Two member bench of NCLAT led by Chairman Justice S J Mukhopadhaya upheld the decision of the Mumbai bench of the National Company Law Tribunal (NCLT) and dismissed the pleas of debt ridden IL&FS auditors – Deloitte Haskins & Sells and KPMG arm BSR & Associates, challenging their impleadment in the case involving alleged fraud in IFIN, a subsidiary of IL&FS.
NCLAT, however, granted relief to both Deloitte and KPMG and other independent directors by allowing the operation of its earlier interim order passed on July 29, 2019 for two weeks.
The bench is empowered to give the decision under the Section 242 of the Companies Act 2013 mentioning the powers of the Tribunal, if, on any application made under the Section 241 of the Companies Act 2013 as the sub-section 2 of Section 241 says it forms opinion that the affairs of the company have been conducted in a manner prejudicial to the public interest.
The bench headed by Justice S.J Mukhopadhyay opined that once such opinion is formed by the Tribunal, it may pass any order as it deems fit and proper. The plea was dismissed by the bench of auditors of debt-ridden IL& FS- Deloitte Haskins and Sells and KMPG arm BSR & Associates along with independent directors tried to challenge their impediment in the case alleging the fraud in group firm IFIN.
The Ministry of Corporate Affairs (MCA) had asked NCLT to freeze the assets of former auditors in the case which involves alleged fraud in IFIN. Nevertheless, the appellant tribunal granted relief to both auditors and other independent directors by allowing the operation to the interim order passed on 29th July 2019 for two weeks.
The development of the case was addressed by the Spokesperson of Deloitte India "We will review the written order before determining our further course of action, which may include an appeal. Auditors cannot be treated as part of the management which is responsible for managing the affairs of the company and therefore should not be charged and we will continue to present and protect its position, supported by the facts, to the relevant authorities. The firm remains committed to high standards of audit quality and ethical conduct in its professional practice”.
Author: Asif Iqbal