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Regarding omission of Rule 9 of Chapter X (Audit and Auditors) of the Companies Act 2013 pertaining to Section 147 (5) (Punishment for Contravention) of the Companies Act 2013
May, 12th 2018

Regarding omission of Rule 9 of Chapter X (Audit and Auditors) of the Companies Act 2013 pertaining to Section 147 (5) (Punishment for Contravention) of the Companies Act 2013

Rule 9 of Chapter X (Audit and Auditors) of the Companies Act 2013 prior to the Companies (Amendment) Act, 2017 read as under: 

In case of criminal liability of any audit firm, the liability other than fine, shall devolve only on the concerned partner or partners, who acted in a fraudulent manner or abetted or, as the case may be, colluded in any fraud. 

Position after the Companies (Amendment) Act 2017 

Rule 9 has been omitted and the provisions of Rule 9 have been introduced in the Act as proviso to Section 147 (5) of the Companies Act, 2013. 



The proviso to Section 147 (5) that has been incorporated reads as under- 

"Provided that in case of criminal liability of an audit firm, in respect of liability other than fine, the concerned partner or partners, who acted in a fraudulent manner or abetted or, as the case may be, colluded in any fraud shall only be liable." 

Consequently, Section 147 (5) reads as follows: 

"(5) Where, in case of audit of a company being conducted by an audit firm, it is proved that the partner or partners of the audit firm has or have acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to or by, the company or its directors or officers, the liability, whether civil or criminal as provided in this Act or in any other law for the time being in force, for such act shall be of the partner or partners concerned of the audit firm and of the firm jointly and severally. 



Provided that in case of criminal liability of an audit firm, in respect of liability other than fine, the concerned partner or partners, who acted in a fraudulent manner or abetted or, as the case may be, colluded in any fraud shall only be liable." 

Hence, it is evident from above that the erstwhile Rule 9 of the Companies (Audit and Auditors) Rules, 2014 has now been incorporated in the Companies Act 2013. 

With Regards 

CA. Debashis Mitra
Chairman, Corporate Laws & Corporate Governance Committee
The Institute of Chartered Accountants of India
CA. Dhinal A. Shah
Vice Chairman, Corporate Laws & Corporate Governance Committee
The Institute of Chartered Accountants of India
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