IL&FS: Should Deloitte and BSR be punished?

The Mumbai Bench of National Company Law Tribunal (NCLT) comprising V.P. Singh and Ravikumar Duraiswamy reserved its order in the case of IL&FS after hearing auditors, Deloitte Haskins and BSR & Associates.

Deloitte Haskins and BSR & Associates were opposing the Ministry of Corporate Affairs (MCA) application to impose a ban on them for five years under Section 140(5) of the Companies Act, 2013. These auditors have been told by NCLT to file their written submission in two days time.

Deloitte and BSR are facing the ban for allegedly conniving with the management of IL&FS Financial Services (IFIN). Serious Fraud Investigation Office (SFIO) probe has also shown alleged collusion.

MCA Director of Legal Prosecution, Advocate Sanjay Shorey has claimed the Government’s ban application is not a legal fiction as presented by the respondent auditors and that they should be punished for their wrongdoings.

Senior Counsel, Janak Dwarkadas, appearing for Deloitte argued that Section 140(5) of the Companies Act, 2013 is applicable only if the auditors are continuing with IFIN and NCLT’s jurisdiction ceases once the auditors resign.

Senior Counsel, Darius Khambata, appearing for BSR & Associates also submitted that they had already resigned as IL&FS auditors and they cannot be put in the same category as independent directors and senior management. Khambata also argued an auditor, once resigned, cannot be double punished.

Deloitte and BSR have filed an application with NCLAT to stay an order awarding liability for fraudulent conduct.