ILFS: Auditors Defend Themselves, Question MCA Demand for Ban

Mumbai, Jun 21 (PTI) Auditors Deloitte Haskins & Sells and KPMG's affiliate BSR Associates, who are under fire for alleged lapses in connection with the IL&FS scam, Friday questioned ministry of corporate affairs' (MCA) demand for a five-year ban on them.

The counsel for the auditors argued before the National Company Law Tribunal (NCLT) here that they were neither related to the management of any IL&FS company nor were they involved in day-to-day management of the crippled group which owes close to Rs 1 lakh crore to the system.

The NCLT posted the matter for hearing on July 15.

The corporate affairs ministry on June 10 moved the NCLT seeking a five-year ban on Deloitte and BSR, who were the auditors of IL&FS Financial Services, and sought appointment of a new auditor for the crippled firm.

Following this, BSR resigned from auditing the company on June 20, while Deloitte had stopped auditing the firm in FY18 itself.

IL&FS Financial Services is one of the 348 arms of the IL&FS group, which went belly up last September. The group got into trouble after many of its subsidiaries began to default in September, and on October 1, the government suspended its board and taken over the company.

The ministry had also made Udayen Sen of Deloitte, and Kalpesh Mehta and Sampath Ganesh of BSR as respondents to the petitions as they were the signatories of audit reports.

Government counsel Sanjay Shorey said they were made respondents as the auditors are required to certify the books of clients and thus would have the knowledge of all financial information and also about the fraud, but failed to detect it or chose not to report.

Deloitte was the financial auditor for 2017-18, while BSR was the auditor of the company till June 20.

Meanwhile, the ministry also filed a petition in NCLT seeking to implead 23 new parties after the Serious Fraud Investigation Office (SFIO) submitted its investigation report which implicated them for mismanagement.

The petition names auditors, audit partners, chartered accountants and a few independent directors for operational mismanagement, Shorey said.

According to the plea, these 23 additional people will be made respondents in the main petition filed last October.

Based on its investigation report, SFIO had filed a complaint in a special court with 30 people were named related with the matter, he said.

Shorey said, of the 30 people, seven were already made respondents in the matter and MCA is seeking to implead the rest who are mentioned in the SFIO report. However, the NCLT bench reserved the order.

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