TMI Blog2023 (6) TMI 1375X X X X Extracts X X X X X X X X Extracts X X X X ..... ires sending of the order to every company or body corporate in which the Auditor is functioning as Auditor. Sub-rule (3) of Rule 12 is, thus, independent provision. Thus, Rule 12, sub-rule (2) provides that action against Auditor in event the Appeal is filed under Rule 12, sub-rule (1), after depositing the 10% penalty amount, the consequences as contemplated under Rule 12, sub-rule (2) shall not take place. Thus, in case when an Appeal is filed with deposit of 10% of penalty, it is not obligatory to the company or body corporate to appoint a new Auditor as required by sub-section (2) of Rule 12. However, sub-rule (1) and (2) are only confine to cases where only monetary penalty has been imposed. These two sub-rules have no application with regard to cases where penalty of debarment has been imposed. Omission of debarment in sub-rules (1) and (2) are with the purpose and object. The learned Counsel for the Respondent has placed reliance on judgment of Hon ble Supreme Court in MD. ALAUDDIN KHAN VERSUS KARAM THAMARJIT SINGH [ 2010 (7) TMI 1006 - SUPREME COURT] where Hon ble Supreme Court while considering the principle of statutory construction has noted the principle that express i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013. 2. It shall be sufficient to notice the nature of impugned order dated 13.04.2023, which has been challenged by the Appellant in Company Appeal (AT) No.68 of 2023 for appreciating the submissions, which have been raised by learned Counsel for the parties with regard to interpretation of Rule12 of National Financial Reporting Authority Rules, 2018 ( 2018 Rules ) 3. The Appellant in Company Appeal (AT) No.68 of 2023 - Mr. Harish Kumar T.K., is a qualified Chartered Accountant. The Appellant s Firm was engaged for conducting of Branch Audit by two appointment letter dated 27.08.2014 for its Firm at Kannur, Kotayyam Thiruvananthapura, Thrissur, Calicut and Kochi Branches. The Appellant being Partner of the Firm was assigned with the Audit work by the Firm for the Branches of the Company at Thrissur Kotayyam and Coimbatore. In the subsequent Financial Years 2015-16, 2016-17, 2017-18 and 2018-19 also, the Firm received similar appointment letter from the Company. For each of the Financial Years, The Appellant conducted Branch Audit for the Kottayam, Thrissur and Coimbatore Branches of DFL and submitted Audit Reports in respect of the same. The Appellant received a Show Cause Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the parties only on interpretation of Rule 12 of 2018 Rules. We indicated to the parties that we shall first determine the question of interpretation of Rule 12 and thereafter shall proceed to hear the Appeal(s) on merit of the case. 7. The learned Counsel for the Appellant relying on Rule 12 of the 2018 Rules, submits that when Appeal challenging the impugned penalty order has been filed within 30 days from the date of order, after depositing the 10% of the penalty amount as required by Rule 12, sub-rule (1), the consequence of said filing of the Appeal and deposit of 10% penalty amount is that no further action can be taken by the Authorities under Rule 12, sub-rule (2), (3) and (4). It is submitted that object of Rule 12, sub-rule (1) is to give protection to those Chartered Accountants, who have filed Appeal within 30 days and have deposited the 10% penalty amount. The result is that no action is required to be taken as per Rule 12, sub-rule (2) and the Authority is not to communicate the companies or body corporate where the Appellant was functioning to appoint a new Auditor in accordance with the provisions of the Act. The consequence is that the Chartered Accountant is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , head (A) and head (B). It is submitted that 2018 Rules has been framed to give effect to the provisions of Section 132(4) and Rules cannot envisage any kind of embargo on the provisions of Section 132(4) of only on filing of Appeal. Rules cannot stay any action contemplated under the statute when no such intention is decipherable from the Rules. 9. We have considered the submissions of learned Counsel for the parties and have perused the record. 10. Section 132 of the Companies Act, 2013 deals with Constitution of National Financial Reporting Authority . Sub-rule (4), (c) provides: 132 (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 84 (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 ten 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 engaging himself or itself from practice as member of the Institute of Chartered Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 12, sub-rule (1) confines to order passed under Rule 11 relates to imposition of a monetary penalty on any auditor . Proviso of Rule 12, subrule (1) thus relates to only a case where imposition of monetary penalty has been imposed. Rule 12, sub-rule (1) can have no application in a case where penalty of debarment has been imposed. Expression debarment has consciously been not included in Rule 12, sub-rule (1) whereas sub- rules (3) and (4) use expression debars . Thus, rulemaking Authority was well aware that Rule 12 provides for both monetary penalty as well as debarment. 14. We may also refer to Rule 11, sub-rules (6) and 7) in this context, which is to the following effect: 11(6) The order disposing of a show-cause notice may provide for- (a) no action; (b) caution; (c) action for imposing penalty against auditor under sub-clause (A) of clause (c) of sub-section (4) of section 132 or for debarring the auditor from engaging as such under sub-clause (B) of clause (c) of sub-section (4) of section 132 or both. (7) The order passed under sub-rule (6) shall not become effective until thirty days have elapsed from the date of issue of the order unless the Division states otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition is filed without seeking for a declaration that the election petitioner or any other candidate is the returned candidate. In such a case, the application of Order 8 Rule 6-A would not be permissible, as permitting the same would amount to allowing indirectly, what is prohibited by law to be done directly. It is settled law that whatever is prohibited by law to be done directly cannot be allowed to be done indirectly. The decision of the Court in Jagir Singh v. Ranbir Singh [(1979) 1 SCC 560 : 1979 SCC (Cri) 348] may be referred to, wherein it was held thus : (SCC p. 565, para 5) 5. We do not think that it is permissible to do so. What may not be done directly cannot be allowed to be done indirectly; that would be an evasion of the statute. It is a well-known principle of law that the provisions of an Act of Parliament shall not be evaded by shift or contrivance (per Abbot, C.J. in Fox v. Bishop of Chester [(1824) 2 B C 635 : 107 ER 520] ). To carry out effectually the object of a statute, it must be construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited or enjoined. (Maxwell, 11th Edn., p. 109) 18. Applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty has been deposited by the Auditor or Appeal has been filed with 10% deposit. In a case where punishment is only of monetary penalty, the information of said order has also to be sent to the company or body corporate where the Auditor is functioning as required by Rule 12, sub-rule (3) and it is for company or body corporate to chose its further action. The provisions of the statute read with Rule 12, do not indicate that in case of monetary penalty only, it is obligatory on the company or body corporate to appoint a new Auditor. Meaning thereby that in case of monetary penalty the Auditor, after having deposited the monetary penalty or has filed an Appeal with 10% deposit can continue discharging its functions, subject to any decision taken by the company or body corporate. 21. In view of the foregoing discussions and conclusion, we are of the view that filing of the Appeal by the Appellant(s) with deposit of 10% of the penalty shall have no effect on the order of debarment passed against the Appellant(s) under Section 132(4)(c) and under head (B). Order of debarment shall continue to operate unless an order is passed by the Appellate Tribunal. 22. We have not heard the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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