On a reference made to it by the Central Government;
for such class of bodies corporate or persons, in such manner as may be prescribed, into matters of professional or other misconduct committed by any member or firm of Chartered Accountants registered under the Chartered Accountants Act, 1949.
Important Bar: Once NFRA has initiated an investigation under this section, no other institute or body (notably ICAI) shall initiate or continue any proceedings in such matters of misconduct.
### 2. Powers of a Civil Court (CPC, 1908)
NFRA shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of:
(i) Discovery and production of books of account and other documents, at such place and time as specified by NFRA;
(ii) Summoning and enforcing the attendance of persons and examining them on oath;
(iii) Inspection of any books, registers and other documents of any person referred to at any place;
(iv) Issuing commissions for examination of witnesses or documents.
### 3. Power to Pass Orders on Proof of Misconduct
Where professional or other misconduct is proved, NFRA may make orders for:
#### (i) Imposing Penalty
Subject
Minimum Penalty
Maximum Penalty
Individuals (CA member)
`1 lakh
5 times the fees received
Firms (CA firm)
`5 lakhs
10 times the fees received
#### (ii) Debarring from Profession
NFRA may debar the member or the firm from:
(a) Being appointed as:
An auditor; OR
An 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.
(b) Performing any valuation as provided under Section 247.
Duration of Debarment:
Minimum: 6 months
Maximum: 10 years
(or such higher period not exceeding 10 years as may be determined by NFRA)
## Remedy to Aggrieved Party
Any person aggrieved by any order of NFRA may prefer an appeal before the National Company Law Appellate Tribunal (NCLAT) in such manner and on payment of such fee as may be prescribed.
## Memory Aid
Penalty Ladder:
Individual: `1L (min) → 5× fees (max)
Firm: `5L (min) → 10× fees (max)
Debarment Range: 6 months → 10 years
Appeal Route: NFRA Order → NCLAT (NOT NCLT, NOT High Court directly)
Worked example
### Example 1
Example 1: CA Mr. P (sole practitioner) was found guilty by NFRA of professional misconduct. The audit fee he received from the client was `8 lakhs. What is the maximum penalty NFRA can impose?
Answer: For individuals, the maximum penalty is 5 times the fees received. Maximum penalty = 5 × `8,00,000 = `40,00,000. The minimum penalty would be `1 lakh.
### Example 2
Example 2: PQR & Associates, a CA firm, was found guilty of professional misconduct. The firm received audit fees of `25 lakhs from the impugned engagement. What is the range of penalty NFRA can impose?
NFRA can also debar the firm for a period of 6 months to 10 years.
### Example 3
Example 3: NFRA has initiated investigation against CA Mr. S for misconduct. Can the ICAI Disciplinary Committee parallelly initiate its own proceedings against him for the same matter?
Answer: No. Once NFRA has initiated an investigation, the Act expressly bars any other institute or body (including ICAI) from initiating or continuing any proceedings in such matters of misconduct.
### Example 4
Example 4: Mr. T is aggrieved by an order of NFRA debarring him from audit for 5 years. Where should he file his appeal?
Answer: Mr. T should prefer an appeal before the National Company Law Appellate Tribunal (NCLAT), not NCLT or any High Court.
⚠️ Common exam mistakes
Confusing the appellate forum — appeals from NFRA go to NCLAT, not NCLT or High Court.
Mixing up the penalty multiples — Individuals: 5× fees; Firms: 10× fees (not the other way round).
Forgetting that NFRA has CPC powers — it can summon persons, examine on oath, issue commissions.
Believing both NFRA and ICAI can investigate the same misconduct in parallel — NFRA's initiation BARS other bodies.
Forgetting the minimum penalty floor — `1 lakh for individuals, `5 lakhs for firms (cannot be lower).
Overlooking that debarment also applies to Section 247 valuation work, not just audit assignments.
Confusing the debarment range — it is 6 months minimum to 10 years maximum.
Bare-Act text Section 132 · The Companies Act, 2013 · click to expand
Powers of NFRA: 1. Power to investigate, either suo moto or on a reference made to it by the Central Government, for such class of bodies corporate or persons, in such manner as may be prescribed into the matters of professional or other misconduct committed by any member or firm of chartered accountants, registered under the Chartered Accountants Act, 1949: No other institute or body shall initiate or continue any proceedings in such matters of misconduct where the NFRA has initiated an investigation under this section. 2. NFRA shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of: (i) Discovery and production of books of account and other documents; (ii) Summoning and enforcing the attendance of persons and examining them on oath; (iii) Inspection of any books, registers and other documents; (iv) Issuing commissions for examination of witnesses or documents. 3. Where professional or other misconduct is proved, have the power to make order for: (i) Imposing penalty of: In case of individuals: Minimum ₹1 lakh, but which may extend to 5 X (fees received); In case of Firms: Minimum ₹5 lakhs, but which may extend to 10 X (fees received). (ii) Debarring the member or the firm from (a) being appointed as an auditor or 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 (b) performing any valuation as provided under section 247, for a minimum period of 6 months or such higher period not exceeding 10 years as may be determined by NFRA. Any person aggrieved by any order of the NFRA, may prefer an appeal before the National Company Law Appellate Tribunal (NCLAT) in such manner and on payment of such fee as may be prescribed.