however, no final order be passed till the next date of hearing of this Court.
18. List on 24th April 2026.
19. Order be uploaded on the website of this Court.
ANISH DAYAL, J FEBRUARY 27, 2026/ak/sp This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 13/03/2026 at 21:30:06