Supreme Court Vacates Stay On NCLAT Order, Allows SFIO To Reopen And Recast Accounts of IL&FS And Three Subsidiaries

The Supreme Court has allowed the Serious Fraud Investigation Office (SFIO) to reopen as well as recast the accounts of Infrastructure Leasing & Financial Services (IL&FS), IL&FS Financial Services (IFIN), and IL&FS Transportation Networks (ITNL), between FY13 and FY18.

The Supreme Court order came in response to a recent plea by the Ministry of Corporate Affairs (MCA), which had sought to examine the books of the three companies by the SFIO, which functions under the MCA.

Initially, the Ministry of Corporate Affairs (MCA) had approached the Mumbai Bench of the National Company Law Tribunal (NCLT), which had allowed reopening books of the three companies and asked the MCA to name the person or firm it wished to appoint as auditors.

After the NCLT order, Hari Sankaran, former IL&FS vice-president and director, had moved the NCLAT, alleging that it had passed the orders ex-parte and without hearing his arguments, but the NCLAT dismissed his plea.

It found no merit in his argument that Section 230 of the Companies Act was a “draconian section”.

Shortly after the NCLAT dismissed Sankaran’s plea, he had approached the Supreme Court, which had initially stayed the NCLAT order on April 29.

However, the MCA moved the Supreme Court again, seeking vacation of its stay on the NCLAT order, stating that it needed to reopen and recast the accounts of the three companies in order to get a fair picture of their financial position.

Thereafter, the Supreme Court vacated its stay on the NCLAT order and allowed the SFIO, which functions under the MCA to reopen as well as recast the accounts of the three companies.