In a major blow to the defaulting company IL&FS' auditors Deloitte and BSR and Associates, the Mumbai bench of the National Company Law Tribunal (NCLT) on Friday said that it has jurisdiction over these firms and the authority to ban them under the Companies Act for their alleged role in financial misappropriation
Deloitte Haskins and Sells (Deloitte) and global advisory firm KPMG arm BSR had challenged the NCLT's jurisdiction to prosecute the companies and ban them after the Corporate Affairs Ministry (MCA) had sought such a five-year ban on them.
The tribunal said that the order is "appealable" and it was aware of the fact that the case could move ahead to the National Company Law Appellate Tribunal and the Supreme Court.
Both the audit companies have been under the MCA's scanner after the probe by the Serious Fraud Investigation Office (SFIO) found that Deloitte had disregarded the Reserve Bank of India's (RBI) regulations and turned a blind eye to the defaulting firm IL&FS Financial Service Ltd's (IFIN) "evergreening" of loans, and never cross-checked any of the certificates used by the company to mislead lenders.
BSR too was found to be involved in such gross negligence and violation of norms.
Reacting to Friday's order, a Deloitte spokesperson said: "The NCLT's ruling is unfortunate. While we need to review the written order before determining our further course of action, we continue to believe the NCLT lacks the jurisdictional authority to adjudicate this matter."
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