MCA Gets NCLT Nod To Prosecute Deloitte Haskins, BSR Associates Which Had Audited IL&FS Financial Services

The Ministry of Corporate Affairs (MCA) has received a nod from the National Company Law Tribunal (NCLT) to prosecute Deloitte Haskins and BSR Associates which had audited IL&FS Financial Services (IFIN), based on a Serious Fraud Investigation Office (SFIO) investigation report.

The MCA has also received the go ahead to investigate individuals like Surinder Singh Kohli and Subhalakshmi Panse, who were independent directors on the board of directors of IFIN, besides others like Deloitte partners Udayan Sen and Kalpesh Mehta, as well as BSR Associates partner Sampath Ganesh.

Earlier, an SFIO complaint had alleged that Panse and Kohli, who were part of the audit committee, knew about the stressed asset portfolio of the company. They also knew that loans were being granted to group companies of existing defaulting borrowers.

The auditors knew about IFIN lending to defaulting borrowers through group companies so that it could suppress its non-performing assets as well as not provide for bad debt, the SFIO complaint had stated.

The auditors had also failed to verify the end use of bank finances and money raised through non-convertible debentures (NCDs), despite this being a regulatory mandate to verify such things, the SFIO complaint had mentioned.

According to the SFIO complaint, these auditors had even falsified books of accounts as well as financial statements of the company from FY14 to FY18.

The auditors did not report the negative net owned fund and negative capital to risk (weighted) assets ratio, which resulted in loss to those who had invested in the company’s NCDs, the SFIO complaint had stated.

Allegedly, the audit committee members colluded with the IFIN management and overlooked many impairment indicators in contravention of accounting standards, the SFIO complaint had stated.