The Indian government has moved the National Company Law Tribunal against two companies part of the network of firms KPMG in connection with the IL&FS case. The Centre has asked the NCLT to bar Deloitte Haskins & Sells LLP and BSR Associates over irregularities in IL&FS Financial Services (IFIN) and asked for a new auditor to be appointed.
Deloitte was the IFIN’s auditor till 2016-17 – the company was audited by both BSR and Deloitte in 2017-18 – and now BSR is their sole auditor.
In its application, the Ministry of Corporate Affairs has also moved to implead Deloitte’s Udayan Sen and BSR’s Kalpesh Mehta and Sampath Ganesh as they were the signatories of the audit reports. It has also named nine individual auditors involved in auditing IFIN to be prosecuted under Section 140(5) of the Companies Act.
Section 140(5) of the Companies Act looks at the following: “Without prejudice to any action under the provisions of this Act or any other law for the time being in force, the Tribunal either suo motu or on an application made to it by the Central Government or by any person concerned, if it is satisfied that the auditor of a company has, whether directly or indirectly, acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, the company or its directors or officers, it may, by order, direct the company to change its auditors.”
The Serious Fraud and Investigation Office had also filed charges against the two firms on May 30.
According to the Business Standard, the MCA sought for the interim attachment of the properties of the audit firms and partners.
On June 1, IANS reported that the Regional Director, Western Region of the MCA was authorised to initiate proceedings under Section 140 (5) of Companies Act, 2013 before the NCLT against auditors named in the report — Udayan Sen, Kalpesh Mehta, Sampath Ganesh, Shrenya Baid, Rakesh Kumar Jain, Nishit Dipak Udani, Anuj Rawat, Payal Mukeshbhai Rathod, A.P. Shah, AP Shah and Associates, Deloitte Haskins and Sells LLP, BSR and Associates LLP for their role in perpetuating the fraud and seek their debarment.
The Regional Director had also been directed to include names of the above-named auditors in the proceedings under sections 241 and 242 of Companies Act, 2013 pending before the NCLT and seek interim attachment of movable and immovable properties of all persons including lockers, bank accounts and jointly-held properties etc.
In the current application, the ministry has made the Reserve Bank of India, the Securities and Exchange Board of India and the Institute of Chartered Accountants of India as respondents in the same to execute orders that may be passed.
A two-member bench of the NCLT comprising VP Singh and Ravikumar Duraisamy asked the auditors to file their replies by June 19. The matter will be heard on June 21.
Livemint reported that if KPMG and Deloitte are barred, 276 companies listed on the National Stock Exchange will have to get new auditors.
With IANS inputs