India Supreme Court clears tribunal to act against IL&FS auditors

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Mumbai (Reuters) – India’s Supreme Court has allowed the National Company Law Tribunal (NCLT) to proceed with its enquiry and any subsequent action against the auditors of IL&FS Financial Services, a unit of Infrastructure Leasing and Financial Services that filed for bankruptcy in 2018.

The Supreme Court upheld provisions in India’s ‘Companies Act, 2013’ that allows the government to enquire and act against auditors, according to an order uploaded on the court’s website on Wednesday.

The country’s top court was ruling on a petition filed by the government against a lower court order in 2020 that said any action against auditors is not applicable if they resign.

The Supreme Court, however, made it clear in its ruling that it was not making any comments on the merits of the allegations against the auditors.

The government had moved a petition in the NCLT in 2019 to bar IL&FS Financial Services’ former auditors — Deloitte Haskin and Sells (DHS LLP) and BSR and Co, a KPMG affiliate — for five years owing to lapses in their conduct.

The Supreme Court, while allowing the application to proceed, said the NCLT should pass a final order on the centre’s application.

DHS LLP will continue to present its position, supported by the facts and necessary context, before the relevant judicial forums, a spokesperson for the firm told Reuters, noting the ruling did not restrict it from servicing its clients.

BSR and Co said it was assessing the order and will determine its next steps, noting the ruling “has not decided on the merits of the case.”

The top court ruling also allowed a local court to continue the proceedings lodged by the Serious Fraud and Investigation Office (SFIO) in accordance with law and on its own merits.

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