In a relief to former IL&FS auditors and KPMG audit firm, BSR and Associates, the Bombay High Court on Wednesday stayed the proceedings by the National Company Law Tribunal (NCLT) for four weeks.
A Division Bench of Justices Ranjit More and N.J. Jamadar was hearing a plea filed by BSR and Associates on August 14 under Sections 140 (removal, resignation of auditor and giving of special notice) and 447 (punishment for fraud) of the Companies Act. It had moved court to quash the criminal complaint filed by the Serious Fraud Investigation Office. N. Sampath Ganesh, an employee of the company, had also challenged the constitutional validity of NCLT’s decision.
The Ministry of Corporate Affairs had moved NCLT in June to ban the auditors for five years in the backdrop of the IL&FS fraud. The NCLT had scheduled to hear the matter from September 5.
The tribunal order read, “Keeping in consideration the legislative intent and creative interpretation of second proviso to Section 140 (5) of the Companies Act. It empowers the Central government to order the company to change its auditors in case the government is satisfied that the auditor of a company has acted in a fraudulent manner or abetted or colluded in any fraud.”
Senior counsel Mukul Rohatgi and advocate Sujay Kantawala, appearing for the auditors, told the HC on Wednesday that on May 28, the government gave its sanction to take action against the firm, and the next day, the SFIO submitted its 32,000-page interim report.
The court stayed the proceedings for four weeks and directed the ministry and SFIO to file their replies within that time.
