IL&FS auditors: NCLT adjourns hearing till Bombay HC verdict

The National Company Law Tribunal Thursday adjourned the proceedings against the former auditors of the crippled IL&FS--Deloitte and BSR Associates, till further direction from the Bombay High Court. A division bench of the Bombay High Court had on Wednesday stayed the proceedings against BSR in the Mumbai bench of the NCLT until further orders.

The relief to BSR was granted on two counts, one that the accounting firm was seeking relief from Section 140 (5) of the Companies Act under which NCLT had passed the order, and secondly against criminal proceedings brought upon by various government agencies. BSR, a domestic affiliate of global major KPMG, had challenged the constitutional validity of Section 140 (5) in the High Court and also the NCLT's jurisdiction to take up the case against them.

The court had directed the corporate affairs ministry and the Serious Frauds Investigation Office to file their replies within four weeks. The HC order came after BSR and N Sampath Ganesh, a partner with the firm, had approached last month moved the court challenging the NCLT go-ahead to the government to remove as auditors of IL&FS Financial Services (IFIN) for its alleged role in financial irregularities in the firm as they are no longer the auditors of the firm therefore the maintainability of the plea.

BSR had resigned from the post of statutory auditor of the firm in June this year, well after the client-IFIN was sent for bankruptcy, while Deloitte had done so in FY18. The ministry's counsel said the entire case filed by BSR was meant to confuse so that the proceeding against them did not progress further.

On July 18, NCLT gave the go-ahead to the government to prosecute Deloitte and BSR for their failure to detect and report the scams that took place across the now bankrupt IL&FS Group and 21 other entities, when they were the auditors of IFIN, on the basis of the findings of the SFIO probe. It can be noted that the NCLT is yet to give its view on the ministry plea to ban them from business for five years as a penalty..