IL&FS Crisis: Government Seeks Five-Year Ban On Deloitte Haskins, BSR & Associates 
Deloitte was IL&FS’s financial auditor for 2017-18. BSR Associates is still the auditor of the company. (Photographer: Abhijit Bhatlekar/Bloomberg News)

IL&FS Crisis: Government Seeks Five-Year Ban On Deloitte Haskins, BSR & Associates 


The government on Monday filed fresh applications seeking a ban on the auditors to IL&FS group’s non-bank lending arm for allegedly colluding with the management in dubious lending practices.

At the National Company Law Tribunal, the Corporate Affairs Ministry sought a five-year ban on Deloitte Haskins & Sells and BSR Associates, a unit of KPMG, the past and current auditors to IL&FS Financial Services Ltd. The ministry, which moved its applications through senior counsel Sanjay Shorey, also sought to appoint a new auditor for the company.

It moved to implead Udayan Sen and Kalpesh Mehta, partners at Deloitte Haskins and Sells and Sampath Ganesh of BSR & Associates, who were involved in the audit of IL&FS group companies.

IL&FS Financial Services is one of the 348 subsidiaries and associate companies of group, which owes lenders more than Rs 95,000 crore. A series of defaults last year bared the rot at the infrastructure conglomerate, forcing the government to take over and appoint a new board to avert a contagion in the debt markets.

The Serious Frauds Investigation Office, after its non-month-long probe, filed a criminal complaint against 30 entities related to the IL&FS group for alleged fraud. It found abusive lending practices at IL&FS Financial Services for evergreening of loans.

The role of an auditor is to uphold accounting standards and to ensure that the accounts are true and fair, and to comment on the presence of necessary safeguards in its report, Shorey said. The auditors of IL&FS Financial Services failed to enquire into extension of loans without adequate security to companies with negative net worth, he said.

Also read: IL&FS Crisis: A Cheat Sheet Of The SFIO’s 800-Page Report 

Deloitte Haskins and Sells were auditors to IL&FS group companies, including the non-bank lender, from 2012 to 2017. It was replaced by BSR Associates which continues to audit its books.

The counsel representing the audit firms and their partners argued they haven’t received the ministry’s notices. Claiming that they were not provided an opportunity to be heard, they questioned maintainability of the ministry’s action.

The NCLT, however, accepted the ministry’s application, saying it’s necessary to admit the petition to initiate action against the auditors under Section 140(5) of the Companies Act. A two-member NCLT bench of VP Singh and Ravikumar Duraisamy asked the auditors to file their replies by June 19 and posted the matter for hearing on June 21.

The NCLT allowed them to access the documents submitted by the ministry in electronic format.

Meanwhile, Ashakiran and Akansha, wife and the daughter of RC Bawa who was one of the directors of the IL&FS Group, said they were yet to get the contempt notice from the ministry for allegedly withdrawing money from the frozen bank accounts of Bawa.

The tribunal then directed the ministry to serve the notice to them and posted the matter for June 21.

On April 26, the ministry had sought to implead Ashakiran and Akansha, saying they were the beneficiaries of these funds. The ministry alleged that Bawa withdrew or transferred Rs 1 crore and Rs 14 lakh from Axis Bank accounts in two instances in violation of the Dec. 3, 2018 order of the tribunal which had frozen these accounts.

(With inputs from PTI)

Also read: IL&FS Board Extends Deadline For Claims Submission To June 20

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.