ILFS case: Deloitte & BSR question MCA’s ban demand

Mumbai: Auditors Deloitte Haskins & Sells and KPMG’s affiliate BSR Associates, who are under fire for alleged lapses in connection with the IL&FS scam, 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) 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 15 July.

The Corporate Affairs Ministry on 10 June 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 20 June, 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 1 October, 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 20 June. 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.

NT Bureau