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India Plans to File Petition Against IL&FS Auditors

India’s Serious Fraud Investigation Office is probing alleged diversion and siphoning of funds from IL&FS.

India Plans to File Petition Against IL&FS Auditors
Road construction takes place near the IL&FS building, in Mumbai, India. (Photographer: Abhijit Bhatlekar/Bloomberg News)

(Bloomberg) -- The Indian government has sought to reopen the books of Infrastructure Leasing & Financial Services group, alleging evidence of auditing lapses was uncovered while looking into allegations that funds were siphoned from the beleaguered financier.

A probe by India’s Serious Fraud Investigation Office indicated the lender’s accounts were fraudulent and mismanaged, Sanjay Shorey, a lawyer for the government told the National Company Law Tribunal on Friday. The court told the government to notify those involved, including regulators and tax authorities, of its petition and set Jan. 1 as the next hearing date.

India’s is probing the alleged diversion and siphoning of funds from IL&FS, a systemically important infrastructure financier, which missed a series of debt repayments this year. The group’s struggle to service $12.6 billion in borrowings had roiled the credit market and continues to make it harder for other non-bank lenders to access funds. The government in October replaced the management of the troubled company.

The initial findings of a body overseeing accountants found that IL&FS’s statutory auditors were responsible for mismanagement, Shorey told the court in Mumbai. The petition included copies of the Institute of Chartered Accountants of India’s initial opinion of audits of some companies conducted by Deloitte Haskins & Sells LLP, SRBC & Co. LLP and BSR & Associates LLP, according to a copy of the petition seen by Bloomberg.

A spokeswoman for EY, an SRBC & Co. affiliate, declined to comment before seeing a copy of the petition, while there was no immediate response to an email sent to Deloitte Haskins and a representative for KPMG, a BSR affiliate, wasn’t immediately reachable.

Shorey, who was representing the Ministry of Corporate Affairs, has asked for a re-examination of the books over the past five years of Infrastructure Leasing & Financial Services, IL&FS Financial Services Ltd. and IL&FS Transportation Networks Ltd. He asked that the central government be allowed to appoint an auditor and the books to be finalized in three months.

To contact the reporters on this story: Saloni Shukla in Mumbai at sshukla72@bloomberg.net;Shruti Srivastava in New Delhi at ssrivastav74@bloomberg.net

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, ;Unni Krishnan at ukrishnan2@bloomberg.net, Candice Zachariahs, Jeanette Rodrigues

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