After BSR & Associates, former IL&FS auditor, Deloitte Haskins and Sells LLP, has moved the Bombay High Court on Thursday challenging the maintainability of the Ministry of Corporate Affairs (MCA) application before the National Company Law Tribunal (NCLT) Mumbai seeking a five-year ban.
The MCA had moved the NCLT in June to ban the auditors for five years in the backdrop of the IL&FS fraud. 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 (SFIO).
On September 4, the HC stayed the NCLT proceedings for four weeks and said, “In our prima facie opinion, (it) requires to be dealt with elaborately.”
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The tribunal’s order said the second proviso to Section 140 (5) of the Companies Act empowers the Central government to order the company to change its auditors in case the government is satisfied that the auditor has acted in a fraudulent manner or abetted or colluded in any fraud.
Senior counsel Darius Khambata and advocate Sujay Kantawala are appearing for BSR. Mr. Khambata argued that the 32,000-page interim report by the Serious Fraud Investigation Office was submitted on May 28 and on the next day, the sanction to prosecute was granted, exposing non-application of mind. Therefore, it has been done in haste, he said.
The court said, to prosecute under Section 140 (5), a report is not needed.
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Mr. Khambata then said, “But all they have is a report and I am challenging prosecution under the Section.” He also said, “If we are found guilty, we should be prosecuted by rule of law and not under summon proceedings by the NCLT.”
Senior counsel Aspi Chenoy opposed the petition on behalf of the Central government. The matter is adjourned to October 16.