Tribunal Dismisses Deloitte, BSR Plea In IL&FS Case

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The National Company Law Appellate Tribunal (NCLAT) on Wednesday dismissed the pleas of Deloitte Haskins & Sells and KPMG arm BSR & Associates challenging their impleadment in the case regarding fraud in IL&FS Financial Services (IFIN).

Both Deloitte and BSR are former auditors of the fraud-hit IL&FS Financial Services. The judgement comes after the appellate tribunal in January reserved its verdict on the matter.

The NCLAT judgement on Wednesday said: “The tribunal is empowered to pass order under Section 242 of the Companies Act, 2013 in a petition under Section 241(2) if it forms opinion that the affairs of the company have been conducted in a manner prejudicial to the public interest. Once such opinion is formed by the Tribunal, it may pass any order as it deem fit and proper.”

Referring to the economic impact caused due to IL&FS crisis, the two judge bench headed by NCLAT Chairperson SJ Mukhopadhaya said that before passing any appropriate order in public interest and to save the economy of the country from collapse, if the tribunal is of the opinion that it requires to give appropriate hearing to the concerned parties, including those who audited IL&FS and those who have managed or were concerned with IL&FS or its group companies, it cannot be held to be illegal.

“We find no merit in these appeals. They are accordingly dismissed,” the orders said.

The ministry had cited the interim report of the Serious Fraud Investigation Office (SFIO) alleging collusion by the auditors with IL&FS Financial Services management in concealing information, among other charges. The ministry had sought freezing of the assets of the audit firms based on the allegations in the report.

Counsel of both the audit firms had told the appellate tribunal that their clients cannot be prosecuted as they are no longer the statutory auditors of IL&FS Financial Services and were neither in the management. They also submitted that the SFIO’s report is interim and, therefore, not admissible.

July last year, the Mumbai-bench of NCLT had allowed the plea of the Ministry of Corporate Affairs (MCA) to implead the auditors and independent directors of IL&FS Financial Services.

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