Delhi High Court Upholds Validity of Section 132 of Companies Act, Validates NFRA Rules

The Delhi High Court upheld the constitutional validity of Section 132 of the Companies Act, 2013, and Rules 3, 8, 10, and 11 of the National Financial Reporting Authority (NFRA) Rules, 2018.

A batch of petitions were filed by individual Chartered Accountants & auditing firms challenging the National Financial Reporting Authority's (NFRA's) powers and applicability to audits.

The Court dismissed arguments on vicarious liability, retroactive operation and Article 20(1) violations, emphasizing that the provision strengthens compliance and professional accountability.

It clarified that National Financial Reporting Authority (NFRA) proceedings are disciplinary in nature, governed by the preponderance of probabilities standard, and are based on audit records, not oral testimony.