Lok Sabha Question No. 44 (STARRED), answered on 2018-07-20
Subject: National Financial Reporting Authority
Ministry: CORPORATE AFFAIRS
Asked by: BHARATENDRA SINGH, ANIRUDHAN SAMPATH

## GOVERNMENT OF INDIA

## MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA

STARRED QUESTION NO. 44 ANSWERED ON FRIDAY, THE 20th JULY, 2018 [ASHADHA 29, 1940 (SAKA)]

## NATIONAL FINANCIAL REPORTING AUTHORITY

## QUESTION

- *44.  KUNWAR BHARATENDRA:

DR. A. SAMPATH:

Will the Minister of CORPORATE AFFAIRS कारपोरेट कार्य मंत्री be pleased to state:

(a)the details of update on the action taken against shell companies identified by the Task Force on the Confirmed List, Derived List and Suspect List;

- (b) whether the new Companies Act, 2013 provides for setting up of a  National  Financial  Reporting  Authority  (NFRA)  and  if  so,  the details thereof;
- (c) whether the said Authority has been set up and if so, the details thereof; and
- (d)  if  not,  the  reasons  for  not  constituting  NFRA  along  with  the timeline by which the same will be set up/ operationalised?

## ANSWER

THE MINISTER OF CORPORATE AFFAIRS          (SHRI PIYUSH GOYAL)

- (a) to (d) A statement is laid on the Table of the House.

******

STATEMENT  REFERRED  TO  IN  REPLY  TO  PARTS  (a)  TO  (d)  OF  THE STARRED QUESTION NO.44 FOR ANSWER IN LOK SABHA ON 20.07.2018:

- (a) :  The  Confirmed  List,  Derived  List  and  Suspect  List  of  'Shell Company'  was  compiled  by  Serious  Fraud  Investigation  Office (SFIO)  as  per  the  directions  of  the  Task  Force.    The  Lists  were shared  with  law  enforcement  agencies  (LEAs).    The  details  of action  taken  against  these  companies  by  various  agencies  is  as follows:
- (i) Financial  Intelligence  Unit  (FIU)  has  disseminated  the  lists  on FINNET to its Reporting Entities for reporting Suspicious Transaction  Reports  in  respect  of  these  companies  which  are shared with LEAs for appropriate action;
- (ii) The  Income  Tax  Department  had  reopened  the  income  tax assessments of such companies wherever warranted;
- (iii) Enforcement Directorate (ED) has filed 20 prosecution complaints and has made 34 arrests which include 6 accommodation entry operators, 6 Chartered Accountants and 4 bankers;
- (iv) Securities  and  Exchange  Board  of  India  (SEBI)  has  restricted trading of securities in stock exchanges for 331 of the companies;
- (v) Central Bureau of Investigation (CBI) has carried out searches in 14 cases, launched prosecution proceedings against 69 Chartered  Accountants  (CAs)  who  were  found  to  be  associated with  shell  companies  and  shared  reports  with  ICAI  in  98  cases where  complaints  were  filed  against  professionals  involved  in operation/audit/certification of shell companies;
- (vi) Inquiries by Registrars of Companies under Section 206(4) of the Companies  Act,  2013  has  been  ordered  in  respect  of  1505 Companies;
- (vii) SFIO  has  launched  prosecutions  under  various  provisions  of Companies Act as well as other relevant statutes on around 250 companies as identified during the investigations undertaken by it.    List  of  54  professionals involved has been shared with ICAI, ICSI  and  Bar  Council  of  India  for  initiating  disciplinary  action against them.
- (b),  (c)  &  (d):  Yes  Madam.  Section  132  of  the  Companies  Act,  2013 provides  for  constitution  of  National  Financial  Reporting  Authority (NFRA).  NFRA shall have:
- (i) the  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:

Provided that no other institute or body shall initiate or continue any proceedings  in  such  matters  of  misconduct  where  the  National Financial Reporting Authority has initiated an investigation under this section;

- (ii) the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, in respect of the following matters, namely:-
- (a) Discovery  and  production  of  books  of  account  and  other documents,  at  such  place  and  at  such  time  as  may  be specified by the National Financial Reporting Authority;
- (b) Summoning  and  enforcing  the  attendance  of  persons  and examining them on oath;
- (c) Inspection of any books, registers and other documents of any person referred to in clause (ii) at any place;
- (d) Issuing commissions for examination of witnesses or documents;
- (iii) where  professional  or  other  misconduct  is  proved,  have  the power to make order for imposing monetary penalty, debarring the member or the firm from engaging himself or itself from practice as member of the Institute of Chartered Accountant of India referred to in  clauses(e)  of  sub-section  (1)  of  Section  2  of  the  Chartered Accountants Act, 1949 for  a  minimum  period  of  six  months  or  for such higher period not exceeding ten years as may be decided by the National Financial Reporting Authority.

The  said  authority  shall  consist  of  a  chairperson,  who  shall  be  a person of eminence and having expertise in accountancy, auditing, finance or law to be appointed by the Central Government and such other  members  not  exceeding  fifteen  consisting  of  part-time  and full-time members as may be prescribed.

The  Government  has  vide  Notification  dated  21.03.2018  notified sub-Section (3)  &  (11)  of  Section  132  of  the  Companies  Act,  2013 relating to the manner  of appointment  and  other terms and conditions  of  service  of  Chairperson  and  Members  as  well  as Secretary and other employees of the NFRA. On 30 th  May, 2018, application for filling up the post of Chairperson and  three  full  time  Members  in  the  National  Financial  Reporting Authority  were  invited  and  since  the  closing  date  of  receiving application  is  over,  this  Ministry  is  processing  such  applications received.    The  consultation  process  of  finalization  of  the  NFRA (Technical) Rules with stakeholders is ongoing.

- ****