IL&FS Case: NCLAT Refuses Interim Relief To Deloitte And BSR Associates

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The National Company Law Appellate Tribunal (NCLAT) has refused to give interim relief to IL&FS auditors Deloitte and BSR Associates regarding the move to ban them.

On August 9, the NCLT rejected the plea made by Deloitte and BSR Associates, who had challenged the tribunal’s jurisdiction to ban them for five years for their omissions and commissions in the IL&FS Group fraud. NCLAT was hearing the auditors’ appeals against the order of the Mumbai bench of the NCLT.

On August 20, Chairperson Justice SJ Mukhopadhaya said that it will continue its scheduled hearing in the case of their alleged role in the IL&FS issue. The NCLAT also said that it will not pass any final order till its next hearing on September 20.

Further, the NCLAT has also issued a notice to the Ministry of Corporate Affairs (MCA) to file its reply within two weeks. The auditors had challenged the jurisdiction of the NCLT to ban them, pointing out that Section 140(5) of the Companies Act is applicable only to auditors who are still auditing the company in question, while they have already resigned from the service.

The NCLT argued that it has jurisdiction over the matter. The tribunal, on September 5, will hear a fresh plea from the ministry on the five-year ban on the auditors, as per the legal process. The reason to ban the auditors follows the Serious Fraud Investigation Office (SFIO), which, in its investigation, found them guilty of not taking action despite being aware of the poor financial health of IL&FS.

BSR, which was the statutory auditor of IL&FS Financial Services (IFIN), resigned in June this year, nine months after IL&FS was sent to the Insolvency and Bankruptcy Board of India.

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 been stayed after they sought time to challenge the order at the NCLAT.