The Delhi High Court has upheld the Institute of the Chartered Accountants of India (ICAI)’s authority to take action against the affiliates of the Big Four firms, lifting the previous stay on ICAI’s orders. Moreover, the court ruled that the firms and their partners must respond to the notices issued by ICAI. This decision follows a series of disciplinary actions taken by ICAI against domestic affiliates of the Big Four firms and some former partners, which included imposing monetary penalties and disciplinary measures under the Chartered Accountants (CA) Rules 2007 and the CA Act. The court dismissed petitions filed by nine partners of these firms, stating that they were not liable to answer the orders under the CA Act.
In addition, the court has directed ICAI to establish regulations for the operation of global firms in India, acknowledging the potential benefits they bring in terms of global best practices and opportunities for youth. It emphasized the need to examine provisions related to licensing agreements and brand usage by these companies.
ICAI has been actively working on global networking guidelines and held discussions with the Ministry of Corporate Affairs to address this matter. The dispute stems from India’s accounting regulations, which do not permit foreign accounting firms to audit domestic businesses. ICAI argues that the affiliates of the Big Four have access to resources and expertise from their global businesses, thus violating the rules, while the affiliates maintain that they operate in India as domestic firms with solely Indian employees.