An order has been posted on website on July 18 by NCLT.
As per order, The National Company Law Tribunal (NCLT) has taken action to prosecute the auditors of IL&FS Financial Services (IFIN) — Deloitte Haskins and BSR Associates as the Ministry of Corporate Affairs (MCA) allowed to do.
However, there is no scuh demand to ban the auditors for five years from business.
On the basis of investigation held by Serious Fraud Investigation office (SFIO), it has reported that:
- The auditors were aware that FIN was lending to defaulting borrowers through group companies so that it could suppress its non-performing assets and not provide for the bad debt.
- There is a regulatory mandate to verify end-use bank finances and money raised through non-convertible debentures (NCDs) but the auditors failed to verify.
- the auditors falsified books of accounts and financial statements of the company from FY14 to FY18
- Auditors also didn’t report the negative net owned fund and its negative capital to risk (weighted) assets ratio, resulting in loss to those who had invested in the company’s NCDs
- The audit committee members (Kohli and Panse) were secretly cooperated with the management and overlooked many impairment indicators in contravention of the accounting standards and principles of prudence.
However, the tribunal has observed that, No specific role was assigned to the independent auditors. Therefore, prosecution of independent directors in the case is not justified, at this stage.
Other individuals allowed by the tribunal to be prosecuted include partners of audit firm Deloitte Udayan Sen, Kalpesh Mehta, and Sampath Ganesh, partner in BSR Associates. Surinder Singh Kohli and Subhalakshmi Panse, independent directors on the board of directors of IFIN, are also on the list. They were part of the audit committee of IFIN.