IL&FS case: NCLAT refuses interim relief to audit firms

IL&FS case: NCLAT refuses interim relief to audit firms

Reuters File Photo for representation

The National Company Law Appellate Tribunal (NCLAT) on Tuesday declined to give any interim relief to auditing firms Deloitte Haskins & Sells LLP and B S R Associates LLP with regard to a ban imposed on them in the IL&FS case.

The NCLAT Mumbai will continue its scheduled hearing in the case of their alleged role in the IL&FS fraud matter, a three-member bench headed by Chairperson Justice S J Mukhopadhaya said.A

The NCLAT, however, said that the NCLT will not pass any final order till its next hearing on September 20.

Listing the matter for September 20, the NCLAT also issued a notice to the Ministry of Corporate Affairs to file its reply within two weeks.

The NCLAT was hearing appeals filed by Deloitte and BSR against the order of the Mumbai bench of the National Company Law Tribunal (NCLT), which on August 9, rejected their pleas of challenging its jurisdiction to ban them from the business for five years for their omissions and commissions in the IL&FS Group scam.

The NCLAT will hear the matter on September 5. The court had allowed the corporate affairs ministry to prosecute them along with 21 others in the same case, though the implementation of the same has stayed after they sought time to challenge the order at the appellate tribunal NCLAT.

The ministry in June moved NCLAT seeking a five-year ban on these auditors in the IL&FS fraud case.

The auditors, the local arm of the England-based Deloitte Haskins & Sells, which is one of the big four accounting firms, and BSR & Associates, which is the local affiliate of another big four, the US-based KPMG, had challenged the jurisdiction of the NCLT to ban them under Sec 140(5) of Company's Act.

They had challenged the jurisdiction of the NCLT to ban them, saying section 140(5) of the Companies Act pertains to auditors who are still auditing the company in question while they have already resigned from the service and thus cannot be banned under the given provisions.

While Deloitte had stopped auditing IL&FS Group, which owes over Rs 95,000 crore to lenders and other financial institutions, by the end of FY2017-18, BSR was the statutory auditor of IL&FS Financial Services (IFIN) and resigned only in June this year-nine months after the company was sent to the bankruptcy court.

The Serious Fraud Investigation Office (SFIO) in its investigation found them guilty of painting a rosy picture of IFIN despite being aware of the poor financial health of the company, triggering the ministry to seek a ban on the auditors.